SNR New Senior Investment Group Inc

Proposal 3

Advisory Vote On 2020 Executive Compensation

In accordance with Section 14A of the Exchange Act and the related SEC rules promulgated thereunder, we are providing our shareholders the opportunity to cast a non-binding advisory vote to approve the 2020 compensation of our named executive officers (“NEOs”) as disclosed in this Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives our shareholders the opportunity to express their views on the compensation of our NEOs.

As described in the “Compensation Discussion and Analysis” section of these proxy materials, the primary objectives of our executive compensation program are to attract and retain qualified individuals who can help the company achieve its key business objectives and ultimately increase long-term shareholder value. We urge our shareholders to review the Executive Compensation section below and the compensation tables and narrative discussion included therein for more information.

We believe that our executive compensation programs have been effective at promoting the achievement of positive results, appropriately aligning pay and performance, and enabling us to attract and retain very talented executives while at the same time avoiding the encouragement of unnecessary or excessive risk-taking.

For these reasons, the Board recommends a vote in favor of the following resolution:

“RESOLVED, that the compensation paid to the company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”

As an advisory vote, this proposal is not binding upon us. Notwithstanding the advisory nature of this vote, the Compensation Committee values the opinions expressed by shareholders in their vote on this proposal and will consider the outcome of the vote when making future compensation decisions for our named executive officers.

The affirmative vote of the holders of a majority of the votes cast by our shareholders in person or represented by proxy and entitled to vote is required to approve this Proposal 3.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL, ON AN ADVISORY BASIS, OF THE 2020 COMPENSATION OF THE NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THESE PROXY MATERIALS.

Compensation Discussion and Analysis

Executive Summary

Fiscal 2020 In Review

Following a transformational year for New Senior in 2019 as we internalized our management effective January 1, 2019, fiscal 2020 started out strong. However, beginning in February our business began to face significant challenges with the onset of the COVID-19 pandemic. While the pandemic has severely impacted the entire world, at-risk populations, including seniors in the communities we serve, have been disproportionately impacted by the effects of COVID-19. The health and safety of our residents and our operators’ associates around the country was – and remains – our top priority. The pandemic led federal, state and local governments and public health authorities to impose measures intended to control the spread of COVID-19, including restrictions on freedom of movement and business operations such as travel bans, border closings, business closures, quarantines and shelter-in-place orders. As the owner of a portfolio of independent senior living properties, our operators had to implement several measures to ensure the health and safety of residents and employees, including restrictions on move-ins, restrictions on non-essential visitors, restrictions on communal dining and activities, enhanced cleaning protocols and requirements to wear personal protective equipment. As a result of these actions, we had fewer move-ins, resulting in significant occupancy declines, and higher expenses as our operators worked to limit the spread of the virus. While necessary, these actions had a significant impact on our operational and financial performance in 2020, and these actions and the uncertainty caused by the pandemic resulted in increased volatility in our stock price performance throughout the year.

While the pandemic had a significant impact on our business, we saw features unique to our independent living properties that allowed our operators to adjust protocols within our communities and effectively manage the spread of the virus while also reducing expenses in response to lower occupancy levels. As a result, our incidence rate of COVID-19 cases throughout the year remained relatively low versus reported results in the senior housing industry, and our portfolio has experienced lower occupancy and NOI declines than the broader industry. In addition, strategic initiatives completed early in 2020 positioned us well prior to the onset of COVID-19. These actions, together with strong balance sheet management, enabled us to achieve solid AFFO⁽¹⁾ per share results of $0.71, which was at the high end of the original guidance that we provided to investors in February 2020 prior to the onset of COVID-19, and was also at the high end of the guidance that we provided to investors in August 2020 in connection with the release of our second quarter earnings results.

We executed significant initiatives within our capital structure and portfolio, as well as at the corporate level, to mitigate the pandemic’s overall impact on our results:

In summary, despite an extremely challenging year, we were pleased with how our business performed in the face of the global pandemic in 2020. We believe that our portfolio continues to benefit from our independent living model and a more flexible expense structure. We were able to offset occupancy losses at our properties throughout the year with property expense reductions and interest savings. We worked tirelessly with our operators to respond swiftly at the outset of the pandemic, including making difficult decisions early on to restrict access to our properties to protect residents and staff. We believe that these actions, together with financial efficiencies driven by our independent living model, helped us to achieve strong AFFO results for 2020. Our stock price at the close of the year partially recovered to $5.18, which we believe reflects an understanding by investors of our 2020 results and positioning in the market going forward.

The Compensation Committee’s Process & Evaluation

The Compensation Committee met seven times in 2020 (and an additional two times in early 2021) to review the impacts of COVID-19 and consider the appropriate compensation actions to take in light of the circumstances. As discussed in more detail below, the Compensation Committee utilized the following framework in making decisions relating to executive compensation for 2020:

2020 Total Shareholder Return

The graph below compares our average total shareholder return (“TSR”) performance versus the average TSR of two comparable indices: the MSCI U.S. REIT Index and the FTSE Nareit Equity Health Care Index. The graph assumes an investment of $100 in our shares in each of the indices on December 31, 2018, which corresponds to the timing of the Internalization. The past performance of our shares is not an indication of future performance.

