UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
| Filed by a Party other than the Registrant | o |
Check the appropriate box:
|
| |
| o | Preliminary Proxy Statement |
| o | Confidential, For Use of the Commission Only (as Permitted by Rule 14a-6(e)(2)) |
| x | Definitive Proxy Statement |
| o | Definitive Additional Materials |
| o | Soliciting Material Pursuant to §240.14a-12 |
AMERICAN REALTY CAPITAL PROPERTIES,
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
| o | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
| (1) | Title of each class of securities to which transaction applies: |
| (2) | Aggregate number of securities to which transaction applies: |
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
| (4) | Proposed maximum aggregate value of transaction: |
| o | Fee paid previously with preliminary materials. |
| o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
| (1) | Amount Previously Paid: |
| (2) | Form, Schedule or Registration Statement No.: |
VEREIT, INC.
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![[GRAPHIC MISSING]](https://capedge.com/proxy/DEF 14A/0001144204-13-025095/logo_arcp-redbg.jpg)
AMERICAN REALTY CAPITAL PROPERTIES, INC.
405 Park Avenue
New York, New York 10022
2325 E. Camelback Road, Suite 1100NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on
Tuesday, JuneWednesday May 4,
2013April 30, 2013
2016
March 22, 2016
To the Stockholders of
American Realty Capital Properties,VEREIT, Inc.:
I am pleased to invite
our stockholdersyou to the
20132016 Annual Meeting of Stockholders (“Annual Meeting”) of
American Realty Capital Properties,VEREIT, Inc., a Maryland corporation (the “Company”). The Annual Meeting will be held on
Tuesday, JuneWednesday, May 4,
20132016 at
The W New York, locatedthe Company’s principal executive offices at
541 Lexington Avenue, New York, NY 10022,2325 E. Camelback Road, Ground Floor, Phoenix, Arizona 85016, commencing at
3:9:00
p.m.A.M. (local time). At the Annual Meeting, you will be asked
toto: (i) elect
the seven
membersdirector nominees described in the enclosed proxy statement to the Board of Directors; (ii) ratify the
audit committee’s appointment of
Grant ThorntonDeloitte & Touche LLP as the Company’s independent
auditorregistered public accounting firm for
2013;the fiscal year ending December 31, 2016; (iii) adopt a non-binding advisory resolution approving the compensation of our named executive officers; and
(iii)(iv) consider and act on such other matters as may properly come before the Annual Meeting and any adjournment thereof.
Our Board of Directors has fixed the close of business on
Tuesday, April 23, 2013March 9, 2016 as the record
date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting or any adjournment or postponement thereof. Recorddate. Only record holders of shares of our common stock, par value $0.01 per share, at the close of business on the record date are entitled to notice of and to vote at the Annual
Meeting.For further information regardingMeeting or any adjournment or postponement thereof.
We make proxy materials available to our stockholders on the
mattersInternet. You can access proxy materials at http://www.proxyvote.com. You also may authorize your proxy via the Internet or by telephone by following the instructions on that website. In order to
be acted upon atauthorize your proxy via the
Annual Meeting, I urgeInternet or by telephone, you
must have the stockholder identification number that appears on the materials sent to
carefully read the accompanying proxy statement.you. If you
have questions about the proposalsreceived a Notice of Internet Availability of Proxy Materials, you also may request a paper or
would like additional copiesan e-mail copy of
the proxy statement, please contact our proxy
solicitor, Broadridge Financial Solutions, Inc. at 1-877-827-0538.Whether you ownmaterials and a few or many shares and whether you plan to attend in person or not, it is important that your shares be voted on matters that come before the Annual Meeting. You may authorize a proxy to vote your shares by using a toll-free telephone number or via the Internet. Instructions for using these convenient services are provided on the enclosedpaper proxy card and inby following the attached proxy statement. If you prefer, you may vote your shares by marking your votes on the proxy card, signing and dating it and mailing it in the postage paid return envelope provided. If you sign and return your proxy card without specifying your choices, it will be understood that you wish to have your shares voted in accordance with the directors’ recommendations. If we do not hear from you after a reasonable amount of time, you may receive a telephone call from our proxy solicitor, reminding you to vote your shares.
You are cordially invited to attend the Annual Meeting. instructions included therein.
By Order of the Board of Directors,
/s/ Edward M. Weil, Jr.
Edward M. Weil, Jr.,
Lauren Goldberg,
Executive Vice President, TreasurerGeneral Counsel and Secretary
Important Notice Regarding the Availability of Proxy Materials for
the Stockholder Meeting to be Held on May 4, 2016.
This proxy statement and our 2015 Annual Report to Stockholders
are available at http://www.proxyvote.com
Whether or not you plan to attend the Annual Meeting, please carefully read the proxy statement and other proxy materials and complete a proxy for your shares as soon as possible. You may authorize your proxy via the Internet or by telephone by following the instructions on the website indicated in the materials you received in the mail. If you received a Notice of Internet Availability of Proxy Materials, you may also request a paper or an e-mail copy of our proxy materials and a paper proxy card at any time. If you attend the Annual Meeting, you may vote in person if you wish, even if you previously have submitted your proxy. However, please note that if your shares are held of record by a bank, broker or other nominee and you wish to vote in person at the Annual Meeting, you must obtain a “legal proxy” issued in your name from such bank, broker or other nominee.
VEREIT, INC.
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AMERICAN REALTY CAPITAL PROPERTIES, INC.
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i
ii
VEREIT, INC.
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AMERICAN REALTY CAPITAL PROPERTIES, INC.
405 Park Avenue — 15th Floor
New York, New York 10022
2325 E. Camelback Road, Suite 1100
The accompanying proxy, mailed together with this proxy statement (this “Proxy Statement”) and our 20122015 Annual Report, is solicited by and on behalf of the board of directors (the “Board of Directors” or the “Board”) of American Realty Capital Properties,VEREIT, Inc., a Maryland corporation (the “Company”), for use at the 20132016 Annual Meeting of Stockholders (the “Annual Meeting”) and at any adjournment or postponement thereof. References in this Proxy Statementproxy statement to “we,” “us,” “our” or like terms also refer to the Company, and references in this Proxy Statementproxy statement to “you” refer to the stockholders of the Company. The mailing address of our principal executive offices is 405 Park Avenue — 15th Floor, New York, New York 10022.2325 E. Camelback Road, Suite 1100, Phoenix, Arizona 85016. This Proxy Statement, the accompanying proxy card, Notice of Annual Meetingstatement and our 20122015 Annual Report were firsthave either been mailed to you or been made available to you on the Internet. Mailing to our stockholders commenced on or about May 2, 2013.
Important Notice Regarding the Availability of Proxy Materials
for the Annual Stockholders Meeting To Be Held on Tuesday, June 4, 2013
This Proxy Statement and our 2012 Annual Report are available athttp://www.proxyvote.com.
March 22, 2016.
INFORMATION ABOUT THE MEETING AND VOTING
What is the date of the Annual Meeting and where will it be held?
The Annual Meeting will be held Tuesday, Juneon Wednesday, May 4, 20132016 at our principal executive offices at 2325 E. Camelback Road, Ground Floor, Phoenix, Arizona 85016, commencing at 3:9:00 p.m. at The W New York, located at 541 Lexington Avenue, New York, NY 10022.
A.M. (local time).
What will I be voting on at the Annual Meeting?
At the Annual Meeting, you will be asked to:
| |
| 1. | elect the seven directorsdirector nominees described in this proxy statement for a one-year terms expiringterm to serve until the next annual meeting of stockholders in 20142017 and until their successors are duly elected and qualified;qualify; |
| |
| 2. | ratify the audit committee’s appointment of Grant ThorntonDeloitte & Touche LLP (“Grant Thornton”Deloitte”) as the Company’s independent auditorregistered public accounting firm for 2013;the fiscal year ending December 31, 2016; |
| |
| 3. | adopt a non-binding advisory resolution approving the compensation of our named executive officers described in this proxy statement; and |
| 3. |
| 4. | consider and act on such matters as may properly come before the Annual Meeting and any adjournment thereof. |
The Board of Directors does not know of any matters that may be considered at the Annual Meeting other than the matters set forth above.
Why did I receive a notice in the mail regarding the Internet availability of the proxy materials instead of a paper copy of the proxy materials?
As permitted by rules adopted by the U.S. Securities and Exchange Commission (“SEC”), we are making this proxy statement and our 2015 Annual Report available to our stockholders electronically via the Internet. On or about March 22, 2016, we began mailing to many of our stockholders a Notice of Internet Availability of Proxy Materials (“Notice”) containing instructions on how to access this proxy statement and our 2015 Annual Report online, as well as instructions on how to vote. If you received a Notice by mail, you will not receive a printed copy of the proxy materials in the mail unless you request a copy. Instead, the Notice instructs you on how to access and review all of the important information contained in this proxy statement and our 2015 Annual Report. The Notice also instructs you on how you may vote via the Internet. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice. Our 2015 Annual Report is not part of the proxy solicitation material.
Who can vote at the Annual Meeting?
