CareTrust REIT Inc

2023 Base Salaries

We pay each named executive officer a fixed base salary to provide each executive with a minimum level of cash compensation. One aspect of our executive compensation philosophy is to pay a base salary level that, when combined with the annual performance-based cash bonus opportunity and the target value of annual long-term equity awards, results in more than two-thirds of the named executive officers’ total annual compensation opportunity being at risk and tied to performance metrics and/or the price of our Common Stock.

Decisions regarding adjustments to base salaries are made at the discretion of our compensation committee, after considering each executive’s current base salary, job responsibilities, performance, the base salaries paid by our Peer Group companies to similarly situated executives and our base salary compensation philosophy described above. No named executive officers are entitled to any automatic base salary increases.

The compensation committee reviewed each named executive officer’s base salary in December 2022 and approved the following increases to their annual base salary for 2023: Mr. Sedgwick’s base salary was increased from $700,000 to $800,000; Mr. Wagner’s base salary was increased from $529,200 to $555,660; and Mr. Callister’s base salary was increased from $465,000 to $500,000. The compensation committee determined the base salary increases for each named executive officer were appropriate to adjust for approximate cost of living increases and a merit increase based on 2022 performance. In addition, for Messrs. Sedgwick and Callister, the base salary increases reflected additional slight increases to adjust the base salary levels closer to peer comparison levels for similarly situated executives following their recent promotions to President and Chief Executive Officer and Chief Investment Officer, respectively.

2023 Annual Cash Incentive Awards

In General. We provide our named executive officers with a performance-based annual cash incentive compensation opportunity to motivate and reward the executives for their achievement of annual financial and operational goals and other strategic objectives measured over the year. We believe the annual cash incentive opportunity helps further our compensation objective of aligning executive compensation with achievement of the Company’s corporate strategies, business objectives and the creation of long-term value for our stockholders.

Design. Based on input from Pearl Meyer, the compensation committee redesigned the structure of the annual cash incentive program for 2021 to more closely reflect peer group practices, and the compensation committee has continued this program structure in subsequent years. The principal change to the named executive officers’ cash incentive opportunity under this new program structure was that the compensation committee determined to approve a predetermined target bonus amount for each named executive officer, rather than having percentage values for each performance metric that are multiplied by an executive’s base salary in order to determine the bonus payout. We believe that having a predetermined target bonus amount, coupled with upside and downside leverage, is more consistent with the practices of our peer group based on Pearl Meyer’s study. As further described below, for 2023 the compensation committee retained the key incentive metrics used for annual cash incentive opportunities in prior years. The compensation committee believes that these incentive metrics have served to effectively incentivize our named executive officers’ performance. The compensation committee also determined to continue use of a separate ESG Incentives metric for our President and Chief Executive Officer.

Incentive Targets. For 2023, the compensation committee established the following annual cash incentive bonus targets for each named executive officer.

Mr. Sedgwick’s annual cash incentive bonus target was set at 150% of his annual base salary, which increased slightly from the percentage of annual base salary applicable to his annual cash incentive bonus target for 2022 to adjust his total cash compensation level closer to peer comparison levels for similarly situated executives following Mr. Sedgwick’s recent promotion to President and Chief Executive Officer and taking into account his additional year of experience in that role. For Mr. Wagner and Mr. Callister, the above annual cash incentive bonus targets represented 100% of each named executive officer’s annual base salary, which corresponded to the same percentage of annual base salary applicable to their respective annual cash incentive bonus target for 2022.

Incentive Metrics. Under our annual cash incentive plan design for 2023, the compensation committee selected the following performance measures to evaluate executive incentive performance:

(1) NFFO per share for 2023;

(2) capital deployment;

(3) average net debt to normalized run rate EBITDA calculated at each quarter end during 2023; and

(4) for our President and Chief Executive Officer, certain ESG Incentives as further described below.

FFO, as defined by the National Association of Real Estate Investment Trusts (“Nareit”), is an important supplemental measure not computed in accordance with GAAP and measures operating performance for a REIT. FFO is defined by Nareit as net income computed in accordance with GAAP, excluding gains or losses from real estate dispositions, real estate depreciation and amortization and impairment charges, and adjustments for unconsolidated partnerships and joint ventures. We compute FFO in accordance with Nareit’s definition. NFFO adjusts FFO for certain revenue and expense items that we do not believe are indicative of our ongoing operating results, such as provision for loan losses, provision for doubtful accounts and lease restructuring, effect of the senior unsecured notes payable redemption, recovery of previously reversed rent, lease termination revenue, accelerated amortization of stock-based compensation, non-routine transaction costs, loss on extinguishment of debt, unrealized loss on other real estate related investments and property operating expenses. Normalized EBITDA represents net income before interest expense (including amortization of deferred financing costs) and amortization of stock-based compensation, and depreciation and amortization, adjusted for certain income and expense items we do not believe are indicative of our ongoing operating results, such as real estate impairment charges, provision for loan losses, provision for doubtful accounts and lease restructuring, recovery of previously reversed rent, lease termination revenue, property operating expenses, non-routine transaction costs, loss on extinguishment of debt, unrealized loss on other real estate related investments and gains or losses from dispositions of real estate or other real estate. These performance measures are non-GAAP financial measures for which net income is the most directly comparable financial measure reported under GAAP.