2-Year TSR (2019-2020)

After our 2019 TSR of approximately 101.8% ranked us as the best performing public REIT in the two indices noted above, 2020 saw our TSR drop significantly as a result of the impacts of the COVID-19 pandemic. The financial markets experienced significant stress in March 2020 almost immediately following the onset of the effects of COVID-19. The economic shock rapidly lowered market prices of equity and debt securities, and rising uncertainty regarding the economy caused significant volatility. The steep decline in stock price for New Senior, all of the peers in our peer groups, and the senior housing market persisted throughout the year as the market continues to try to understand the longer-term impacts of the pandemic. And while REITs, including those in our senior housing sector, have partially rebounded as the year progressed, uncertainty persists which will only dissipate over the passage of time when more stability returns to the markets. Despite the significant pressures in 2020, our two-year TSR still outperforms both the MSCI U.S. REIT Index and the FTSE Nareit Equity Health Care Index.

We have focused above on two years of total return because 2019 was the year that we internalized, and was therefore the first year that we had employees dedicated to providing services to New Senior and operated as a self-managed company.

Say-on-Pay and Engagement with Shareholders

2019 was our first fiscal year following the Internalization and, as a consequence, was the first year in which we had employees who we paid directly. Accordingly, we have not historically disclosed information relating to executive compensation for years prior to 2019 for certain executives. In addition, we held our first say-on-pay and frequency of say-on-pay votes at the 2020 Annual Meeting of Shareholders. We were pleased to have the support of 95.5% of the shares which were voted in favor of our first say-on-pay proposal last year. In addition, in response to the overwhelming expression of shareholder support (97.4%) last year in favor of an annual frequency of say-on-pay votes, our Board determined to hold these votes annually and we are again including a say-on-pay vote in this Proxy Statement.

Compensation Program Summary

Competing successfully in our industry requires dedicated, knowledgeable individuals who are committed to delivering outstanding shareholder returns while effectively building relationships across the industry. The Compensation Committee is committed to continuously reviewing New Senior’s compensation practices so that its program is in line with the market, is responsive to concerns of shareholders and takes into account best compensation practices. New Senior’s 2020 executive compensation program had the following key structural features:

Total Compensation

A substantial majority of each executive’s total compensation is performance-based;

Balance of Metrics

There are balanced metrics across our short-term cash bonus plan and our long-term incentive plan which include financial, operational and TSR goals;

Short and Long-Term Focus

We have established goals which balance and measure value creation over both the short and long-term;

Strong Alignment with Shareholders

We have created strong alignment of management and shareholder interests through practices such as stock ownership guidelines for executives, balanced goals and incentives to drive to shareholder returns; and

Long-Term Equity Design Utilizes Best Practices

75% of the grant-date value of our annual equity awards in 2020 was performance-based, based on our TSR versus an index, with target payouts only being achieved if we outperform versus the index and awards that are reduced if TSR is negative, as described in more detail below:

100% of the performance-based award long-term incentive award is granted based on 3-year relative performance to the FTSE Nareit Equity Health Care Index.		New Senior must outperform the FTSE Nareit Equity Health Care Index by achieving relative performance at the 55th percentile to earn the target award.		New Senior utilizes an absolute TSR modifier whereby awards are reduced if the Company’s absolute TSR is negative.

Introduction

Named Executive Officers

The Compensation Discussion and Analysis that follows provides a description of our compensation program for each of the individuals listed below. We refer to these individuals throughout the Compensation Discussion and Analysis and the tables and narratives that follow as our named executive officers or NEOs. For 2020, our named executive officers were as follows:

Internalization

Until January 1, 2019, Ms. Givens and Mr. Patel were employees of our Former Manager (see “Corporate Governance and Related Matters–Certain Relationships and Related Party Transactions”). Each of these officers was compensated by the Former Manager and did not receive any compensation directly from us. We did not reimburse our Former Manager or any of its affiliates for the compensation of any of these officers and did not make any decisions regarding their compensation. Only Mr. Patel, who served as our Interim Chief Financial Officer, Treasurer, and Chief Accounting Officer throughout 2018, was exclusively dedicated to providing services to New Senior prior to 2019. Accordingly, the Former Manager determined that the entire amount of the compensation that it paid to Mr. Patel in or in respect of 2018 was for services that he performed for New Senior and Mr. Patel’s compensation for 2018 is included in the “Summary Compensation Table” below. Although Ms. Givens devoted a substantial portion of her time to New Senior in 2018, she did not exclusively provide services to us and therefore the Former Manager was not able to segregate and identify any portion of the compensation awarded to her as relating solely to service performed for us. Accordingly, we have not included any information relating to the compensation paid to Ms. Givens by our Former Manager in or in respect of years prior to 2019 in the “Summary Compensation Table” below.

We internalized our management on January 1, 2019 and are no longer externally managed by the Former Manager. In connection with the Internalization, we entered into employment agreements with Ms. Givens and Mr. Patel, with initial terms running through December 31, 2021. These employment agreements document the key elements of our executive compensation program and reflect our pay-for-performance compensation philosophy. We believe that use of employment agreements is critical to ensuring a stable, appropriately incentivized management team as we transition from an externally to internally managed company. These agreements are described in more detail below in the section entitled “—Other Compensation and Benefits—Executive Agreements.”

Governance and Compensation

Executive Compensation Philosophy

We have designed our compensation programs to help us recruit and retain the executive talent required to successfully manage our business, achieve our business objectives and maximize their long-term contributions to our success. We include compensation elements that are designed to align the interests of executives with our goals of enhancing shareholder value and achieving our long-term strategies. We determine total annual compensation by reviewing the median of the competitive market, then position compensation at, above or below the median based on experience, performance, critical skills and the general talent market for each senior executive.

Best Practices that Support our Executive Compensation Philosophy

The Compensation Committee oversees the design and administration of our executive compensation programs and evaluates these programs against competitive practices, legal and regulatory developments and corporate governance trends. The Compensation Committee has incorporated the following best practices into our programs.