The record date for the determination ofAnnual Meeting is March 9, 2016. Only holders of shares of our common stock, par value $0.01 per share, (“Common Stock”),at the close of business on March 9, 2016 are entitled to notice of and to vote at the Annual Meeting or any adjournment or postponement of the Annual Meeting, is the close of business on April 23, 2013.thereof. As of the record date, 154,940,679904,788,479 shares of our Common Stockcommon stock were issued and outstanding and entitled to vote at the Annual Meeting.
Each share of Common Stockcommon stock has one vote on each matter considered at the Annual Meeting or any adjournment or postponement thereof. The enclosed proxy card shows the number of shares of Common Stockcommon stock you are entitled to vote.
If you are a “registered owner” or “record holder” (i.e., you hold your shares in your own name as a holder of record with our transfer agent, Computershare Trust Company, N.A.) and you attend the Annual Meeting, you may vote in person at the Annual Meeting. If you are a “beneficial owner” because your bank, broker dealer or similar organization is the holder of your shares (i.e., your shares are held in “street name”) and you wish to vote in person at the Annual Meeting, you will need to obtain a “legal proxy” from the bank, broker or other record holder. If you attend the Annual Meeting and you submit your vote in person, any previous votes that you submitted by mail or authorized via the Internet or by proxy. Instructionstelephone will be superseded by the vote that you cast at the Annual Meeting. Further instructions for in personin-person voting can be obtained by calling our proxy solicitor, Broadridge Financial Solutions, Inc. (“Broadridge”)us at 1-800-690-6903. (877) 405-2653.
Stockholders may submit their votes by
proxy by mail
(if they have received a hard copy set of documents) by completing, signing, dating and returning their proxy in the
envelope enclosed
envelope.with the mailing. Stockholders also have the following two options for authorizing a proxy to vote their shares:
| • | via the Internet athttp://www.proxyvote.com; or |
via the Internet at http://www.proxyvote.com; or
by telephone to Broadridge Financial Solutions, Inc. For those who hold shares in their own name, by calling 1-800-690-6903.(800)-690-6903 and for shares held in “street name,” by calling (800) 454-8683.
For those stockholders with Internet access, we encourage you to authorize a proxy to vote your shares via the Internet, a convenient means of authorizing a proxy that also provides cost savings to us.savings. In addition, when you authorize a proxy to vote your shares via the Internet or by telephone prior to the date of the Annual Meeting, date, your proxy authorization is recorded immediately and there is no risk that postal delays will cause your vote by proxy to arrive late and, therefore, not be counted. For further instructions on authorizing a proxy to vote your shares, see the proxy card.
If your proxy card enclosed with this Proxy Statement. You may alsoshares are held in “street name,” you should instruct your bank, broker or other record holder how to vote your shares atby following the Annual Meeting.voting instructions provided by such organization. If you attend the Annual Meeting, you may submitdo not give instructions to your vote in person, and any previous votes that you submitted by mailbank, broker or authorized by Internet or telephonerecord holder, such organization will be superseded byentitled to vote your shares on routine items, but will not be permitted to do so on non-routine items. Your bank, broker or record holder will have discretion to vote on Proposal 2 (ratification of auditors) without any instructions from you, but such organization will not have the ability to vote thatyour uninstructed shares on Proposal 1 (election of directors) or Proposal 3 (advisory vote to approve executive officer compensation) on a discretionary basis. Accordingly, if you hold your shares in “street name” and you do not instruct your broker, dealer or other record holder how to vote on these proposals, such organization cannot vote these shares and will report them as “broker non-votes,” and no votes will be cast at the Annual Meeting.
on your behalf for Proposals 1 and 3.
How will proxies be voted?
Shares represented by valid proxies will be voted at the Annual Meeting in accordance with the directions given. If
the enclosedyou are a registered stockholder and submit a properly executed proxy
card is signed and returned withoutbut do not indicate any
directions given,voting instructions, the shares will be voted “FOR”
the (i) election of the
director nominees
for director named in
the proxy; andthis proxy statement, (ii) ratification of the
audit committee’s appointment of
Grant ThorntonDeloitte as the Company’s independent
auditorregistered public accounting firm for
2013.The Boardthe fiscal year ending December 31, 2016 and (iii) the adoption of Directors doesa non-binding advisory resolution approving the compensation of our named executive officers described herein.
We are not intendcurrently aware of any other matters to present, and has no information indicating that others will present, any businessbe presented at the Annual Meeting other than as set forththose described in the attached Notice of Annual Meeting of Stockholders. However, ifthis proxy statement. If any other matters requiring the vote of our stockholders come beforenot described in this proxy statement are properly presented at the Annual Meeting, it isany proxies received by us will be voted in the intentiondiscretion of the persons named in the accompanying proxy to vote the proxies held by them in their discretion.
holders.
How can I change my vote or revoke a proxy?
You have the unconditional right to revoke your proxy at any time prior to the voting thereof by (i) submitting a later-dated proxy
either by telephone, via the Internet,
by telephone or
in theby mail
to our proxy solicitor at the following address:to: Broadridge Financial Solutions, Inc., 51 Mercedes Way, Edgewood,
NYNew York 11717, or (ii) by attending the Annual Meeting and voting in person. No written revocation of your proxy shall be effective, however, unless and until it is received at or prior to the Annual Meeting.
What if I return my proxy but do not mark it to show how I am voting?
If your proxy card is signed and returned without specifying your choices, your shares will be voted as recommended by the Board of Directors.
What vote is required
to approve each item?
There is no cumulative voting in the election of our directors. Each director is elected by the
The affirmative vote of a pluralitymajority of the votes cast at the meeting. Each share may be votedAnnual Meeting at which a quorum is present is required for as many individuals as there arethe election of each director nominee. For purposes of the election of directors, to be elected and for whose election the share is entitled to be voted. Aa majority of the votes cast means that the number of votes cast “for” a nominee for election as a director exceeds the number of votes cast “against” that nominee.
The affirmative vote of a majority of the votes cast at the meetingAnnual Meeting at which a quorum is present is required to ratifyfor ratifying the audit committee’s appointment of Grant ThorntonDeloitte as the Company’s independent auditor for 2013. Athe fiscal year ending December 31, 2016.
The affirmative vote of a majority of the votes cast at the meeting shall be sufficientAnnual Meeting at which a quorum is present is required to approveadopt the non-binding advisory resolution approving the compensation of our named executive officers as described herein.
Abstentions and broker non-votes, if any, other
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matter which may properly come before the meeting, unless otherwise required by the Company’s charter (the “Charter”) or by statute. Any shares not voted (whether by abstention, broker non-vote, or otherwise)will have no impacteffect on the vote.outcome of these matters. A “broker non-vote”broker “non-vote” occurs when a broker who holdsnominee holding shares for thea beneficial owner does not vote on a proposal because the broker does not have discretionary voting authority for that proposal and has not received instructions from the beneficial owner ofand does not have or chooses not to exercise discretionary authority to vote the shares.
None of the proposals, if approved, entitle stockholders to appraisal rights under Maryland law or the Charter.
Company’s charter.
What constitutes a “quorum”?
The presence at the Annual Meeting, in person or represented by proxy, of stockholders entitled to castthe holders of a majority of all the votes entitled to be cast atshares of common stock outstanding on the Annual Meeting constitutesrecord date, or 452,394,240 shares, will constitute a quorum. Abstentions and broker non-votes will be counted as present for the purpose of establishingdetermining whether there is a quorum; however, abstentionsquorum.
What happens if a quorum is not present at the Annual Meeting?
If a quorum is not present at the scheduled time of the Annual Meeting, the chairman of the meeting may adjourn the meeting to another place, date or time until a quorum is present. The place, date and broker non-votestime of the adjourned meeting will not be counted as votes cast.
announced when the adjournment is taken, and no other notice will be given unless the adjournment is to a date more than 120 days after the original record date or if, after the adjournment, a new record date is fixed for the adjourned meeting.
Will you incur expenses in soliciting proxies?
We are soliciting the proxy on behalf of the Board of Directors, and we will pay all costs of preparing, assembling and mailing the proxy materials. We have retained Broadridge Financial Solutions, Inc. to aid in the mailing of proxy materials and tabulation and recording of votes. In addition, our directors, officers and other employees, without additional compensation, may participate in the solicitation of proxies. Broadridge will receive a fee of approximately $95,000, which includes the reimbursement for certain costs and out of pocket expenses incurred in connection with their services, all of which will be paid by us. In addition, our directors and officers may solicit proxies by telephone or fax, without receiving any additional compensation for their services.
We will request banks, brokers
custodians, nominees, fiduciaries and other record holders to forward copies of
this Proxy Statementthe proxy materials to people on whose behalf they hold shares of
Common Stockcommon stock and to request authority for the exercise of proxies by the record holders on behalf of those people. In compliance with the regulations of the
U.S. Securities and Exchange Commission (the “SEC”),SEC, we will reimburse such
personsbanks, brokers and other record holders for reasonable expenses incurred by them in forwarding proxy materials to the beneficial owners of shares of our
Common Stock.common stock.
As the date of the Annual Meeting approaches, certain stockholders may receive a telephone call
from a representative of Broadridge if their votes have not yet been received. Proxies that are obtained telephonically will be recorded in accordance with the procedures described below.
Authorization to permit the caller to execute proxies may be obtained by telephonic instructions from stockholders of the Company. The Board of Directors believes that these procedures are reasonably designed to ensure that both the identity of the stockholder casting the vote and the voting instructions of the stockholder are accurately determined.