The compensation committee chose NFFO per share as a performance metric because the committee believes it is a common performance metric used by investors to evaluate the performance of REITs, and the committee believes that motivating the executives to drive growth in our NFFO per share performance will in turn benefit stockholders in the form of increased stockholder returns. For 2023, the compensation committee determined the following threshold, target and high performance levels for our NFFO per share: NFFO per share of $1.314 to earn the threshold bonus amount, $1.349 to earn the target bonus amount, and $1.374 to earn the high bonus amount payable with respect to this performance measure.

The NFFO per share performance levels set by the compensation committee were lower than the NFFO per share levels established for 2022 to reflect expected lower revenue levels during 2023 compared to 2022 due to expectations for a continued challenging operating environment caused by, among other things, a delayed recovery in tenant occupancy levels in connection with the COVID-19 pandemic, ensuing labor shortages and lower Provider Relief Funds for healthcare providers under the Public Health Emergency than expected. The compensation committee determined a target level for our 2023 NFFO per share performance that represented business plan expectations for 2023, including the lower revenue expectations as well as expected investment and disposition activity, including the continued execution of the Company’s previously announced repositioning plan. The threshold NFFO per share performance level for 2023 reflected a potential higher risk of rental revenue loss to account for, among other things, rent collection at levels lower than expected as well as possible re-tenanting or rent deferral actions for certain tenants. Conversely, the high NFFO per share performance level was set at a level that could be achieved only if our 2023 NFFO per share exceeded our expectations. The compensation committee believed the target NFFO per share level would require the named executive officers to successfully execute our business plan during 2023, while it believed the maximum bonus opportunity for the NFFO per share performance metric was a stretch goal that was meant to be difficult to attain. The compensation committee determined that the lower NFFO per share metrics for each of the threshold, target and high levels compared to prior years was appropriate in light of the continuing challenges facing the Company that were expected to continue in 2023 given the ongoing risk that the COVID-19 pandemic and prolonged recovery continued to present.

The compensation committee chose our capital deployment and our 2023 average quarterly net debt to normalized run rate EBITDA ratio as performance metrics because it wanted to motivate the executives to grow our portfolio and pursue new tenant relationships with quality operators to further diversify our revenue stream, while at the same time motivating the executives to responsibly manage our leverage ratios and our overall capital structure.

For 2023, the compensation committee required capital deployment of $100 million to earn the threshold bonus amount, $150 million to earn the target bonus amount, and $200 million to earn the high bonus amount payable with respect to this performance measure. Additionally, a super high performance measure was included as part of the capital deployment objective, which required capital deployment of $400 million to earn the super high bonus amount payable with respect to this performance measure. With respect to our leverage levels, the compensation committee required a 2023 average quarterly ratio of net debt to normalized run rate EBITDA to be 4.50x to earn the threshold bonus amount, 4.25x to earn the target bonus amount, and 4.00x to earn the high bonus amount payable with respect to this performance measure. The capital deployment targets were higher compared to 2022, reflecting cautious optimism about the Company’s chances to grow through acquisitions in 2023 following the challenging industry dynamics for investments that existed during the height of the COVID-19 pandemic and into 2022. The capital deployment target was held constant at the super high amount compared to 2022 to reward the named executive officers if investment activity in 2023 significantly exceeded expectations. Finally, the net debt-to-normalized EBITDA ratio targets were set slightly higher than 2022 levels to reflect the expected use of more debt to finance investments in order to bring our net debt-to-normalized EBITDA ratio to our stated range of 4.0x to 5.0x. As noted above, we believe these capital deployment and ratio of net debt to normalized EBITDA targets operated in tandem to motivate the executives to grow and diversify our portfolio while at the same time motivating them to responsibly manage our capital structure and use of leverage.

The following table illustrates the performance metrics set forth above for the named executive officers at the threshold, target, high and super high bonus levels.