What We Do			What We Don’t Do
	Significant Majority of Pay is Performance-Based			Excise Tax Gross-Ups
	Emphasize Long-Term Compensation to Align Pay with Long-Term Performance			Repricing of Stock Options
	Meaningful Stock Ownership Requirements For NEOs			Golden Parachutes
	Robust Clawback Policy That Applies to All Incentive Compensation			Permit Hedging or Pledging of Company Stock
	Double-Trigger Change in Control Vesting of Equity Awards			Dividends or Dividend Equivalents on Unearned  Performance Shares
	Proactive Engagement With Shareholders			Excessive Perquisites or Personal Benefits
	Utilize Independent Compensation Consultant			Accelerated Vesting of Equity Awards or Severance Benefits  Solely Upon a Public Change in Control

Key Participants in the Compensation Process

Role of the Compensation Committee

The Compensation Committee assists the Board of Directors in determining the compensation of our executive officers. It evaluates and recommends to the Board of Directors appropriate policies and decisions relative to executive officer salary, benefits, bonus, incentive compensation, severance, equity-based and other compensation plans.

As described in more detail below, compensation for fiscal year 2020 for each of our NEOs was determined by the Compensation Committee based upon a review of the Company’s performance, including shareholder returns, the individual performance of each NEO, and certain peer group information.

Further, the Compensation Committee evaluates the Company’s compensation programs on an annual basis to ensure that our plans do not induce or encourage excessive risk-taking by participants. Pursuant to its charter, the Compensation Committee may delegate authority to act upon specific matters to a subcommittee.

Role of Management

Our CEO made recommendations to the Compensation Committee regarding executive compensation actions and incentive awards. The General Counsel (who also serves as the Chief Human Resources Officer) serves as the liaison between the Compensation Committee and FPL, providing internal data on an as-needed basis so that FPL can produce comparative analyses for the Compensation Committee. In 2020, the Company’s human resources, finance and legal departments supported the work of the Compensation Committee by providing information, answering questions and responding to various requests of committee members.

Role of the Independent Compensation Consultant

In 2020, the Compensation Committee continued to use the services of FPL in fulfilling its obligations under its charter, the material terms of which are described elsewhere in this Proxy Statement under the heading “Corporate Governance and Related Matters—Compensation Committee.” FPL generally provides the Committee with objective expert analyses, assessments, research, and recommendations for executive compensation programs, incentives, perquisites and compensation standards. FPL was first engaged by the Compensation Committee in 2018 as the Company began preparations for the Internalization and the hiring of a management team.

FPL attended 6 meetings of the Compensation Committee in 2020. Specifically, during 2020 FPL performed the following services:

FPL is paid a fee by the Company for providing its services relating to executive and director compensation and is also reimbursed for reasonable travel and business expenses and any fees related to the purchasing of compensation benchmarking data.

FPL performs no services for management unless requested by or on behalf of the Chair of the Compensation Committee. The Compensation Committee selected FPL to serve as its Independent Compensation consultant only after assessing the firm’s independence. As part of its independence review, the Compensation Committee reviewed the Company’s relationship with FPL and determined that no conflicts of interest existed. The Compensation Committee has the sole authority to retain and terminate its consultants, including FPL.

External Benchmarking

The Compensation Committee considers competitive market compensation data, in addition to other factors, in determining policies and programs that address executive compensation, benefits and perquisites. Traditionally, companies compare their compensation practices and performance against the performance of a single group of companies whose business model and industry are relatively similar to those of the company. Because New Senior is one of the smaller REITs by market capitalization, the Committee, at FPL’s recommendation, determined that it would be appropriate to utilize two peer groups—one for size and one for the healthcare REIT industry—in designing and administering the Company’s executive compensation program. This two peer group approach allows for New Senior to see how its compensation compares to REITs of a similar size, as well other healthcare REITs, all of which can be helpful in guiding magnitude decisions, structure and design decisions.

Therefore, for 2020 pay decisions for the NEOs, the Compensation Committee selected and reviewed compensation levels and elements at companies in the following two peer groups (the “Peer Groups”), all of which are comprised of public real estate companies:

QTS Realty Trust, Inc. and Rexford Industrial Realty, Inc., were both removed from the Size Peer Group in 2020 due to their significantly larger size than New Senior, and were replaced by Community Healthcare Trust Incorporated and Global Medical REIT Inc. Community Healthcare Trust Incorporated was already part of the Healthcare Peer Group. There were no changes made to the Healthcare Peer Group in 2020. The Peer Group compensation analysis prepared by FPL was utilized by our Compensation Committee as part of the process of reviewing and making decisions regarding our NEO compensation for 2020. The Compensation Committee annually reviews and evaluates these Peer Groups to ensure that they remain appropriate.

Elements of Compensation

NEO Compensation Elements at a Glance

The compensation of our executive officers, including our NEOs, is reviewed in detail by the Compensation Committee during the first quarter of every year. NEO direct compensation for 2020 consisted of a base salary, an AIP award and LTI awards, each of which is detailed below:

The Company also provides benefits and limited perquisites to its NEOs that it believes are competitive with the external market for talent. For a more detailed discussion of these benefits and perquisites, see the discussion under the heading “Benefits and Perquisites.”