In all cases where a telephonic proxy is solicited, the Broadridge representativecaller is required to ask for each stockholder’s full name and address, or the zip code or control number, and to confirm that the stockholder has either received the proxy materials in the mail.mail or has been provided with the Notice. If the stockholder is a corporation or other entity, the Broadridge representativecaller is required to ask for the person’s title and confirmation that the person is authorized to direct the voting of the shares. If the information solicited from the stockholder agrees with the information providedavailable to Broadridge,the caller, then the Broadridge representativecaller has the responsibility to explain the process, read the proposalproposals listed on the proxy card and ask for the stockholder’s instructions on the proposal.proposals. Although the Broadridge representativecaller is permitted to answer questions about the process, he or she is not permitted to recommend to the stockholder how to vote, other than to read any recommendation set forth in this Proxy Statement. Broadridgeproxy statement. The stockholder’s instructions will recordbe recorded on the stockholder’s instructions on theproxy card. Within 72 hours, the stockholder will be sent a letter or other written communication to confirm his or her vote and asking the stockholder to call Broadridgeus immediately if his or her instructions are not correctly reflected in the confirmation.
What does it mean if I receive more than one proxy card?
Some of your shares may be registered differently or held in a different account. You should authorize a proxy to vote the shares in each of your accounts by mail,via the Internet or by telephone or via the Internet.by mail. If you mail proxy cards, please sign, date and return each proxy card to guarantee that all of your shares are voted. If you hold your shares in registered form and wish to combine your stockholder accounts in the future, you should call us at (212) 415-6500.(877) 405-2653. Combining accounts reduces excess printing and mailing costs, resulting in cost savings to us that benefit you as a stockholder.
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What if I receive only one set of proxy materials although there are multiple stockholders at my address?
The SEC has adopted a rule concerning therules that permit companies and intermediaries such as brokers to satisfy delivery of documents filed by us with the SEC, includingrequirements for proxy statements and annual reports. The rule allows uswith respect to send a single set of any annual report, proxy statement, proxy statement combined with a prospectus or information statement to any household at which two or more stockholders reside if they sharesharing the same last name or we reasonably believe they are members of the same family.address by delivering to that address a single proxy statement to those shareholders. This procedureprocess is referred to as “Householding.“householding.” This rule benefitsThe rules benefit both you and us. It reduces the volume of duplicate information received at your household and helps us reduce expenses. Each stockholder subject
Some brokers household proxy materials, delivering a single proxy statement to
Householdingmultiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker or us that they or we will
be householding materials to your address, householding will continue
until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy
cardstatement, or
voting instruction card.We will promptly deliver, upon written or oral request, a separate copyif you are receiving multiple copies of our Annual Report or Proxy Statement as applicable, to a stockholder at a shared address to which a single copy was previously delivered. If you received a single set of disclosure documents for this year, but you would preferthe proxy statement and wish to receive only one copy, please notify your own copy,broker if your shares are held in a brokerage account, or notify us if you hold registered shares. You may direct requests for separate copiesnotify us by calling us at (212) 415-6500(877) 405-2653 or by mailing a request to us at 405 Park Avenue — 15th Floor, New York, New York 10022,2325 E. Camelback Road, Suite 1100, Phoenix, Arizona 85016, Attention: Investor Relations. Likewise, if your household currently receives multiple copies of disclosure documents and you would like to receive one set, please contact us.
Whom
Who should I call for additional information about voting by proxy or authorizing a proxy by telephone or
via the Internet to vote my shares?
Please call Broadridge, our proxy solicitor,us at 1-877-827-0538.
How do(877) 405-2653.
Can I submit a stockholder proposal for next year’s annual meeting or proxy materials, and what isaccess the deadline for submitting a proposal?In order for a stockholder proposal to be properly submitted for presentation at our 2014 annual meeting and included in the proxy material for next year’s annual meeting, we must receive written notice of the proposal at our executive offices during the period beginning at 5:00 p.m., Eastern Time, on December 1, 2013 and ending at 5:00 p.m., Eastern Time, on December 31, 2013. Any proposal received after the applicable time in the previous sentence will be considered untimely. All proposals must contain the information specified in, and otherwise comply with, our bylaws. Proposals should be sent via registered, certified or express mail to: 405 Park Avenue — 15th Floor, New York, New York 10022, Attention: Edward M. Weil, Jr., President, Treasurer and Secretary. For additional information, see the section in thisNotice, Proxy Statement captioned “Stockholder Proposals forand our 2015 Annual Report on the 2014 Annual Meeting.”
UNLESS SPECIFIED OTHERWISE, Internet?
These materials are available on our website and can be accessed at www.proxyvote.com. The information found on, or accessible through, our website is not incorporated into, and does not form a part of, this proxy statement or any other report or document we file with or furnish to the SEC.
THE PROXIES WILL BE VOTEDBOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” (I) THE ELECTION OF THE DIRECTOR NOMINEES TO SERVE AS DIRECTORS OF THE COMPANY UNTIL THE NEXT ANNUAL MEETING OF STOCKHOLDERS IN 20142017 AND UNTIL THEIR SUCCESSORS ARE DULY ELECTED AND QUALIFIED ANDQUALIFIES, (II) THE RATIFICATION OF THE AUDIT COMMITTEE’S APPOINTMENT OF GRANT THORNTONDELOITTE AS THE COMPANY’S INDEPENDENT AUDITORREGISTERED PUBLIC ACCOUNTING FIRM FOR 2013. IN THE DISCRETIONFISCAL YEAR ENDING DECEMBER 31, 2016 AND (III) THE ADOPTION OF A NON-BINDING ADVISORY RESOLUTION APPROVING THE COMPENSATION OF THE PROXY HOLDERS, THE PROXIES WILL ALSO BE VOTED “FOR” OR “AGAINST” SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING. MANAGEMENT IS NOT AWARE OF ANY OTHER MATTERS TO BE PRESENTED FOR ACTION AT THE ANNUAL MEETING. NONE OF THE PROPOSALS, IF APPROVED, ENTITLE STOCKHOLDERS TO APPRAISAL RIGHTS UNDER MARYLAND LAW OR THE CHARTER.NAMED EXECUTIVE OFFICERS DESCRIBED HEREIN.
PROPOSAL 1
The Board of Directors
including our independent directors, is responsible for monitoring and supervising the performance of our day-to-day operations by
ARC Properties Advisors, LLC (the “Manager”).our executive management team. Directors are elected annually by our stockholders, and there is no limit on the number of times a director may be elected to office. Each director serves until the next annual meeting of stockholders
or (if longer)and until his or her successor is duly elected and
qualifies.qualifies or until his or her earlier death, resignation or removal. The
CharterCompany’s charter provides that the number of directors shall
not be
not less than the minimum number required by the Maryland General Corporation Law nor more than fifteen; provided, however, that the number of directors may be changed from time to time by resolution adopted by the affirmative vote of a majority of the Board. The number of directors on the Board is currently fixed at seven.
Any director who fails to be elected by a majority vote shall tender his or her resignation to the Board, subject to acceptance. The Nominating and Corporate Governance Committee will make a recommendation to the Board of Directors on whether to accept or reject the resignation, or whether other action should be taken. The Board of Directors has proposedwill then act on our Nominating and Corporate Governance Committee’s recommendation and publicly disclose its decision and the followingrationale behind it within 90 days from the date of the certification of election results. If the resignation is not accepted, the director will continue to serve until the next annual meeting and until the director’s successor is duly elected and qualifies. The director who tenders his or her resignation will not participate in the Board’s decision regarding whether to accept or reject such director’s resignation.
The Board of Directors, at the recommendation of the Nominating and Corporate Governance Committee, proposes that the seven nominees
for electionlisted below, all of whom are currently serving on our Board, be elected to serve as directors
each to serve for a term ending atuntil the
20142017 annual meeting of stockholders and until his
or her successor is duly elected and
qualifies: Messrs. Nicholas S. Schorsch, William M. Kahane, Edward M. Weil, Jr., Leslie D. Michelson, Edward G. Rendell, Scott J. Bowman and Walter P. Lomax, Jr. Eachqualifies. If a nominee
currently servesbecomes unavailable to serve as a
director.Thedirector for any reason, the shares represented by any proxy holder named onwill be voted for any substitute nominee, if any, who may be designated by the enclosed proxy card intendsBoard to vote “FOR”replace that nominee. At this time, the Board of Directors does not know of any reason why any nominee would not be able to serve as a director.
The election of each
director nominee requires the affirmative vote of a majority of the
seven nominees. If you do not wish your shares to be voted for particular nominees, please identify the exceptions in the designated space provided on the proxy card or, if you are authorizing a proxy to vote your shares by telephone or the Internet, follow the instructions provided when you authorize a proxy. Directors will be elected by a plurality of votes cast at the Annual Meeting
provided thatat which a quorum is present.
Any shares not voted (whether by abstention, broker non-vote, or otherwise) have no impact on the vote.If, at the timeFor purposes of the Annual Meeting, one or moreelection of directors, a majority of the nominees should become unable to serve, shares represented by proxies will be voted for the remaining nominees and for any substitute nominee or nominees designated by the Board of Directors. No proxy will be voted for a greater number of persons thanvotes cast means that the number of nominees described in this Proxy Statement.
votes cast “for” a nominee for election as a director exceeds the number of votes cast “against” that nominee.
