Ventas (VTR)

Long-Term Incentive Compensation

As described above, the Compensation Committee believes that a substantial portion of each Named Executive Officer’s compensation should be in the form of long-term incentive compensation. Long-term incentive awards are based on a number of criteria as determined by the Compensation Committee, including the achievement of pre-established corporate and individual goals for the performance year. At the beginning of each year, a range of earnings opportunity, expressed as multiples of base salary and corresponding to three levels of performance (threshold, target and maximum), is established for each executive. Long-term incentive opportunity is generally targeted at the 65^th percentile of the Comparable Companies. However, the Compensation Committee reviews the performance metrics and required performance levels in the context of market pay and performance data each year when setting the range of earnings opportunity and when determining the actual awards earned. Long-term incentive awards are then determined and granted in the first quarter of the year following the performance year.

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The table below illustrates the earnings opportunities of each of the Named Executive Officers under our long-term incentive plan for performance in fiscal 2008 that were approved by the Compensation Committee and by the non-management members of the Board, in the case of the Chief Executive Officer, in January 2008:

At these target levels, the 2008 long-term incentives for each Named Executive Officer result in total direct compensation levels that approximate the 65^th percentile or lower based on information from the PM&P compensation study.

For 2008, the value of the long-term incentive award was based on the accomplishment of a series of corporate objectives, including total shareholder return (absolute and relative to our peers), our integration of the assets and operations acquired through the Sunrise REIT acquisition, effective diversification, continued development of our medical office building business, strong credit characteristics, balance sheet management and capital markets execution, business ethics and reputation and individual performance, and other factors deemed appropriate by the Compensation Committee, in each case at the discretion of the Compensation Committee. While there was no specific weighting or target level attributed to any of these factors, the Compensation Committee carefully analyzed these factors in determining the 2008 long-term incentive awards.

In January 2009, the Compensation Committee determined that each of the Named Executive Officers had performed well against the performance objectives under the long-term incentive plan for 2008 based on the accomplishments described above. Accordingly, the long-term incentive awards granted to each of the Named Executive Officers exceeded their respective target levels and equaled 25% of the range between their respective target and maximum levels. As previously stated, the Compensation Committee believes the Chief Executive Officer should have the greatest alignment with our shareholders, and, therefore, her compensation structure was designed to reflect higher sensitivity to performance than the other Named Executive Officers. The actual award amounts ranged from 2.25x to 5.63x base salary as follows: Ms. Cafaro—$3,546,900; Mr. Schweinhart—$815,063; Mr. Lewis—$1,067,800; and Mr. Riney—$756,000. The portions of these amounts recognized by us as stock-based compensation expense in 2008 are reflected in the 2008 Summary Compensation Table below.

For 2008, long-term incentive compensation consisted of equity awards in the form of stock options and shares of restricted stock made pursuant to our 2006 Incentive Plan. The Compensation Committee recognizes that while the annual cash incentive plan provides rewards for positive short-term and mid-term performance, the interests of stockholders are served by giving key employees the opportunity to participate in the appreciation of our Common Stock through grants of stock options and restricted stock awards. The use of equity awards encourages management to create stockholder value over the long term because the full benefit of the compensation package cannot be realized unless an appreciation in price of the Common Stock occurs over time. In addition, equity awards are an effective tool for management retention because vesting occurs over a number of years.

For 2008, the Compensation Committee determined that 70% of the value of the long-term incentive award should be granted in the form of shares of restricted stock and 30% should be granted as stock options. The long-term incentive equity mix is weighted more heavily toward restricted stock because we believe that restricted stock provides a stronger incentive to create and preserve long-term stockholder value. Furthermore, we believe that restricted stock is the most prevalent form of long-term incentive compensation in our competitive market. Equity grants for the Named Executive Officers, other than the Chief Executive Officer, are made on the date

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that the Compensation Committee meets to review annual performance and determine the long-term incentive awards. For the Chief Executive Officer, equity grants are made on the date that the non-management members of the Board meet to review and approve the recommendations of the Compensation Committee, which typically has been the same date on which equity grants for the other Named Executive Officers are made. In general, shares of restricted stock and stock options granted to executives vest in three equal annual installments, beginning on the date of grant, and stock options are subject to a ten-year term. The stock option exercise price is the closing price of our Common Stock on the date of grant.