The Compensation Committee has adopted a compensation program that meets New Senior’s goals of aligning executive and shareholder interests and appropriately incentivizing New Senior’s executives. The allocation of the elements of the compensation program – base salary, annual cash incentives and long-term equity incentives — helps New Senior to retain, motivate and reward the NEOs and other executives and, at the same time, emphasizes performance-based compensation. The chart below illustrates our CEO’s base salary, annual cash incentive (at target) and long-term equity incentive (at target) as a percent of total target compensation for 2020. A total of 69.3% of New Senior’s CEO’s compensation was performance-based in 2020.

Base Salaries

Base salaries are established at levels that will attract and retain talented executives. Base salaries are not “at risk” elements of compensation. Base salaries are reviewed annually by the Compensation Committee each February and may be adjusted to better match market competitive levels, to acknowledge the scope of the individual’s role in the organization and experience in the current position and/or to recognize an individual’s growth and development. Base salaries for the NEOs approved in February 2020, as well as the salaries approved for the NEOs in February 2021, are as follows:

2020 Annual Incentive Plan

The Company’s AIP provides for an annual cash payment to participating executives established as a target percentage of base salary. In setting AIP awards, the Compensation Committee approves target AIP awards after careful consideration of external data, individual roles and responsibilities and individual performance.

The Company pays for AIP performance that demonstrates substantial achievement of plan goals. We establish strong incentives and set aggressive goals for financial metrics at the start of a year. The Company must achieve a certain threshold for each of the financial performance metrics discussed below in order for each performance component to be considered in the calculation of the AIP payout. Performance below the threshold performance level results in a zero payout for that particular performance component.

The formula to determine each NEO’s AIP total potential payment is as follows:

The individual component, which is at the discretion of the Compensation Committee, is then factored into the payout. Both the individual performance component of the AIP and the overall AIP award payout are capped at percentages set forth in each NEO’s Executive Agreement (250% of the annual cash bonus target in the case of the CEO and 150% in the case of the other NEOs).

2020 AIP Performance Metrics, Weightings and Results

Based on the Company’s 2020 business objectives, the Compensation Committee identified financial performance metrics and a subjective individual component for the 2020 performance year, which together comprise the AIP Performance Factor.

The Compensation Committee utilized the same two financial performance metrics in 2020 as it used in 2019 — AFFO Per Share and Same Store Cash NOI (Managed Portfolio). The original targets for each financial metric were based on the Company’s 2020 operating budget and were set early in 2020 prior to the onset of the COVID-19 pandemic. The Compensation Committee reviewed the operating budget with management to ensure that the targets were appropriate and determined that the achievement of the combination of financial goals would be challenging and reflect strong performance in our business.

As discussed above in “–The Impacts of COVID-19,” COVID-19 had obvious impacts on our financial performance and our stock price performance during 2020. In light of these impacts, the Compensation Committee determined to restate the 2020 AIP (the “Restated 2020 AIP”) in conjunction with the Company disclosing a new public guidance range to investors at the time we reported earnings for the second quarter in August 2020. At that time, the Compensation Committee adjusted the performance levels related to one of the two financial metrics as follows:

As illustrated in the table above, the AFFO Per Share range remained the same in the Restated 2020 AIP. In addition, in comparison to the prior year, the AFFO Per Share range for 2020 was higher than both the performance levels and targets were in 2019. The range of performance levels for Same Store Cash NOI (Managed Portfolio) in the Restated 2020 AIP were reduced below the ranges originally established for 2020 prior to the widespread impact of COVID-19 in the United States, and they reflect performance levels below 2019 levels due to significantly lower occupancy levels as a result of the pandemic. However, with respect to financial performance metrics, Same Store Cash NOI (Managed Portfolio) is considered by the Compensation Committee to be of lesser importance than AFFO Per Share, and as such has always been assigned lesser weight in the plan design. In addition, the Compensation Committee determined that the restated ranges continued to be rigorous in light of the impacts of COVID-19 on the business.

In addition to restating the performance levels related to the two financial metrics, the Compensation Committee also adjusted the weightings of each component as follows. As illustrated in the table below, when adopting the Restated 2020 AIP, the Compensation Committee elected to retain a higher level of subjective discretion over executive compensation and increased the weighting for the subjective component so that it had the flexibility to make appropriate compensation decisions as management navigated the difficulties of the COVID-19 pandemic as it evolved over the remainder of the year. The Compensation Committee ultimately utilized this discretion when it determined final compensation decisions for 2020 and reduced the payout percentage related to the subjective performance component for all executives below the subjective percentage levels that were awarded for 2019.

The following table sets forth the components for the Restated 2020 AIP, the weighting of each component and rationale for its usage, and the 2020 actual results.

The two financial performance metrics described above are non-GAAP financial measures and should not be considered a substitute for measures determined in accordance with GAAP. These non-GAAP financial measures may not be comparable to similar measures reported by other companies or those that we use in our Annual Report on Form 10-K or other external financial presentations.

In making the compensation decisions for fiscal 2020, the Compensation Committee considered what the resulting payouts would have been for each of our NEOs had the originally approved 2020 AIP remained in effect at the end of the year. The Compensation Committee considered the following in approving the final 2020 AIP awards:

The Compensation Committee assessed the above, as well as the Company’s financial performance prior to the onset of COVID-19 and the significant actions management took to navigate the unprecedented pandemic during the remainder of the year. The Compensation Committee also considered the fact that the Company took early and aggressive steps to reduce the spread of COVID-19, prioritizing resident and associate safety, notwithstanding the impacts on occupancy and achievement of the financial performance metrics. Based on its evaluation of these items and other considerations after the conclusion of 2020, the Compensation Committee determined that the weightings and the metrics utilized in the Restated 2020 AIP were appropriate.