The table set forth below lists the names and ages of each of the nominees as of the date of this
Proxy Statementproxy statement and the position and office that each nominee currently holds with the Company:
 |
| | | | |
| Name | | Age | | PositionPositions |
Nicholas S. SchorschGlenn J. Rufrano | | 5266 | | Chairman and Chief Executive Officer |
Edward M. Weil, Jr. | | 46 | | President, Secretary, Treasurer and Director |
William M. KahaneHugh R. Frater | | 6560 | | DirectorNon-Executive Chairman of the Board of Directors (Independent Director) |
LeslieBruce D. MichelsonFrank | | 6261 | | Independent Director |
Edward G. RendellDavid B. Henry | | 6967 | | Independent Director |
Scott J. BowmanMark S. Ordan | | 5657 | | Independent Director |
Walter P. Lomax, Jr.Eugene A. Pinover | | 8068 | | Independent Director |
| Julie G. Richardson | | 52 | | Independent Director |
Business Experience of
Director Nominees
Nicholas S. Schorsch
Nicholas S. Schorsch has been
Glenn J. Rufrano became the chairmanCompany’s Chief Executive Officer and chief executive officer of the Company since our formationa director in December 2010 and chief executive officer of the Manager since its formation in November 2010.April 2015. Mr. Schorsch served as chairman of the board of directors of American Realty Capital Trust, Inc. (“ARCT”) until January 2013 when it completed its merger with Realty Income Corporation and, until March 2012, the chief executive officer of ARCT, the ARCT advisor and the ARCT property manager since their formation in August 2007. Mr. SchorschRufrano has served as chairman and the chief executive officer of American Realty Capital New York Recovery REIT, Inc. (“NYRR”) since its formation in October 2009, and the NYRR property manager and the NYRR advisor since their formation in November 2009. Mr. Schorsch has served as the chief executive officer of the Phillips Edison-ARC Shopping Center REIT Inc. (“PE-ARC”) advisor since its formation in December 2009. Mr. Schorsch has been the chairman and the chief executive officer of American
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Realty Capital — Retail Centers of America, Inc. (“ARC RCA”) and the ARC RCA advisor since their formation in July 2010 and May 2010, respectively. Mr. Schorsch has served as chairman of the board and chief executive officer of American Realty Capital Healthcare Trust, Inc. (“ARC HT”) since its formation in August 2010 and chief executive officer of the ARC HT advisor and property manager since their formation in August 2010. Mr. Schorsch has been chairman and the chief executive officer of Business Development Corporation of America (“BDCA”) since its formation in May 2010. Mr. Schorsch served as chairman and chief executive officer of American Realty Capital Trust III, Inc. (“ARCT III”), the American Realty Capital Advisors III, LLC (the “ARCT III Advisor”) and the ARCT III property manager from their formation in October 2010 until the close of ARCT III’s merger with the Company in February 2013 (the “ARCT III Merger”). Mr. Schorsch has been the chairman and chief executive officer of American Realty Capital Global Trust, Inc. (“ARC Global”), the ARC Global advisor and the ARC Global property manager since their formation in July 2011, July 2011 and January 2012, respectively. He has also served as the chief executive officer of American Realty Capital Trust IV, Inc. (“ARCT IV”), the ARCT IV Advisor and the ARCT IV property manager since their formation in February 2012. February 2012. Mr. Schorsch has served as the chairman of the board of directors of American Realty Capital Healthcare Trust II, Inc. (“ARC HT II”) since its formation in October 2012. Mr. Schorsch has served as chairman of the board of directors of ARC Realty Finance Trust, Inc. (“ARC RFT”) since its formation in November 2012 and as chief executive officer of ARC RFT and the ARC RFT advisor since November 2012. Mr. Schorsch has as served as the chairman of the board of directors and chief executive officer of American Realty Capital Trust V, Inc. (“ARCT V”) since its formation in January 2013. Mr. Schorsch has served as chairman of the board of directors of RCS Capital Corporation (“RCS Capital”) since February 2013.
From September 2006continues to July 2007, Mr. Schorsch was chief executive officer of an affiliate, American Realty Capital, a real estate investment firm. Mr. Schorsch founded and formerly served as president, chief executive officer and vice chairman of American Financial Realty Trust (“AFRT”) from its inceptionserve as a REIT in September 2002 until August 2006. AFRT wasdirector of Ventas, Inc., a publicly traded senior housing and healthcare real estate investment trust (“REIT”) (which was listed on the NYSE within one year, since June 2010 and of its inception) that invested exclusively in offices, operation centers, bank branches, and other operatingO’Connor Capital Partners, a privately-owned, independent real estate assetsinvestment, development and management firm that are net leased to tenants in the financial services industry, such as banks and insurance companies. Through American Financial Resource Group (“AFRG”) and its successor corporation, AFRT, Mr. Schorsch executed in excess of 1,000 acquisitions, both in acquiring businesses and real estate properties with transactional value of approximately $5 billion, while also operating offices in Europe that focused on sale and leaseback and other property transactions in Spain, France, Germany, Finland, Norway and the United Kingdom. In 2003, Mr. Schorsch received an Entrepreneur of the Year award from Ernst & Young. From 1995 to September 2002, Mr. Schorschhe co-founded, since October 2013. He served as chief executive officerChairman and presidentChief Executive Officer of AFRG, AFRT’s predecessor, a private equity firm founded for the purpose of acquiring operating companies and other assets in a number of industries. Prior to AFRG, Mr. Schorsch served as president of a non-ferrous metal product manufacturing business, Thermal Reduction.O’Connor Capital Partners from November 2013 through March 2015. He successfully built the business through mergers and acquisitions and ultimately sold his interests to Corrpro (NYSE) in 1994. Mr. Schorsch attended Drexel University. We believe that Mr. Schorsch’s current experience as chairman and chief executive officer, as applicable, of NYRR, PE-ARC, ARC RCA, ARC HT, ARC HT II, ARC DNAV, ARC Global, ARCT IV, ARCT V, RCS Capital and ARC RFT, his previous experience as president, chief executive officer and vice chairman of AFRT, as chairman and chief executive officer of ARCT and ARCT III and his significant real estate acquisition experience, make him well qualified to serve as our chairman of the Board of Directors.
Edward M. Weil, Jr.
Edward M. Weil, Jr. hasalso served as a director for Columbia Property Trust, Inc., a publicly traded commercial real estate REIT, from January 2015 until March 2015. Previously, Mr. Rufrano was President and Chief Executive Officer of the Company sinceCushman & Wakefield, Inc., a privately-held commercial property and real estate services company, and a member of its Board of Directors from March 2012 and has2010 to June 2013. From January 2008 through February 2010, he served as Chief Executive Officer of Centro Properties Group, an executive officer of the CompanyAustralian-based shopping center company, and the Manager since their formation in September 2010.from April 2007 through January 2008, Mr. WeilRufrano served as an executive officerChief Executive Officer of ARCT, the ARCT advisor and the ARCT property manager from their formationCentro Properties Group U.S. From 2000 until its acquisition by Centro Properties Group in AugustApril 2007, through March 2012. Mr. Weil hashe served as an executive officer of NYRR since its formation in October 2009,Chief Executive Officer and the NYRR property manager and the NYRR advisor since their formation in November 2009. He has served as the executive vice president and secretary of the PE-ARC advisor since its formation in December 2009. Mr. Weil has served as an executive officer of ARC RCA and the ARC RCA advisor since their formation in July 2010 and May 2010, respectively. Mr. Weil has served as an executive officer of ARC HT, the ARC HT advisor and the ARC HT property manager since their formation in
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August 2010. Mr. Weil served as a director of ARCT III beginningNew Plan Excel Realty Trust, a commercial retail REIT. He presently serves on the Board of New York University’s Real Estate Institute. Mr. Rufrano received his Bachelor’s Degree in February 2012Business Administration from Rutgers University and as an executive officerhis Masters of ARCT III, the ARCT III advisorScience degree in Management and the ARCT III property managerReal Estate from their formation in October 2010 until the close of the ARCT III Merger in February 2013.Florida International University. We believe Mr. Weil has served as an executive officer, and, beginning in March 2012, a director, of ARC DNAV, and has served as an executive officer of the ARC DNAV advisor and the ARC DNAV property manager since their formation in September 2010. Mr. Weil has been a director and an executive officer of ARC Global, the ARC Global advisor and the ARC Global property manager since their formation in July 2011, July 2011 and January 2012, respectively. Mr. Weil has served as the president, chief operating officer, treasurer and secretary of ARCT IV, the ARCT IV advisor and the ARCT IV property manager since their formation in February 2012. Mr. Weil was appointed as a director of ARCT IV in January 2013. Mr. Weil has served as a director of ARCT V since its formation in January 2013 and as president, chief operating officer, treasurer and secretary of ARCT V, the ARCT V advisor and the ARCT V property manager since their formation in January 2013. Mr. Weil has served as the president, chief operating officer, treasurer and secretary of ARC HT II, the ARC HT II advisor and the ARC HT II property manager since their formation in October 2012. Mr. Weil served as the president, treasurer and secretary of ARC RFT and the ARC RFT advisor from November 2012 until January 2013. Mr. Weil has served as president, treasurer, secretary and a director of RCS Capital since February 2013. Mr. Weil has served as the executive vice president and secretary of the BDCA advisor since its formation in June 2010. Mr. Weil has been the chief executive officer of Realty Capital Securities, LLC (“RC Securities”), since December 2010. Mr. Weil was formerly the senior vice president of sales and leasing for AFRT from April 2004 to October 2006, where he was responsible for the disposition and leasing activity for a 33 million square foot portfolio of properties. Under the direction of Mr. Weil, his department was the sole contributorRufrano’s extensive experience in the increase of occupancy and portfolio revenue through the sales of over 200 properties and the leasing of over 2.2 million square feet, averaging 325,000 square feet of newly executed leases per quarter. After working at AFRT, from October 2006 to May 2007, Mr. Weil was managing director of Milestone Partners Limited and prior to joining AFRT, from 1987 to April 2004, Mr. Weil was president of Plymouth Pump & Systems Co. Mr. Weil attended George Washington University. Mr. Weil holds FINRA Series 7, 24 and 63 licenses. We believe that Mr. Weil’s current experience as a director and/or executive officer of NYRR, ARC RCA, ARC HT, ARC DNAV, ARC Global, ARCT IV, ARCT V, ARC HT II, RCS Capital and the BDCA advisor,real estate industry, his previous experience as senior vice president at AFRT, and as a director and executive officer of ARCT IIItenure on various REIT boards and his real estatewide-ranging leadership experience make him well qualified to serve on our Board of Directors.