In addition to the performance metrics above, the compensation committee decided to continue the ESG Incentives for our President and Chief Executive Officer to reinforce the Company’s commitment to achieving its ESG targets. The ESG Incentives that our President and Chief Executive Officer was required to achieve to receive the ESG Incentives amount at either a threshold, target or high level were as follows for 2023:

•ESG Incentives Threshold: Track 100 facilities’ utilities expenditures.

•ESG Incentives Target: Meet threshold requirement above plus (i) conduct a Tenant ESG survey and (ii) provide and begin tracking community service by employees.

•ESG Incentives High: Meet target requirement above plus begin tracking climate risk by properties.

The following table illustrates the weighting of each performance measure for each named executive officer at the threshold, target, high and super high bonus levels.

Performance Measure Weighting

The actual annual cash incentive earned by each named executive officer is determined by the sum of the percentage values for each metric at the level achieved for that metric multiplied by each executive’s target bonus amount. If the actual performance level achieved for any metric falls below the threshold level, no percentage is awarded for that metric. If the actual performance is above the high level, high level is awarded for that metric (except for capital deployment, where there is a super high opportunity). If actual performance is in between, the percentage for each metric is calculated using straight line linear interpolation.

On February 1, 2024, the compensation committee assessed performance based on actual results achieved for 2023. The compensation committee determined that the Company achieved a 2023 NFFO per share amount of

$1.408, 2023 capital deployment of approximately $288.3 million, and a 2023 average quarterly net debt to normalized run rate EBITDA ratio of 2.82x. Based on the Company’s accomplishments with respect to the sustainability initiatives required by the ESG Incentives described above, the SCR committee determined that each of the ESG Initiatives were met and the compensation committee determined that this performance metric was met at the high performance level with respect to the annual cash incentive award for our President and Chief Executive Officer.

The following table illustrates the percentage value actually achieved for each performance metric based on our 2023 performance.

The following table illustrates the actual 2023 cash incentive awards approved by the compensation committee:

Long-Term Equity Incentive Awards Granted in 2023

In General. The compensation committee believes that stock-based incentives align the interests of our named executive officers with the interests of our stockholders, and that the long-term compensation of the named executive officers should be linked to the value provided to our stockholders. Our stock-based incentives are structured in the form of full value stock awards payable in shares of our Common Stock that may increase or decrease in value over the multi-year vesting period. Our stock awards are designed to reward long-term performance and generally consist of an equal number of time- and performance-based vesting awards. We also use stock-based compensation as a retention tool. Because the stock awards generally vest over a multi-year period subject to continued employment with the Company (and subject to the achievement of the applicable performance-vesting conditions), these awards provide our executives with an ongoing incentive to continue their employment with the Company and to maximize stockholder value.

As part of the design changes for our 2021 equity awards, we decided to move away from our prior practice of determining the amount of each named executive officer’s long-term equity award based on the achievement of the annual incentive plan performance metrics in the prior year. Instead, based on the advice of Pearl Meyer, beginning in 2021 we switched to a practice of awarding each named executive officer a target grant date value of long-term equity awards that is set at a level with reference to the 50 th percentile of our Peer Group companies to their similarly situated executives, which, consistent with our named executive officers’ total targeted direct compensation, may be adjusted above or below this level based on factors the compensation committee determines appropriate for the particular executive. In addition, beginning with our equity grants made in December 2021, we changed the timing of our annual equity grant schedule to late in the fourth quarter of each calendar year. We believe making annual equity awards in the fourth quarter of each calendar year (instead of during the first quarter of each calendar year) better allows us to take our performance for the calendar year into account when determining the level of equity awards to be granted, while also ensuring that the applicable service period for those awards commences after their grant date.

The annual equity awards granted under our long-term equity incentive award program are divided equally between time-based and performance-based awards. The time-based awards, which are awarded in the form of restricted stock, vest ratably over a three-year vesting period. The performance-based equity awards, which are awarded in the form of stock units, are eligible to cliff-vest at the end of a three-year performance period based on the Company’s TSR performance relative to a custom TSR peer group consisting of other publicly traded healthcare REITs. We believe this is consistent with the practice at our Peer Group companies and will result in each named executive officer receiving a market-based long-term incentive opportunity each year.

Performance-based TSR awards granted under our long-term equity award program entitle the executive to receive an additional credit of stock units having a value equal to the amount of the ordinary cash dividends paid on the shares of common stock underlying the award (i.e., dividend equivalents are reinvested in additional units). Any additional stock units credited as a dividend equivalent payment will not be paid unless they vest and are subject to the same performance-based vesting requirements as the stock unit awards to which they relate.