2020 AIP Performance Measure Weightings for Each NEO

Each NEO has a set threshold, target and maximum annual cash incentive bonus, each expressed as a percentage of base salary. The weighting of each performance measure for the Chief Executive Officer at the threshold, target and maximum bonus levels is 75%, 150% and 250%, respectively. The weighting of each performance measure for the other NEOs at the threshold, target and maximum bonus levels is 50%, 100% and 150%, respectively.

AIP Individual Component Considerations

As described above, for 2020, 50% of each NEO’s AIP bonus was based on the individual component, which rewards achievement of their individual and team goals. In determining the subjective component of the annual bonuses, the Compensation Committee evaluated the performance of our company for the year compared to other real estate investment trusts and the overall market. The determination made with respect to the subjective component of each NEO’s bonus was awarded based on the Compensation

Committee’s consideration of the Company’s overall results for 2020, as well as the following individual achievements.

		Successfully navigated New Senior through a turbulent year that saw a global pandemic disproportionately affecting the cohort that we serve and causing significant disruption to the business and volatility in our stock price;
		Oversaw completion of successful transactions which improved the Company’s balance sheet and extended its debt maturities;
		Spearheaded the Company’s increased investor outreach efforts and transparency of communication with all stakeholders, including being the only REIT with a senior housing portfolio that provided explicit financial guidance to investors post-COVID;
		Drove the development of a multi-year capital expenditure program and the launch of a renovation prototype;
		Recruited two well-respected and experienced independent members to the Board of Directors; and
		Partnered with all operators throughout the year to share best practices and drive best business results, while achieving best performance possible.

		Successfully transitioned the finance and accounting function to a fully remote working environment after the onset of COVID-19, maintaining financial reporting accuracy and delivering on all required timelines;
		Opportunistically executed an interest rate swap at an attractive rate, increasing the Company’s fixed rate debt exposure and capitalizing on the declining interest rate environment;
		Proactively worked with lenders to ensure ongoing compliance with all covenants and requirements;
		Took prudent steps to reorganize finance and accounting function; and
		Supported the rest of the senior management team in the achievement of the Company’s objectives in other areas of the business.

		Monitored and proactively addressed various concerns throughout 2020 relating to the impact of COVID-19 on our communities and our business, and led government affairs efforts to advocate for better outcomes for the Company and our operators;
		Supported a wide range of capital markets transactions and strategic initiatives;
		Significantly reduced external legal counsel spend in 2020 versus 2019;
		Completed a comprehensive review in corporate governance and drove progress in various areas, including improved proxy disclosures in 2020 and advancements in the corporate secretarial function;
		Completed an organizational and staffing review and drove prudent headcount actions; and
		Implemented a corporate philanthropy program and continued to take steps to promote a healthy and high performing culture.

2020 Long-Term Incentive Compensation

In 2020, the Committee approved two types of vehicles for the Company’s annual LTI awards with each addressing long-term shareholder value alignment in different ways. The Committee believed that granting a combination of Performance Stock Units (“PSUs”) and Restricted Stock Units (“RSUs”) was appropriate to provide shareholder alignment, retention value and the opportunity to leverage awards up and down consistent with stock price performance, as well as Company and individual performance over the long term.

The following table shows the target value of the annual LTI award grants made to NEOs in 2020 as part of the Company’s regular annual compensation process. These LTI values were determined by taking into market competitive total compensation levels and an appropriate mix of fixed versus variable and short-term versus long-term incentives. These values also considered each NEO’s role, potential long-term contribution, performance, experience and skills.

In addition to annual LTI awards, the Compensation Committee may award other grants in the form of PSUs, RSUs, restricted stock awards (“RSAs”) or stock options. These grants are used to attract new senior executives to New Senior, provide additional retention incentive or reward extraordinary performance. In March 2020, the Compensation Committee made such a grant of 38,462 RSUs (target value of $300,000) to Mr. Patel in recognition of the additional service he has been providing to the Company through his service as our interim Chief Financial Officer since September 2019.

Performance Units

PSUs are settled in shares after a three-year performance measurement and vesting period, with performance tied to the Company’s three-year TSR performance relative to one or more indices. The PSUs granted in 2020 utilize both the FTSE Nareit Equity Health Care Index (75% weighting) and the MSCI U.S. REIT Index (25% weighting) as the comparative indices.

All PSUs have an absolute TSR modifier which provides that in the event that the Company has negative returns over the three-year performance period, the award payout will be reduced by 20% down to a minimum of target payout levels.

Relative TSR was selected as the metric by the Committee to ensure executive compensation is aligned with shareholder value creation. TSR performance is measured for companies in the TSR peer group by comparing the closing stock price on the day prior to the start of the three-year performance period to the average closing price over the 20 trading days ending on the last day of the applicable three-year performance cycle, including reinvestment of dividends during the period. Vesting at the end of the applicable three-year performance period is based on the Company’s TSR performance ranked against the TSR performance of the other companies within the indices.

Delivery of shares generally requires employment throughout the three-year performance period. PSUs therefore provide alignment with absolute stock performance, relative stock performance, Company financial performance and potential retention value. Dividend equivalents accrue on unvested PSUs during the three-year performance period and are paid in cash after the awards are settled and actually earned. Expected dividends are included in the calculation of the grant date fair value of PSU awards. Following is a table which sets forth the payout factor for PSU awards granted in 2020:

2019 was the first year that the Company issued PSUs and therefore none have been settled at this time.