Prior to January 1, 2007, our long-term incentive compensation for executive officers also included a cash award made pursuant to the deferred cash incentive program under our 2000 Incentive Compensation Plan. Under this program, 40% of the value of the long-term incentive award was deferred for three years from the beginning of the fiscal year to which the award related and was paid in cash, if at all, at the end of the three-year period. The Compensation Committee believed this program was an effective incentive for management to create long-term value for stockholders due to the performance-based nature of the award and the fact that the cash payout was deferred for three years. It also believed that the three-year “cliff” vesting schedule provided an enhanced retention incentive for the Named Executive Officers. In 2007, however, the Compensation Committee determined that long-term incentive compensation should be entirely equity-based in order to better reflect our competitive market and elected to discontinue the deferred cash incentive program in favor of all equity awards for periods beginning after January 1, 2007 (without affecting or removing any cash awards for periods prior to that date, including payments under prior cash awards to be made after that date). The final payments were made to the Named Executive Officers under the deferred cash incentive program for the 2006-2008 period in January 2009 as follows:

Long-Term Incentive Compensation

As described above, the Compensation Committee believes that a substantial portion of each Named Executive Officer’s compensation should be in the form of long-term incentive compensation. Long-term incentive awards are based on a number of criteria as determined by the Compensation Committee, including the achievement of pre-established corporate and individual goals for the performance year. At the beginning of each year, a range of earnings opportunity, expressed as multiples of base salary and corresponding to three levels of performance (threshold, target and maximum), is established for each executive. Long-term incentive opportunity is generally targeted at the 65^th percentile of the Comparable Companies. However, the Compensation Committee reviews the performance metrics and required performance levels in the context of market pay and performance data each year when setting the range of earnings opportunity and when determining the actual awards earned. Long-term incentive awards are then determined and granted in the first quarter of the year following the performance year.

The table below illustrates the earnings opportunities of each of the Named Executive Officers under our long-term incentive plan for performance in fiscal 2007 that were approved by the Compensation Committee in February 2007 and by the non-management members of the Board, in the case of the Chief Executive Officer, in December 2006:

At these target levels, the 2007 long-term incentives for each Named Executive Officer other than the Chief Executive Officer approximate the 65^th percentile based on information from the PM&P compensation study.

For 2007, the value of the long-term incentive award was based on the accomplishment of a series of corporate objectives, including total shareholder return (absolute and relative to our peers), our integration of the assets and operations acquired through the Sunrise REIT acquisition, FFO per share growth, effective diversification, balance sheet management and capital markets execution, business ethics and reputation and individual performance, and other factors deemed appropriate by the Compensation Committee, in each case at the discretion of the Compensation Committee. While there was no specific weighting or target level attributed to any of these factors, the Compensation Committee carefully analyzed these factors in determining the 2007 long-term incentive awards.

In January 2008, the Compensation Committee determined that each of the Named Executive Officers (other than the Chief Executive Officer, whose long-term incentive award was predetermined in connection with the negotiation of her amended and restated employment agreement in December 2006) had met and exceeded

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the maximum level performance objectives under the long-term incentive plan for 2007 based on the accomplishments described above. Accordingly, the long-term incentive awards granted to the Named Executive Officers (other than the Chief Executive Officer) ranged from 2.4x to 3x base salary and are reflected in the 2007 Summary Compensation Table below. Ms. Cafaro’s long-term incentive award having an aggregate value of $5.4 million is also reflected in the 2007 Summary Compensation Table below.

For 2007, long-term incentive compensation consisted of equity awards in the form of stock options and shares of restricted stock made pursuant to our 2006 Incentive Plan. The Compensation Committee recognizes that while the annual cash incentive plan provides rewards for positive short-term and mid-term performance, the interests of stockholders are served by giving key employees the opportunity to participate in the appreciation of our Common Stock through grants of stock options and restricted stock awards. The use of equity awards encourages management to create stockholder value over the long term because the full benefit of the compensation package cannot be realized unless an appreciation in price of the Common Stock occurs over time. In addition, equity awards are an effective tool for management retention because vesting occurs over a number of years.