William M. Kahane
Mr. Kahane was re-appointed as a director of the Company in February 2013. Mr. Kahane
Hugh R. Frater has served as athe Company’s Non-Executive Chairman and independent director since April 2015. He previously served on the Board’s Audit Committee and executive officerNominating and Corporate Governance Committee from April 2015 to September 2015. From April 2014 to December 2015, Mr. Frater served as Chairman of the Company and asBerkadia Commercial Mortgage LLC (“Berkadia”), an executive officer of the Manager from their formation in December 2010 and November 2010, respectively, until March 2012. Mr. Kahane has been active in the structuring and financial management ofindustry-leading commercial real estate investmentscompany that is owned 50% by Berkshire Hathaway Inc. and 50% by Leucadia National Corporation, which provides comprehensive capital solutions and investment sales advisory and research services for over 35 years.multifamily and commercial properties. Mr. KahaneFrater formerly served as an executive officer of ARCT, the ARCT advisor and the ARCT property manager from their formation in August 2007 until the close of ARCT’s merger with Realty Income Corporation in January 2013. He also served as a director of ARCT from August 2007 until January 2013. Mr. Kahane has served as a director of ARC RCA since its formation in July 2010. He also had served as an executive officer of ARC RCA and the ARC RCA advisor from their formation in July 2010 and May 2010, respectively, until March 2012. Mr. Kahane also has been a director of PE-ARC and the president, chief operating officer and treasurer of the PE-ARC advisor since their formation in December 2009. Mr. Kahane has served as a director of NYRR since its formation in October 2009 and had served as an executive officer of NYRR from October 2009 until March 2012 and as an executive officer of the NYRR advisor and property manager from their formation in November 2009 until March 2012. Mr. Kahane served as a director of ARC DNAV and an executive officer of ARC DNAV, the ARC DNAV advisor and the ARC DNAV property manager from their formation in September 2010 until March 2012. Mr. Kahane served as an executive officer of ARCT III from its formation in October 2010 until April 2012 and as an executive officer of the ARCT III Advisor and the ARCT III property manager from their formation in October 2010 until April 2012. Mr. Kahane has served as a director of ARC HT since its formation in August 2010 and as president and chief operating officer of ARC HT, the ARC HT advisor and the ARC HT property managerBerkadia’s Chief Executive Officer from August 2010 until March 2012.April 2014. From November 2007 until June 2010, Mr. KahaneFrater was appointedthe Chief Operating Officer at Good Energies, Inc. and from February 2004 until May 2007, Mr. Frater was Executive Vice President at PNC Financial Services, where he led the real estate division. From August 1988 until February 2004, he was a Founding Partner and Managing Director of BlackRock, Inc., the largest global investment manager, where he also led the real estate practice. Mr. Frater has served on the Board of Directors of the Federal National Mortgage Association (Fannie Mae) since January 2016. Mr. Frater has also been active in industry affairs, having served on the Board of Directors of the Mortgage Bankers Association (“MBa”) as Vice Chair of the MBa sponsored Government-Sponsored Enterprise (“GSE”) Task Force, as a director of ARC HT II in March 2013. Mr. Kahane also has been an interested director of BDCA since its formation in May 2010 and, until March 2012, was the president of BDCA.
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Mr. Kahane also served as president and chief operating officerChair of the BDCA advisor from its formation in June 2010 until March 2012. Mr. Kahane has served as chief executive officerMBa Affordable Rental Housing Task Force and a director of RCS Capital since February 2013. Mr. Kahane has served as a member of the investment committee of Aetos Capital Asia Advisors, a $3 billion series of opportunistic funds focusing on assets primarily in Japan and China, since 2008.
Mr. Kahane began his career as a real estate lawyer practicing in the public and private sectors from 1974 – 1979. From 1981 – 1992, Mr. Kahane worked at Morgan Stanley & Co., specializing in real estate, becoming a managing director in 1989. In 1992, Mr. Kahane left Morgan Stanley to establish a real estate advisory and asset sales business known as Milestone Partners which continues to operate and of which Mr. Kahane is currently the chairman. Mr. KahaneMBa Audit Committee. He has also served as a trustee at AFRT (April 2003 to August 2006), during which time Mr. Kahane served as chairman of the finance committee of AFRT’s board of trustees. Mr. Kahane has been a managing director of GF Capital Management & Advisors LLC (“GF Capital”), a New York-based merchant banking firm, where he has directed the firm’s real estate investments since 2001. GF Capital offers comprehensive wealth management services through its subsidiary TAG Associates LLC, a leading multi-client family office and portfolio management services company with approximately $5 billion of assets under management. Mr. Kahane also was on the board of directors of Catellus Development Corp., a NYSE growth-oriented real estate development company, where he served as chairman. Mr. Kahane received a B.A. from Occidental College, a J.D. fromReal Estate Advisory Board at the Columbia University of California, Los Angeles Law School and an M.B.A. from Stanford University’s Graduate School of Business.Business since 2004 and on its Board of Overseers since 2015. He has a Master of Business Administration from the Columbia University Graduate School of Business and has a Bachelor’s Degree from Dartmouth College. We believe that Mr. Kahane’s current experience as a director of ARC RCA, ARC HT, BDCA, NYRR, PE-ARC, ARC HT IIFrater’s long-standing real estate and RCS Capital, his prior experience as an executive officerpolicy and director of ARC DNAV, ARCT III, and ARCT, his prior experience as chairman of the board of Catellus Development Corp. and his significant investment bankinggovernment relations experience, in real estate,addition to his finance and business operations background, make him well qualified to serve as a member ofon our Board of Directors.
Leslie
Bruce D. MichelsonLeslie D. Michelson was appointed as an independent director of the Company in October 2012. Mr. Michelson was appointed as the lead independent director of ARC HT in January 2011 and lead independent director of ARC HT in July 2012 and ARC RFT in January 2013. Mr. Michelson also has served as an independent director of BDCA since January 2011. Mr. Michelson served as an independent director of ARC RCA from March 2012 until October 2012 and NYRR from October 2009 until August 2011. Mr. Michelson served as an independent director of ARCT until its merger with Realty Income Corporation was completed in January 2013. Since April 2007, Mr. Michelson has served as the chairman and chief executive officer of Private Health Management, which is retained by corporations and individuals to assist them in obtaining high quality care. Mr. Michelson served as vice chairman and chief executive officer of the Prostate Cancer Foundation, the world’s largest private source of prostate cancer research funding, from April 2002 until December 2006 and currently serves on its board of directors. Mr. Michelson served on the board of directors of Catellus Development Corp. (a publicly traded national mixed-use and retail developer) from 1997 until 2004 when the company was sold to ProLogis. Mr. Michelson was a member of the audit committee of the board of directors for 5 years. From April 2001 to April 2002, he was an investor in, and served as an advisor or director of, a portfolio of entrepreneurial healthcare, technology and real estate companies. From March 2000 to August 2001, he served as chief executive officer and as a director of Acurian, Inc., an Internet company that accelerates clinical trials for new prescription drugs. From 1999 to March 2000, Mr. Michelson served as an adviser of Saybrook Capital, LLC, an investment bank specializing in the real estate and health care industries. From June 1998 to February 1999, Mr. Michelson served as chairman and co-chief executive officer of Protocare, Inc., a manager of clinical trials for the pharmaceutical industry and disease management firm. From 1988 to 1998, he served as chairman and chief executive officer of Value Health Sciences, Inc., an applied health services research firm he co-founded. Mr. Michelson had been a director of Molecular Insight Pharmaceuticals, a biotechnology company developing innovative diagnostic and therapeutic products for prostate cancer, from November 2011 to January 2013, Nastech Pharmaceutical Company Inc., a NASDAQ-traded biotechnology company focused on innovative drug delivery technology, from 2004 to 2008, of Highlands Acquisition Company, a AMEX-traded special purpose acquisition company, from 2007 to 2009, and of G&L Realty Corp., a NYSE-traded medical office building REIT from 1995 to 2001. Mr. Michelson is currently a director of Landmark Imaging, a privately held diagnostic imaging and treatment company and of Private Health Management, a retainer-based primary care medical practice management company. Also, since
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June 2004 and through the present, he has been and is a director of ALS-TDI, a philanthropy dedicated to curing Amyotrophic Lateral Sclerosis, commonly known as Lou Gehrig’s disease. Mr. Michelson received his B.A. from The Johns Hopkins University in 1973 and a J.D. from Yale Law School in 1976. We believe that Mr. Michelson’s current experience as a director of ARC HT, ARC RFT and BDCA, his previous experience as a member of the board of directors of NYRR, ARC RCA, ARCT and Catellus Development Corp. and his legal education, make him well qualified to serve as a member of our Board of Directors.