Restricted Stock Units

RSUs granted to NEOs generally vest ratably in one-third annual installments and are settled in shares, which provides alignment with stock performance and retention value. Grants of RSUs provide NEOs with stock ownership of unrestricted shares after the restrictions lapse. NEOs receive RSU awards to incentivize long-term value creation as these individuals are in positions most likely to influence the achievement of the Company’s long-term value creation goals and to create shareholder value over time. The Compensation Committee reviews all grants of RSUs for executive officers prior to the award, including awards based on performance, retention-based awards, and awards contemplated for new employees as part of employment offers for executive officers. RSUs do not grant dividend or voting rights to the holder over the vesting period, however, dividend equivalents are accrued and if any cash dividends are declared while the RSUs are outstanding, individuals receive a dividend equivalent payment on or about the date that the dividend is paid to holders of shares generally. Expected dividends are included in the calculation of the grant date fair value of RSU awards. In certain cases, such as for new hires or to facilitate retention, NEOs may receive RSUs subject to different vesting terms.

Other Incentive Awards

The LTI plan provides the Compensation Committee with the discretion to grant various forms of stock-based compensation to employees (including restricted stock, RSUs and PSUs), as well as other non-stock-based awards (including cash awards). Awards are subject to such conditions and restrictions as the Compensation Committee may determine, which may include, without limitation, the achievement of certain performance goals or continued employment with us through a specific period. Payments made under the Company’s AIP are considered non-stock-based awards under the Company’s LTI plan.

Benefits and Perquisites

All of the NEOs are eligible to participate in the Company’s broad-based U.S. employee benefits program. The program includes the New Senior Retirement Savings Plan, which provides before-tax and after-tax savings features, group medical and dental coverage, group life insurance, group accidental death and dismemberment insurance and other benefit plans.

All of the NEOs participate in the New Senior Retirement Savings Plan, a tax-qualified savings plan, which allows employees to contribute to the plan on a before-tax basis or on an after-tax basis. The Company makes a core contribution of 3% of compensation (up to the IRS maximum allowed amount) to the plan for all eligible employees, including each of the NEOs.

The Company provides only those perquisites that it considers to be reasonable and consistent with competitive practices and all of its perquisites are broad-based and apply to all employees. In connection with its lease of its corporate headquarters, the Company was provided with several fully subsidized fitness memberships at the fitness center within the building, and these memberships, which do not have a specific cost to the Company, are allocated first to NEOs. The Company does not provide any tax gross-up for personal income taxes due on any perquisites.

Other Compensation and Benefits

Executive Agreements

Each NEO has an employment agreement with the Company that governs the terms of their employment (collectively, the “Executive Agreements”). For Ms. Givens and Mr. Patel, the agreements have an effective date of January 1, 2019 and expire on December 31, 2021. For Ms. Marino, the agreement has an effective date of April 29, 2019 and expires on April 28, 2022. The agreements for Ms. Givens and Mr. Patel were attached as Exhibits 10.5 and 10.7 to the Annual Report on Form 10-K filed with the SEC on February 26, 2019. The agreement for Ms. Marino is attached as Exhibit 10.7 to the Annual Report on Form 10-K filed with the SEC on February 28, 2020.

The post-termination and severance provisions of these agreements are discussed under the heading “Potential Post Employment Compensation” below.

Term

The Executive Agreements for the NEOs other than Ms. Marino became effective as of the date of the Internalization on January 1, 2019. Ms. Marino’s Executive Agreement became effective on her starting date, April 29, 2019. The Executive Agreements provide for three-year terms, subject to automatic renewals of additional successive one-year periods. The Executive Agreements provide that each of the NEOs, each in their respective capacity as executive officers (collectively, the “Executive Officers,” and each, an “Executive Officer”), can voluntarily terminate his or her employment or service for any reason upon 30 days’ notice, or may resign for good reason. The Company may also terminate the Executive Agreements without cause. The terms “cause” and “good reason,” are discussed in “Potential Post Employment Compensation” below.

Compensation

The Executive Agreements provide that Ms. Givens, Ms. Marino and Mr. Patel will receive annual base salaries which are subject to adjustment by the Compensation Committee of the Board. The current base salaries of each NEO are $750,000 for Ms. Givens, $350,000 for Mr. Patel and $425,000 for Ms. Marino. Each Executive Agreement further states that each Executive Officer is eligible to receive an annual incentive bonus payable in cash, and annual grants of time- and performance-based equity awards, in each case as described elsewhere in this Compensation Discussion and Analysis. Each Executive Agreement provides that each NEO is entitled to participate in the same manner as other similarly situated employees of the Company in all benefit programs that are generally made available to the Company’s employees, and to be reimbursed for reasonable and customary expenses related to his or her employment and entitled to paid time off in accordance with the Company’s policies.

Non-Competition, Non-Solicitation, Intellectual Property, Confidentiality and Non-Disparagement

The Executive Agreements provide that during employment and for the one-year period following the termination of his or her employment with the Company for any reason, the NEO will not solicit our employees, consultants or independent contractors, or our investors. In addition, during employment and for the one-year period following the termination of his or her employment with the Company for any reason, each NEO may not compete with the Company. Each Executive Agreement also contains covenants relating to the treatment of confidential information and intellectual property matters.

Parachute Payments

Each Executive Agreement provides that to the extent that any payments and benefits provided under the agreement and under any other agreement or arrangement between the Company and the NEO would constitute a “parachute payment” (as defined in Section 280G of the Code), the amount of such payments shall be reduced to the extent necessary so that no portion thereof shall be subject to the excise tax imposed by Section 4999 of the Code but only if, by reason of such reduction, the net after-tax benefit received by the NEO shall exceed the net after-tax benefit received by the NEO if no such reduction was made.