For 2007, the Compensation Committee determined that 70% of the value of the long-term incentive award should be granted in the form of shares of restricted stock and 30% should be granted as stock options. The long-term incentive equity mix is weighted more heavily toward restricted stock because we believe that restricted stock provides a stronger incentive to create and preserve long-term stockholder value. Furthermore, we believe that restricted stock is the most prevalent form of long-term incentive compensation in our competitive market. Equity grants for the Named Executive Officers, other than the Chief Executive Officer, are made on the date that the Compensation Committee meets to review annual performance and determine the long-term incentive awards. For the Chief Executive Officer, equity grants are made on the date that the non-management members of the Board meet to review and approve the recommendations of the Compensation Committee, which typically has been the same date on which equity grants for the other Named Executive Officers are made. In general, shares of restricted stock and stock options granted to executives vest in three equal annual installments, beginning on the date of grant, and stock options are subject to a ten-year term. The stock option exercise price is the closing price of our Common Stock on the date of grant.

Prior to January 1, 2007, our long-term incentive compensation for executive officers also included a cash award made pursuant to the deferred cash incentive program under our 2000 Incentive Compensation Plan. Under this program, 40% of the value of the long-term incentive award was deferred for three years from the beginning of the fiscal year to which the award related and was paid in cash, if at all, at the end of the three-year period. The Compensation Committee believed this program was an effective incentive for management to create long-term value for stockholders due to the performance-based nature of the award and the fact that the cash payout was deferred for three years. It also believed that the three-year “cliff” vesting schedule provided an enhanced retention incentive for the Named Executive Officers. In 2007, however, the Compensation Committee determined that long-term incentive compensation should be entirely equity-based in order to better reflect our competitive market and elected to discontinue the deferred cash incentive program in favor of all equity awards for periods beginning after January 1, 2007 (without affecting or removing any cash awards for periods prior to that date, including payments under prior cash awards to be made after that date). The final payments, if any, to be made to the Named Executive Officers under the deferred cash incentive program for the 2006-2008 period will occur in January 2009.

Long-Term Incentive Compensation

As described above, the Compensation Committee believes that a substantial portion of each Named Executive Officer’s compensation should be in the form of long-term incentive compensation. Long-term incentive awards are based on a number of criteria as determined by the Compensation Committee, including the achievement of pre-established corporate and individual goals for the performance year. At the beginning of each year, a range of earnings opportunity, expressed as multiples of base salary and corresponding to three levels of performance (threshold, target and maximum), is established for each executive. Long-term incentive opportunity is generally targeted at the 65^th percentile of the Comparable Companies. However, the Compensation Committee reviews the performance metrics and required performance levels in the context of market pay and performance data each year when setting the range of earnings opportunity and when determining the actual awards earned. Long-term incentive awards are then determined and granted in the first quarter of the year following the performance year.

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The table below illustrates the earnings opportunities of each of the Named Executive Officers under our long-term incentive plan for performance in fiscal 2006 that were approved by the Compensation Committee and the independent members of the Board, in the case of the Chief Executive Officer, in December 2005:

For 2006, the value of the long-term incentive award was based on the accomplishment of a series of corporate objectives, including total shareholder return (absolute and relative to our peers), the outcome of our rental reset right with Kindred, FFO per share growth and diversification, balance sheet management and capital markets execution, business ethics and reputation and individual performance, and other factors deemed appropriate by the Compensation Committee, in each case at the discretion of the Compensation Committee. While there was no specific weighting or target level attributed to any of these factors, the Compensation Committee carefully analyzed these factors in determining the 2006 long-term incentive awards.

In January 2007, the Compensation Committee determined that each of the Named Executive Officers had met and exceeded the maximum level performance objectives under the long-term incentive plan for 2006 based on the accomplishments described above. Accordingly, the long-term incentive awards granted to the Named Executive Officers ranged from two times to four times base salary and are reflected in the 2006 Summary Compensation Table below. In addition, Mr. Riney received a discretionary bonus in excess of his maximum long-term incentive opportunity in recognition of his significant contributions to the completion of important strategic acquisitions in 2006.