The compensation committee believes the performance-based award structure that began in 2021 includes several improvements over our prior plan design, including (1) awards cliff-vest at the end of three years, rather than being eligible to vest on an annual basis over the length of the performance period, (2) the “catch-up” vesting opportunity for missed performance years in our prior plan design has been eliminated, (3) awards now have a different performance metric (relative TSR) than any of the performance metrics used to measure performance for our annual cash incentive awards, and (4) awards will become earned solely based on our TSR performance, which we believe creates a direct link between the value realized by our named executive officers and our stockholders.

2023 Annual Equity Awards. Consistent with the change in equity grant timing described above, the compensation committee approved annual equity awards for 2023 in December 2022. The time-based awards granted in December 2022 vest in three equal annual installments, that began January 31, 2024, subject to the named executive’s continued employment with the Company. The performance-based equity awards granted in December 2022 are eligible to cliff-vest at the end of a three-year performance period ending December 31, 2025 based on the Company’s TSR performance relative to a custom TSR peer group consisting of other publicly traded healthcare REITs. The 2023 annual equity awards are intended as compensation to the named executive officers for 2023; however, because they were granted in December 2022, these 2023 annual equity awards were reported in the Summary Compensation Table as compensation to the named executive officers in 2022.

2024 Annual Equity Awards. Similar to the 2023 annual equity awards, the compensation committee approved annual equity awards for 2024 in December 2023. The time-based awards granted in December 2023 vest in three equal annual installments beginning January 31, 2025, subject to the named executive’s continued employment with the Company. The performance-based equity awards granted in December 2023 will be eligible to cliff-vest at the end of a three-year performance period ending December 31, 2026 based on the Company’s TSR performance relative to a custom TSR peer group consisting of other publicly traded healthcare REITs. Although these 2024 annual equity awards are intended as compensation to the named executive officers for 2024, they are reported in the Summary Compensation Table as compensation to the named executive officers in 2023 because the grant date occurred in 2023.

The relative TSR performance-based awards will vest based on our three-year TSR performance relative to the following publicly-traded REITs:

TSR Award Peer Companies

Community Healthcare Trust, Inc.

Diversified Healthcare Trust, Inc.

Global Medical REIT, Inc.

Healthcare Realty Trust Inc.

Healthpeak Properties, Inc.

LTC Properties, Inc.

Medical Properties Trust, Inc.

National Health Investors, Inc.

Omega Healthcare Investors, Inc.

Physicians Realty Trust

Sabra Health Care REIT, Inc.

Universal Health Realty Income Trust

Ventas, Inc.

Welltower, Inc.

The TSR award peer group companies is the same for both the 2024 TSR awards and the 2023 TSR awards. We selected our TSR award peer group companies based on their similarity to the Company, taking into account their respective businesses and sources of revenue. While there is significant overlap between the TSR award peer group companies and the Peer Group companies described above, the two peer groups are not identical. This is because the compensation committee believes that the two peer groups are accomplishing different objectives. Many of the TSR award peer group companies have a much larger market capitalization than the Company, which makes them inappropriate to use as peer companies for compensation comparison purposes. However, we believe company size plays a relatively small role in TSR, and that our TSR award peer group companies are valuable comparators to measure our TSR because of the similarity of business models and tenant pools.

If the Company’s TSR for the three-year performance period compared to the TSRs of the peers for the same period is less than the 25 th percentile (the threshold level), 0% of each named executive officers’ TSR awards will vest. If our relative TSR performance is at the 50 th percentile (the target level), 100% of each named executive officer’s TSR awards will vest. If the Company achieves relative TSR performance at or above the 85 th percentile (the maximum level), 200% of each named executive officer’s TSR awards will vest. For performance between target and the threshold and the high levels, the number of TSR awards that vest will be determined by linear interpolation.

The performance vesting schedule for the TSR awards can be illustrated as follows:

Status of Performance-Based Vesting of Prior Long-Term Incentive Awards

2021 TSR Equity Awards. The performance-based equity awards granted in February 2021 under the new long-term equity incentive award program in effect beginning in 2021 were eligible to cliff-vest at the end of a three-year performance period ended December 31, 2023 according to the same performance vesting schedule described above that was in place for the performance-based equity awards granted in 2022 and 2023 and based on the Company’s TSR performance relative to a custom TSR peer group consisting of the same publicly traded healthcare REITs selected for the 2022 and 2023 awards. The Company’s TSR for the three-year performance period of the awards was 20.36% and exceeded the 85 th percentile compared to the TSR peer group, which resulted in vesting at the maximum level of 200%.