Section 409A

Each Executive Agreement provides that it is intended to comply with the requirements of Section 409A of the Code, to the extent applicable, and the Executive Agreement will be interpreted to avoid any penalty sanctions under Section 409A of the Code. Accordingly, each Executive Agreement provides that all of its provisions will be construed and interpreted to comply with Section 409A and, if necessary, any such provision shall be deemed amended to comply with Section 409A of the Code and regulations thereunder. If any payment or benefit cannot be provided or made at the time specified herein without incurring sanctions under Section 409A of the Code, then such benefit or payment shall be provided in full on the first business day after the earlier of (i) the date that is six (6) months following separation from service and (ii) the NEO’s death. To the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A, an NEO shall not be considered to have terminated employment with the Company, and no payment shall be due, until they would be considered to have incurred a “separation from service” from the Company within the meaning of Section 409A.

Any payments that are due within the “short-term deferral period” as defined in Section 409A shall not be treated as deferred compensation unless applicable law requires otherwise. Each amount to be paid or benefit to be provided to an NEO pursuant to his or her Executive Agreement that constitutes deferred compensation subject to Section 409A shall be construed as a separate identified payment for purposes of Section 409A.

Post-Employment Compensation

Severance arrangements for NEOs are set forth in each NEO’s Executive Agreement. The Company does not maintain a formal severance plan. The purpose of the severance arrangements in the Executive Agreements is to provide a period of transition for senior executives in the event of a termination or a change in control. These arrangements do not allow for the payment of tax gross-ups on severance pay or other benefits. These arrangements, including the potential post-employment payments that our NEOs would receive pursuant to these arrangements, are described in more detail elsewhere in this Compensation Discussion and Analysis under the heading “Potential Post-Employment Compensation.”

Policies

Compensation Risk Assessment

In 2020, the Compensation Committee reviewed the potential risks in the Company’s compensation program to ensure that the Company’s compensation program does not encourage excessive risk taking. After reviewing the analysis, the Compensation Committee concluded that any risks arising from our compensation program are not reasonably likely to have a material adverse effect on us. We believe our executive compensation program appropriately balances risk with maximizing long-term shareholder value.

The Compensation Committee believes that the following risk oversight and compensation design features assist in guarding against excessive risk taking:

Executive Stock Ownership Guidelines

In 2019, the Compensation Committee adopted stock ownership guidelines for the Chief Executive Officer and all of the Company’s executive vice presidents (collectively the “Covered Executives”), which include all of the NEOs. Covered Executives have five years in order to meet the guidelines. As of the date of this Proxy Statement, all NEOs either have met the guidelines, or are on track to meet the guidelines.

The guidelines specify expected stock ownership levels expressed as a multiple of base salary, as set forth in the table below. Only the following equity holdings count toward achieving these ownership levels: shares owned outright and restricted stock and RSUs (whether vested or unvested). Stock options and unvested PSUs, which may comprise a significant percentage of total compensation for the CEO and other NEOs, do not count towards the achievement of our executive stock ownership guidelines.

Until an executive has attained the ownership levels set forth in the guidelines, executives are prohibited from selling any restricted stock that vests and becomes unrestricted and are required to hold all shares acquired through the exercise of stock options (except to the extent necessary to meet tax and exercise price obligations). Once an executive achieves his or her stock ownership level, the retention restrictions no longer apply unless a disposition of shares causes the person’s stock ownership to fall below the guideline. Both the guidelines, and compliance with the guidelines, are monitored periodically.

The stock ownership guidelines, as well as the Company’s insider trading policy, both prohibit hedging and speculative trading in and out of the Company’s securities, including short sales and leverage transactions, such as puts, calls, and listed and unlisted options.

Considerations of Tax and Accounting Impacts

The Compensation Committee has considered the anticipated tax treatment to New Senior regarding the compensation and benefits paid to the NEOs under Section 162(m) of the Internal Revenue Code of 1986 (the “Code”). In general, Section 162(m) places a limit of $1,000,000 on the amount of compensation that may be deducted annually by New Senior with respect to certain “covered employees,” which generally includes all of its NEOs. The Compensation Committee has sought to maintain flexibility in compensating executives, and, as a result, New Senior has not adopted a policy requiring that all compensation be deductible, including compensation intended to qualify as “performance-based” compensation and take advantage of the exemption from Section 162(m)’s deduction limits.

Because New Senior operates in such a manner that it will qualify as a REIT under the Code, and therefore is not subject to federal income taxes to the extent New Senior distributes at least 90% of its REIT taxable income, the payment of compensation that does not satisfy the requirements of Section 162(m) will not generally affect our net income, although to the extent that compensation does not qualify for deduction under Section 162(m), a larger portion of shareholder distributions may be subject to federal income taxation as dividend income rather than return of capital. We do not believe that Section 162(m) will materially affect the taxability of shareholder distributions, although no assurance can be given in this regard due to the variety of factors that affect the tax position of each shareholder. For these reasons, Section 162(m) does not directly govern the Committee’s compensation policy and practices.

Potential Post-Employment Compensation

In this section, we describe payments that may be made to our Named Executive Officers (“NEOs”) upon several events of termination, assuming the termination event occurred on December 31, 2020.