Edward G. Rendell
Governor Rendell was re-appointed as an independent director of the Company in February 2013. Governor Edward G. Rendell alsoFrank has served as an independent director of the Company from July 2011 until October 2012. Governor Rendell served as an independent director of ARC Global since March 2012, BDCA since January 2011 and ARCT III from March 2012 until the closemember of the ARCT III Merger in February 2013. Governor Rendell also served as an independent director of ARC RCA fromBoard’s Audit Committee since July 2010 until March 2012 and from October 2012 until2014. He became the present. Governor Rendell also served as an independent director of ARC HT from January 2011 until March 2012. Governor Rendell served as the 45th Governor of the Commonwealth of Pennsylvania from January 2003 through January 2011. As the Governor of the Commonwealth of Pennsylvania, he served as the chief executive of the nation’s 6th most populous state and oversaw a budget of $28.3 billion. He also served as the Mayor of Philadelphia from January 1992 through January 2000. As the Mayor of Philadelphia, he eliminated a $250 million deficit, balanced the city's budget and generated five consecutive budget surpluses. He was also the General Chairperson of the National DemocraticAudit Committee in December 2014. He has also served on the Board’s Compensation Committee since November 2014 and on the Board’s Nominating and Corporate Governance Committee from November 1999 through February 2001. Governor Rendell served2014 until September 2015. Mr. Frank has more than 35 years of experience providing assurance services to prominent public and private owners, investors and developers, both domestically and globally, on a wide range of real estate holding types. Mr. Frank worked at Ernst & Young LLP from 1997 to 2014 and most recently worked as a Senior Partner within the District Attorneyassurance line of Philadelphia from January 1978 through January 1986. In 1986 heErnst & Young LLP’s real estate practice. Prior to Ernst & Young LLP, Mr. Frank was at KPMG LLP for 17 years. Mr. Frank also serves on the boards of directors of ACRE Realty Investors, Inc., a candidate for governorpublic commercial real estate REIT and Landsea Holdings, Inc., a privately held home builder. His extensive experience has included working on initial public offerings and assisting acquirers in consummating acquisition transactions. He serves on the Real Estate Advisory Board of the CommonwealthNew York University Schack Institute of Pennsylvania. In 1987, he wasReal Estate and is an active member of the National Association of Real Estate Investment Trusts (“NAREIT”). Mr. Frank received a candidate forBachelor of Science degree in Accounting from Bentley College, is a member of the mayorAmerican Institute of Philadelphia. From 1988 through 1991, Governor Rendell was an attorney atCertified Public Accountants and is a Certified Public Accountant in the law firmState of Mesirov, Gelman and Jaffe. From 2000 through 2002, Governor Rendell was an attorney at the law firm of Ballard Spahr. Governor Rendell worked on several real estate transactions as an attorney in private practice. An Army veteran, Governor Rendell holds a B.A. from the University of Pennsylvania and a J.D. from Villanova Law School, his prior experience as an independent director of ARCT III and ARC HT.New York. We believe that Governor Rendell’s current experience as a director of BDCA, ARC RCA and ARC Global and his over thirty years of legal, political and management experience gained from serving in his capacities as the Governor of Pennsylvania and as the Mayor and District Attorney of Philadelphia, including hisMr. Frank’s real estate finance experience, in overseeing the acquisition and management of Pennsylvania’s real estate development transactions, including various state hospitals,addition to his strong accounting background, make him well qualified to serve as a member ofon our Board of Directors.
Scott J. Bowman
Scott J. Bowman was appointed
David B. Henry has served as an independent director of the Company and as a member of the Board’s Audit Committee and as Chairperson of the Board’s Nominating and Corporate Governance Committee since September 2015. Mr. Henry served as Chief Executive Officer and Vice Chairman of Kimco Realty Corporation (“Kimco”), a publicly traded REIT, from 2009 to January 1, 2016 and in February 2013. Scott J. Bowman was appointedother capacities at Kimco since April 2001. Before joining Kimco in April 2001, Mr. Henry served in various capacities at GE Capital Real Estate (“GE”) from 1978 to 2001, including as an independent directorGE’s Senior Vice President and Chief Investment Officer from 1998 to 2001. Mr. Henry also served as Chairman of ARC Global in MayGE’s Investment Committee and as a member of its Credit Committee. Prior to joining GE, Mr. Henry served as Vice President for Republic Mortgage Investors, a mortgage REIT, from 1973 to 1978. Mr. Henry has served on the Board of Directors of HCP, Inc., a publicly traded REIT, since January 2004, on the Board of Directors of Fairfield County Bank, a private Connecticut mutual savings bank, since July 2010, on the Board of Directors of Columbia Property Trust, Inc., a REIT that owns and operates commercial office properties, since November 2015, and on the Board of Directors of Tanger Factory Outlet Centers, Inc., a real estate company that owns the chain Tanger Outlets, since January 2016. Mr. Henry is a trustee of the International Council of Shopping Centers (“ICSC”) and served as its Chairman from 2011 to 2012. Mr. BowmanHenry served as the Vice-Chairman of the Board of Governors of NAREIT, ending his term on December 31, 2015, and serves on the real estate advisory boards of New York University and Baruch College. Mr. Henry is also the co-founder of Peaceable Street Capital, an equity lender for income producing commercial real estate properties. Mr. Henry received a Bachelor of Science degree in Business Administration from Bucknell University and a
Master of Business Administration from the University of Miami. We believe that Mr. Henry’s extensive REIT experience, leadership skills and knowledge of the real estate business make him well qualified to serve on our Board of Directors.
Mark S. Ordan has served as an independent director of ARCT IIIthe Company and as a member of the Audit Committee since June 2015 and as a member of the Compensation Committee since September 2015. He served as a member of the Board’s Nominating and Corporate Governance Committee from June 2015 to September 2015. Mr. Ordan is the non-executive Chairman of WP Glimcher, the surviving entity following the closing of Washington Prime Group Inc.’s acquisition of Glimcher Realty Trust. Mr. Ordan served as Washington Prime Group Inc.’s Chief Executive Officer from May 2014 to January 2015 and also as one of its directors from May 2014 until the acquisition. From January 2013 to November 2013, Mr. Ordan served as the Chief Executive Officer and director of Sunrise Senior Living, LLC, the successor to the management business of Sunrise Senior Living, Inc. (“Sunrise”), a publicly traded operator of approximately 300 senior living communities located in the United States, Canada and the United Kingdom prior to its sale in January 2013 to Health Care REIT, Inc. Mr. Ordan served as Sunrise’s Chief Executive Officer from November 2008 to January 2013, and as a director from July 2008 to January 2013. He served as the Chief Executive Officer and President of The Mills Corporation, a publicly traded developer, owner and manager of a diversified portfolio of regional shopping malls and retail entertainment centers, from October 2006 to May 2007, as its Chief Operating Officer from February 20122006 to October 2006 and as a director from December 2006 until ARCT III closed itsMay 2007. Prior to that, he served as President and Chief Executive Officer of Balducci’s LLC, a gourmet food store chain. He also founded and served as Chairman, President and Chief Executive Officer of Fresh Fields Markets, Inc., an organic foods supermarket chain, eventually leading the merger of the company with Whole Foods Markets, Inc. Mr. Ordan also was employed in the Company in February 2013.equities division of the investment banking firm of Goldman Sachs & Co. Mr. Bowman also hasOrdan served as a director of NYRR since August 2011. Mr. Bowman has over 20 years of experience in global brand and retail management in addition to retail store development. Mr. Bowman has served as the Group President of Global Retail and International Development atHarris Teeter Supermarkets, Inc., a publicly traded supermarket chain, from February 2013 until January 2014, when it was acquired by The Jones Group Inc. (NYSE: JNY) since June 2012. Mr. Bowman founded Scott Bowman Associates in May 2009 and has served as its chief executive officer since such time. Scott Bowman Associates provides global management, business development, retail market and network strategies, licensing, strategic planning and international strategy and operations support to leading retailers and consumer brands. From May 2005 until September 2008, Mr. Bowman served as president of Polo Ralph Lauren International Business Development where he was also a memberKroger Company, one of the executive committee and capital committee. From June 2007 until September 2008,world’s largest food retailers. Mr. BowmanOrdan also served as chairman of Polo Ralph Lauren Japan. During his time with Polo Ralph Lauren, Mr. Bowman led the effort to transform the company’s business in Asia from a licensed structure to a direct, integrated subsidiary of Polo Ralph Lauren. The transformation included upgraded merchandising, marketing, store development processes, restructuring remaining partnership agreements as well as leading the effort to buy back control of key operating territories in Asia. From 2003 to 2005, Mr. Bowman served as founder and chief executive officer of Scott Bowman Associates International Retail Consultancy. From May 1998 until January 2003, Mr. Bowman served as an executive officer of two
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subsidiaries of LVMH Moet Hennessy Louis Vuitton. From February 2001 until January 2003, Mr. Bowman served as the chief executive officer of Marc Jacobs Int’l. From May 1998 until January 2001, he was the region president of Duty Free Shoppers. Mr. Bowman has been the chairman ofon the board of Colin Cowie Enterprises,Federal Realty Investment Trust, a multi-platform digital events and lifestyle company, since its formation in March 2011. He was also a member ofpublicly traded REIT, from 1996 to 2006, serving as chairman for the last five years. Mr. Ordan currently serves on the boards of directorsthe following nonprofit organizations: the U.S. Chamber of Stuart Weitzman from February 2009 until April 2010Commerce; the National Endowment for Democracy; the Seed School Foundation; and The Health Back, a specialty and e-commerce retailer, from May 2004 until September 2007.the Chesapeake Bay Foundation. Mr. BowmanOrdan received his B.A.Bachelor of Arts in Philosophy from the State University of New York at Albany.Vassar College and his Masters in Business Administration from Harvard Business School. We believe that Mr. Bowman’s current experience as an independent director of ARC Global and NYRR, his prior experience as an independent director of ARCT III andOrdan’s extensive experience in global brandthe REIT industry, his knowledge of real estate and retail management and retail store developmenthis long-standing leadership experience make him well qualified to serve as a member ofon our Board of Directors.