2021 Performance Equity Awards. In accordance with our long-term equity incentive award program in effect prior to 2021, beginning in 2018 50% of the number of restricted stock awards granted based on the prior year’s performance were subject to additional performance-based vesting conditions based on NFFO growth over a specified performance period (which is either three or four years). The performance period for these awards began in the year the award was granted, with one tranche eligible to vest at the end of each of the calendar years commencing with the year of grant. Each tranche vests at the end of the applicable calendar year only if we achieve a minimum established NFFO per share growth for the year. If the applicable NFFO per share growth target was not achieved for any calendar year in the performance period, the tranche of shares eligible to vest for the missed year was eligible to vest at the end of any subsequent calendar year in the performance period if we achieved the specified cumulative NFFO per share growth during the performance period through the end of the applicable measurement year. If the NFFO per share growth target was achieved for any calendar year (or on a cumulative basis thereafter during the performance period of the award if the NFFO per share growth target was not achieved in a previous year), the applicable tranche of performance-based restricted stock awards vested and was paid to each named executive officer. At the time of this payment, we also paid each named executive officer a cash amount equal to the dividends that had accrued with respect to the vested performance shares, which dividends only became payable upon achievement of the performance vesting conditions for the underlying shares.

For 2023, we achieved NFFO per share of $1.408, which resulted in no vesting for any of the remaining tranches of performance-based restricted stock awards subject to an NFFO growth performance condition. The following table summarizes the vesting of the previously awarded performance-based restricted stock awards (as determined by the compensation committee following the end of calendar year 2023) based on this NFFO per share achievement. Mr. Callister, who did not become employed by us until February 2021 and did not become an executive officer until July 2022, did not receive any of the equity awards disclosed in the table below. There are no remaining unvested performance-based restricted stock awards outstanding that were granted pursuant to this prior long-term equity incentive award program.

For more information on the restricted stock awards that were granted to our named executive officers in 2020-2021 based on the prior year’s performance, see our proxy statement filed in those years.

Severance Benefits

We believe that severance protections, particularly in the context of the uncertainty surrounding any potential change in control transaction, play a valuable role in attracting and retaining quality executive officers. Accordingly, we have entered into a change in control and severance agreement with each of our named executive officers (each, as amended, a “CIC and Severance Agreement”). We believe that the level of potential benefits helps us to retain our qualified executive team and is more consistent with the severance benefits provided by our Peer Group companies than our prior practice of providing no severance benefits to the named executive officers.

As described in more detail below under the heading “Potential Payments Upon Termination or Change in Control,” pursuant to the CIC and Severance Agreement, each of the named executive officers is entitled to severance benefits in the event of a termination of employment by us without “cause” or by the executive for “good reason” (as those terms are defined in each executive’s CIC and Severance Agreement), with the level of severance benefits enhanced if such a termination of employment occurs upon or following a change in control of the Company. None of the severance benefits payable under the CIC and Severance Agreement is a “single trigger” benefit triggered by the occurrence of a change in control, and benefits under the CIC and Severance Agreement are only payable on a “double trigger” basis as a result of a qualifying termination of employment. Also as described in more detail below under the heading “Potential Payments Upon Termination or Change in Control,” the CIC and Severance Agreement also entitles each named executive officer to specified benefits if the executive’s employment is terminated as a result of an “authorized retirement” or due to the executive’s death or “disability” (as such terms are defined in each executive’s CIC and Severance Agreement). No named executive officer is entitled to receive a “gross-up” or similar payment for any excise taxes that may become payable in connection with a change in control pursuant to Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), and, depending on what results in the best after-tax benefit for the executive, benefits may be “cut back” instead in such circumstances.

In addition, under the terms of our stockholder-approved equity incentive plan, outstanding restricted stock or stock unit awards will be subject to accelerated vesting in connection with a change in control of the Company (with outstanding performance-based awards vesting at the targeted performance level). Please see the “Potential Payments Upon Termination or Change in Control” section below for additional details.

401(k) Retirement Plan

We adopted a 401(k) retirement plan that was originally effective as of June 1, 2014. Full-time employees who have completed three months of service have the opportunity to participate in the 401(k) plan. Our 401(k) plan is intended to qualify under Section 401 of the Code. Employees are able to elect to defer a portion of their eligible compensation not to exceed the statutorily prescribed annual limit in the form of elective deferral contributions to our 401(k) plan. Our 401(k) plan also has a “catch-up contribution” feature for employees eligible to defer amounts over the statutory limit that applies to all other employees. We provide a “safe harbor” nonelective contribution of 3% of each participant’s compensation per plan year at the end of each plan year. Participants are always vested in their personal contributions to the 401(k) plan, and Company nonelective contributions are also vested once made.