Susan Givens

Ms. Givens’ Executive Agreement provides that if Ms. Givens’ employment is terminated by the Company without “cause” (including non-renewal of the Executive Agreement by the Company) or by Ms. Givens for “good reason” (each, a “Qualifying Termination”) other than on or within one year following a change in control and Ms. Givens executes a release of claims in favor of the Company, then Ms. Givens will be entitled to receive the following payments and benefits: (i) a lump sum payment equal to two times the sum of her base salary and target bonus, (ii) a prorated portion of her target bonus for the year of termination (the “Prorated Bonus”) and (iii) a lump sum payment equal to the cost of 18 months of health, prescription drug, dental and vision coverage premiums less the portion of such premiums payable by active employees of the Company (“Health and Welfare Premiums”). If a Qualifying Termination occurs on or within one year after a change in control, then Ms. Givens will be entitled to receive: (i) a lump sum payment equal to three times the sum of her base salary and target bonus, (ii) the Prorated Bonus and (iii) a lump sum payment equal to the cost of 18 months of Health and Welfare Premiums.

The Executive Agreement also provides that Ms. Givens will be subject to certain non-competition and non-solicitation restrictions for 12 months following the termination of her employment by the Company for “cause” or by Ms. Givens without “good reason,” and for 18 months following a Qualifying Termination.

Bhairav Patel

Mr. Patel’s Executive Agreement provides that if a Qualifying Termination occurs other than on or within one year following a change in control and Mr. Patel executes a release of claims in favor of the Company, then Mr. Patel will be entitled to receive the following payments and benefits: (i) a lump sum payment equal to the sum of his base salary and target bonus (and if such termination occurred prior to January 1, 2020, Mr. Patel’s cash transition bonus), (ii) the Prorated Bonus, (iii) a lump sum payment equal to the cost of 12 months of Health and Welfare Premiums and (iv) to the extent not yet paid, Mr. Patel’s cash transition bonus. In addition, if such termination occurs on or after the end of a given year but before the date that annual bonuses in respect of such year are paid, then Mr. Patel will receive the annual bonus he would have received if he had remained employed through the payment date (the “Prior Year Bonus”). If a Qualifying Termination occurs on or within one year after a change in control, then Mr. Patel will be entitled to receive:

(i) a lump sum payment equal to two times the sum of his base salary and target bonus (and if such termination occurs prior to January 1, 2020, Mr. Patel’s cash transition bonus), (ii) the Prorated Bonus, (iii) a lump sum payment equal to the cost of 18 months of Health and Welfare Premiums, (iv) to the extent not yet paid, Mr. Patel’s cash transition bonus and (v) the Prior Year Bonus.

Mr. Patel’s Executive Agreement provides that if Mr. Patel’s employment terminates due to death or “disability,” Mr. Patel will be entitled to receive (i) to the extent not yet paid, Mr. Patel’s cash transition bonus and (ii) the Prior Year Bonus.

The Executive Agreement also provides that Mr. Patel will be subject to certain non-competition and non-solicitation restrictions for 12 months following the termination of his employment for any reason.

Lori B. Marino

Ms. Marino’s Executive Agreement provides that if a Qualifying Termination occurs other than on or within one year following a change in control and Ms. Marino executes a release of claims in favor of the Company, then Ms. Marino will be entitled to receive the following payments and benefits: (i) a lump sum payment equal to the sum of her base salary and target bonus, (ii) the Prorated Bonus and (iii) a lump sum payment equal to the cost of 12 months of Health and Welfare Premiums. In addition, if such termination occurs on or after the end of a given year but before the date that annual bonuses in respect of such year are paid, then Ms. Marino will receive the Prior Year Bonus. If a Qualifying Termination occurs on or within one year after a change in control, then Ms. Marino will be entitled to receive: (i) a lump sum payment equal to two times the sum of her base salary and target bonus, (ii) the Prorated Bonus, (iii) a lump sum payment equal to the cost of 18 months of Health and Welfare Premiums and (iv) the Prior Year Bonus.

Ms. Marino’s Executive Agreement provides that if Ms. Marino’s employment terminates due to death or “disability,” Ms. Marino will be entitled to receive the Prior Year Bonus.

The Executive Agreement also provides that Ms. Marino will be subject to certain non-competition and non-solicitation restrictions for 12 months following the termination of her employment for any reason.

Treatment of Equity Awards

Restricted stock awards and unvested options held by the NEOs will become fully vested upon a Qualifying Termination at any time, provided that such vesting will be subject to the NEO’s compliance with the restrictive covenants contained in the applicable Executive Agreement and the NEO’s execution without revocation of a release of claims.

Upon a Qualifying Termination prior to a change in control, (i) the portion of unvested RSUs held by the NEOs that is scheduled to vest on the next vesting date after the date of termination will fully vest upon such termination and (ii) outstanding PSUs held by the NEOs will vest based on actual achievement of applicable performance criteria as of the date of termination, prorated based on the period of time that has elapsed during the applicable performance period, provided that, in each case, such vesting will be subject to the NEO’s compliance with the restrictive covenants contained in the applicable Executive Agreement and the NEO’s execution without revocation of a release of claims.

Upon a change in control, a number of PSUs equal to the greater of (i) the number of PSUs that would vest based on target level of achievement and (ii) the number of PSUs that would vest based on the actual level of achievement of applicable performance criteria as of the date of the change in control (in each case, without any proration), will convert into RSUs that will vest based solely on the NEO’s continued employment with the Company through the applicable vesting date. All unvested RSUs (including PSUs that convert into RSUs upon a change in control) held by the NEOs will fully vest upon a Qualifying Termination at any time upon or following a change in control.

Upon a termination of employment due to death or “disability,” all outstanding equity awards held by the NEOs will fully vest upon such termination of employment, provided that any outstanding PSUs will vest at target achievement level.

The following table sets forth information on the potential payments to our applicable NEOs upon certain qualifying terminations of employment, assuming such termination occurred on December 31, 2020.