Walter P. Lomax, Jr.
Walter P. Lomax, Jr.
Eugene A. Pinover has beenserved as an independent director of the Company and as a member of the Board’s Nominating and Corporate Governance Committee since July 2011. Dr. LomaxSeptember 2015. Mr. Pinover is Of Counsel and Co-Chair of the Real Estate Department of Willkie Farr & Gallagher LLP (“Willkie”) and has practiced law with Willkie since May 1992. Prior to joining Willkie, Mr. Pinover practiced law at Kaye Scholer LLP from 1973 to 1992. Mr. Pinover is a member of the American College of Real Estate Lawyers, the Association of the Bar of the City of New York, the American Bar Association, the Association of Foreign Investors in Real Estate and ICSC. Mr. Pinover is the President of the Board of Directors of Steep Rock Association, a land trust in Connecticut, and has served on its Board of Directors since June 2008. Mr. Pinover also has served as a member of the boardBoard of directorsDirectors of ARC HTNew Alternatives for Children, a New York-based social service organization, since January 2011September 2006. Mr. Pinover received his Juris Doctor from the New York University School of Law and an independent directorhis Bachelor of ARC DNAV since July 2011. Since September 2002, Dr. Lomax has served as the chairman of The Lomax Companies, the Lomax family’s investment office, which manages a global portfolio of private equity investments with a particular emphasis on venture capital and real estate. From September 1958 through September 1990, Dr. Lomax was engaged as a physician in private practice in Philadelphia, Pennsylvania. During this time, he grew his practiceArts from a private single physician office into Lomax Medical Associates, a multi-site group practice consisting of over 20 physicians located in five separate locations. Lomax Medical Associates provided high quality care in traditionally underserved areas. In July 1982, Dr. Lomax established Lomax Health Systems, a management company concentrating exclusively on healthcare. In 1984, Lomax Health Systems won a medical services contract to recruit physicians and physician assistants to supplement Philadelphia’s staff in the prison system. In January 1990, Dr. Lomax formed Correctional Healthcare Solutions, which specialized in the management and delivery of health services to correctional facilities. At the time of its sale in July 2000, Correctional Healthcare Solutions was providing health care in 60 correctional facilities in 16 states. From July 1989 through September 2002, Dr. Lomax was the co-founder and vice chairman of AmeriChoice, Inc., a Medicaid HMO with licenses in Pennsylvania, New Jersey and New York. In September 2002, AmeriChoice was sold to United Health Group Company.Dartmouth College, both cum laude. We believe that Dr. Lomax’s current experience as a director of ARC HT and ARC DNAV and ongoingMr. Pinover’s extensive real estate investments on behalf of The Lomax Companies,experience and legal background make him well qualified to serve on our Board of Directors.
Julie G. Richardson has served as an independent director of the Company and as a member of the Board’s Compensation Committee and the Nominating and Corporate Governance Committee since April 2015, becoming the Chairperson of the Board’s Compensation Committee in September 2015. From November 2012 to October 2014, she was a senior advisor to Providence Equity Partners LLC (“Providence Equity”), a global asset management firm with over $40 billion in assets under management. From April 2003 to November 2012, she was a Partner and Managing Director at Providence Equity, and oversaw the firm’s New York office. While at Providence Equity, her responsibilities included leading the initiation and execution of deals, and optimizing operating results and strategic positioning of portfolio companies throughout Providence Equity’s ownership period. Prior to Providence Equity, Ms. Richardson served as Global Head of JP Morgan’s Telecom, Media and Technology Group, and was previously a Managing Director in Merrill Lynch & Co.’s investment banking group. Ms. Richardson has served on the Board of The Hartford Financial Group, an insurance and financial services company, since January 2014. She received a Bachelor of Business Administration from the University of Wisconsin-Madison. We believe that Ms. Richardson’s risk management skills and investment management and financial services experience make her well qualified to serve on our Board of Directors. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR”
THE ELECTIONEACH OF MESSRS.
NICHOLAS S. SCHORSCH, EDWARD M. WEIL, JR., WILLIAM M. KAHANE, LESLIE D. MICHELSON, EDWARD G. RENDELL, SCOTT J. BOWMANRUFRANO, FRATER, FRANK, HENRY, ORDAN AND
WALTER P. LOMAX, JR. AS MEMBERS OFPINOVER AND MS. RICHARDSON TO SERVE ON THE BOARD OF DIRECTORS
TO SERVE UNTIL THE
20142017 ANNUAL STOCKHOLDERS MEETING AND UNTIL
THEIR SUCCESSORS AREA SUCCESSOR FOR EACH IS DULY ELECTED AND
QUALIFIED.Information About the Board of Directors and its Committees
The Board of Directors ultimately is responsible for the management and control of our business and operations. We are externally managed and advised by the Manager. Pursuant to the terms of a management agreement between the Manager and us, the Manager provides us with our management team, appropriate support personnel and the resources of AR Capital, LLC (“ARC”) necessary for the implementation and execution of our business and growth strategies, including the acquisition of our properties. The Manager is wholly owned by ARC, which is indirectly majority owned and controlled by Mr. Nicholas S. Schorsch, our chairman and chief executive officer. The Board of Directors held a total of 22 meetings during the fiscal year ended December 31, 2012 and took action by written consent on 16 occasions. Each incumbent director attended at least 75% of the aggregate of (1) the total number of meetings of our Board of Directors (held during the period for which he has been a director) and (2) the total number of meetings of all committees of our Board of Directors on which the director served (during the periods that he or she served). All five of our then five directors attended the 2012 stockholders’ annual meeting. We anticipate that all directors and nominees will attend the Annual Meeting. We encourage all incumbent directors and director nominees to attend our annual meetings of stockholders.
QUALIFIES.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND ITS COMMITTEES
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The Board of Directors has approved and organized an audit committee, a compensation committee and a nominating and corporate governance committee. The Company does not currently have a conflicts committee. The Board of Directors carries out the responsibilities typically associated with conflicts committees.
Leadership Structure of the Board of Directors
Nicholas S. Schorsch serves
Our Board has the authority to select the leadership structure it considers appropriate. In making leadership structure determinations, the Board considers many factors, including the specific needs of our business and what is in the best interests of our stockholders. In recognition of the time commitments and activities required to function effectively as both
our chairmanthe Chief Executive Officer and Chairman of the Board,
we have separated the roles, with Mr. Rufrano serving as our Chief Executive Officer and
Mr. Frater serving as our
chief executive officer. As chief executive officer, Mr. Schorsch is responsible forNon-Executive Chairman. The Board believes that the
daily operationscurrent separation of the
Companyroles of Chief Executive Officer and
implementing the Company’s business strategy. The Board of Directors believes that because the chief executive officer is ultimately responsible for ensuring the successful operation ofChairman allows Mr. Rufrano to focus his time and energy on operating and managing the Company
while leveraging the experience and
its business, which is alsoperspectives of Mr. Frater in helping to set the
main focus of the Board’s deliberations, Mr. Schorsch is the most qualified director to act as chairman. The Board of Directors may modify this structure to best address the Company’s circumstances for the benefit of its stockholders when appropriate.The Board of Directors appointed Leslie D. Michelson as the lead independent directorstrategic direction of the Company. The Board of Directors has appointed a lead independent director to provide an additional measure of balance, ensure the Board’s independence, and enhance the Board’s ability to fulfill its management oversight responsibilities.