For 2006, long-term incentive compensation consisted of: (i) equity awards in the form of stock options and shares of restricted stock made pursuant to our 2000 Incentive Compensation Plan and (ii) cash awards made pursuant to the deferred cash incentive program under our 2000 Incentive Compensation Plan. In 2007, the Compensation Committee elected to discontinue the deferred cash incentive program in favor of equity awards for periods beginning after January 1, 2007 (without affecting or removing any cash awards for periods prior to that date, including payments under prior cash awards to be made after that date).

Equity Awards. The Compensation Committee recognizes that while the annual cash incentive program provides rewards for positive short-term and mid-term performance, the interests of stockholders are served by giving key employees the opportunity to participate in the appreciation of our Common Stock through grants of stock options and restricted stock awards. The use of equity awards encourages management to create stockholder value over the long-term because the full benefit of the compensation package cannot be realized unless an appreciation in price of the Common Stock occurs over time. In addition, equity awards are an effective tool for management retention because vesting occurs over a number of years. Stock options and shares of restricted stock/restricted stock units are granted to executive officers based on a number of criteria as determined by the Compensation Committee, including our total return to stockholders as compared to other healthcare REITs.

For 2006, the Compensation Committee determined that 40% of the value of the long-term incentive award should be granted in the form of shares of restricted stock and 20% should be granted as stock options (with the remaining 40% being in the form of deferred cash, as described below). The equity component of our long-term incentive mix is weighted more heavily toward restricted stock because we believe that restricted stock provides a stronger incentive to create and preserve long-term stockholder value. Furthermore, restricted stock is the most

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prevalent form of long-term incentive compensation in our competitive market. Equity grants for the Named Executive Officers, other than the Chief Executive Officer, are made on the date that the Compensation Committee meets to review annual performance and determine the long-term incentive awards. For the Chief Executive Officer, equity grants are made on the date that the independent members of the Board meet to review and approve the recommendations of the Compensation Committee. In general, shares of restricted stock and stock options granted to executives vest in three equal annual installments, beginning on the date of grant, and the stock option exercise price is the closing price of our Common Stock on the date of grant.

Deferred Cash Incentive Payments. In 2006, we continued to maintain a deferred cash incentive program as part of our long-term incentive compensation arrangements for executive officers. Under the arrangement, 40% of the value of the long-term incentive award is deferred for three years from the beginning of the fiscal year to which the award relates and is paid in cash, if at all, at the end of the three-year period. The Compensation Committee believed this program was an effective incentive for management to create long-term value for stockholders due to the performance-based nature of the award and the fact that the cash payout was deferred for three years. It also believed that the three-year “cliff” vesting schedule provided an enhanced retention incentive for the Named Executive Officers. In 2007, however, the Compensation Committee determined that long-term incentive compensation should be entirely equity-based in order to better reflect our competitive market and elected to discontinue the deferred cash incentive program, such that long-term incentive awards for 2007 and periods beyond will no longer be paid in cash and subject to deferral under this arrangement.

3.    Long-Term Incentive Compensation

A.    Stock Options and Restricted Stock/Restricted Stock Unit Awards

The Compensation Committee recognizes that while the annual cash incentive compensation program provides rewards for positive short-term and mid-term performance, the interests of stockholders are served by giving key employees the opportunity to participate in the appreciation of the Common Stock through the grants of stock options and restricted stock/restricted stock unit awards. The use of such awards provides a long-term link between the results achieved for the Company’s stockholders and the reward provided to executive officers. Stock options and shares of restricted stock/restricted stock units are granted to executive officers primarily based on the Company’s total return to stockholders and as compared to other healthcare REITs and other criteria determined by the Compensation Committee. Stock-based compensation also provides an effective incentive for management to create stockholder value over the long-term because the full benefit of the compensation package cannot be realized unless an appreciation in price of the Common Stock occurs over a number of years. The stock-based compensation is an effective tool for management retention because vesting of the stock-based awards occurs over a number of years.

B.    Deferred Incentive Cash Plan

With the advice and recommendation of an expert independent consultant, the Compensation Committee established a deferred incentive cash plan as part of the Company’s long-term incentive compensation arrangements for executive officers. Beginning in 2003, forty percent of the annual long-term incentive compensation award is deferred for three years and paid in cash, if at all, at the end of the three-year period based on certain criteria. The deferred incentive cash plan is an effective incentive for management to create long-term value for stockholders because the cash payout is based upon performance over a three-year period and the cash payment is deferred for three years.