The Company’s management believesdetermined that having a majority of independent, experienced directors, provides the rightour current Board leadership structure foris the Company and is best for the Company and its stockholdersmost appropriate at this time.
time, given the specific characteristics and circumstances of the Company.
Board Oversight of Risk Management
The Board of Directors has an active role in overseeing the management of risks applicable to the Company. The entireA portion of this responsibility has been delegated by the Board is actively involved in overseeing risk management forto the Company through its approvalcommittees of all property and company acquisitions, incurrence and assumptions of debt and its oversightthe Board with respect to the assessment of the Company’s executive officersrisks and risk management in its respective areas of oversight.
In particular, the Board administers its risk oversight function through (i) the review and discussion of regular periodic reports by the Company’s management to the Board of Directors and its committees on topics relating to the risks that we face, including, among others, market conditions, existing and potential legal claims against us, tenant concentrations and creditworthiness, leasing activity and expirations, compliance with debt covenants, management of debt maturities and access to the debt and equity capital markets, (ii) the required approval by the Board of Directors (or a committee thereof) of significant transactions and other decisions, including, among others, significant acquisitions and dispositions of properties, certain borrowings and the Manager, managing risks associatedappointment and retention of certain senior executives, (iii) the direct oversight of specific areas of our business by the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee and (iv) regular periodic reports from our auditors and other outside consultants regarding various areas of potential risk, including, among others, those relating to our qualification as a REIT for tax purposes and our internal controls and financial reporting. The Board of Directors also relies on management to bring significant matters affecting the Company to its attention, and it has tasked the Audit Committee with independencemonitoring the Company’s overall risk profile.
Pursuant to its charter, the Audit Committee is responsible for discussing with management the Company’s significant financial risk exposures and the actions management has taken to limit, monitor and control such exposures. The Audit Committee is also responsible for discussing with management the Company’s risk assessment and risk management policies. In addition, we have adopted policies and procedures with respect to complaints related to accounting, internal control or auditing, which enables anonymous and confidential submission of complaints that the Audit Committee shall discuss with management.
Board Meetings
During the fiscal year ended December 31, 2015, the Board of Directors held 33 meetings (including meetings held in person and by conference call) and the independent directors met in executive session ten times. Mr. Frater, as the Non-Executive Chairman of the Board, served as the presiding director of the executive sessions of the independent directors that occurred after April 1, 2015. The number of meetings for each Board committee is set forth below under the heading “-Board Committees.” During the year ended December 31, 2015, each of our seven incumbent directors attended at least 75% of the total number of meetings of the Board and of the committees on which he or she served (held during the periods that he or she served). Each of our seven incumbent directors attended the 2015 stockholders’ annual meeting. Pursuant to our Corporate Governance Guidelines, all directors are expected to attend our 2016 Annual Meeting.
Board Governance Documents
The Board maintains charters for all its committees. In addition, the Board has adopted a written set of Corporate Governance Guidelines as well as a Code of Business Conduct and Ethics that applies to all of the officers, employees, consultants and directors of the Company and its subsidiaries. The Company intends to satisfy the disclosure requirement regarding any amendment to or waiver of a provision of the Code of Business Conduct and Ethics for the Company’s principal executive officer, principal financial officer, principal accounting officer or persons performing similar functions, by posting such information on the Company’s website. To view the charters of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee as well as the Corporate Governance Guidelines and the Code of Business Conduct and Ethics, please visit our website at www.vereit.com. Each of these documents is also available, free of charge, in print to any stockholder who sends a written request to such effect to VEREIT, Inc., 2325 E. Camelback Road, Suite 1100, Phoenix, Arizona 85016, Attention: Lauren Goldberg.
Independent Directors
Under the listing standards of the New York Stock Exchange (the “NYSE”), at least a majority of the Company’s directors, and all of the members of the
Board, and reviewing and approving all transactions with affiliated parties and resolving other conflicts of interest between the Company and its subsidiaries, on the one hand, and ARC, any director, the Manager or their respective affiliates, on the other hand. The audit committee oversees management of accounting, financial, legal and regulatory risks.Company’s Audit Committee,
Compensation Committee and Nominating and Corporate Governance Committee, must be independent. As part of the qualification for director independence, in addition to other specified criteria, the NYSE listing standards require our Board of Directors to affirmatively determine that the director has no material relationship with us, either directly or as a partner, stockholder or officer of an organization that has a relationship with us. Our Board of Directors has affirmatively determined that six directors - Hugh R. Frater, Bruce D. Frank, David B. Henry, Mark S. Ordan, Eugene A. Pinover and Julie G. Richardson - have no relationship with us that would interfere with such person’s ability to exercise independent judgment as a member of our board, and that they otherwise qualify as “independent” under the NYSE’s listing standards.
Board Committees
The Board of Directors has three standing committees, with each committee described below. The members of each committee are also listed below. The committees consist solely of independent directors.
Audit Committee
We have a separately designated standing Audit Committee established
an audit committee in
July 2011. During 2012, the audit committee met 4 times.The charteraccordance with Section 3(a)(58)(A) of audit committee is available to any shareholder who sends a request to American Realty Capital Properties, Inc., 405 Park Avenue, 15th Floor, New York, NY 10022. The audit committee charter is also available on the Company’s website athttp://www.arcpreit.comunder “Investor Relations — Governance Documents” by clicking on “Audit Committee Charter”. Our audit committee consists of Messrs. Leslie D. Michelson, who also serves as the chair of our audit committee, Edward G. Rendell, Scott J. Bowman and Walter P. Lomax, Jr. Each of the audit committee members is an independent director and “financially literate” under the meaning of the applicable rules of the NASDAQ Stock Market (“NASDAQ”), as well as under the meaning of the applicable (i) provisions set forth in the audit committee charter and (ii) requirements set forth in the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Audit Committee is currently comprised of Messrs. Frank (Chairperson), Henry and the applicable SEC rules.Ordan. The Board has determined that Leslie D. Michelsoneach member of the Audit Committee is qualifiedan independent director under the rules of the NYSE and the SEC and that Mr. Frank qualifies as an audit“audit committee financial expertexpert” as defined in Item 407(d)(5)by the SEC. In addition, the Board has determined that each of Regulation S-Kthe members of the Audit Committee is “financially literate” and has accounting or related financial management expertise, as such qualifications are defined under the rules and regulations of the SEC. NYSE.
The audit committee,Audit Committee, in performing its duties, monitors:
the Company’s financial reporting process, auditing and internal control activities, including the integrity of our financial statements;
the Company’s compliance with legal and regulatory requirements;
the independent auditor’s qualifications and independence; and
the performance of the Company’s independent and internal auditors, as applicable.
The audit committeeAudit Committee is also responsible for engaging our independent registered public accounting firm, reviewing with the independent registered public accounting firm the plans and results of the audit
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engagement, approving professional services provided by the independent registered public accounting firm, reviewing the independence of the independent registered public accounting firm, considering the range of audit and non-audit fees and reviewing the adequacy of our internal accounting controls.
During the fiscal year ended December 31, 2012, all of the members of the audit committee voted to approve the filing of the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.
The audit committee’sAudit Committee’s report on our financial statements for the fiscal year ended December 31, 20122015 is discussed below under the heading “Audit Committee Report.”
Stockholders who would like to propose
During 2015, the Audit Committee met sixteen times (including meetings held in person and by conference call).
Compensation Committee
We have a standing Compensation Committee, which is currently comprised of Ms. Richardson (Chairperson) and Messrs. Frank and Ordan. The Board has determined that each member of the Compensation Committee is an independent director candidateunder the rules of the NYSE. Pursuant to the NYSE listing standards, in determining the independence of the directors serving on the Compensation Committee, our Board of Directors considered all factors specifically relevant to determining whether a director has a relationship to us which is material to that director’s ability to be independent from our management in connection with the duties of a Compensation Committee member, including, but not limited to, such director’s source of compensation and whether such director is affiliated with us, one of our subsidiaries, or an affiliate of one of our subsidiaries. In addition, all of the members of our Compensation Committee are “non-employee directors” within the meaning of the rules of Section 16 of the Exchange Act and “outside directors” for purposes of Section 162(m) of the considerationInternal Revenue Code of 1986, as amended (the “Code”).
The principal functions of the Compensation Committee are to:
approve and evaluate all compensation plans, policies and programs as they affect the Company’s executive officers;
review and oversee management’s annual process, if any, for evaluating the performance of our executive officers and review and approve on an annual basis the remuneration of our executive officers;
oversee our equity incentive plans, including, without limitation, the issuance of stock options, restricted shares of capital stock, restricted stock units, dividend equivalent rights and other equity-based awards;
assist the Board of Directors and the Non-Executive Chairman in overseeing the development of executive succession plans; and
determine from time to time and make recommendations to the Board regarding the remuneration for our non-executive directors.
In carrying out its responsibilities, our Compensation Committee may do so by followingdelegate any or all of its responsibilities to a subcommittee to the proceduresextent consistent with the Company’s charter, Bylaws and any other applicable laws, rules and regulations. In February 2016, consistent with an amendment made to the Compensation Committee’s charter, the Compensation Committee authorized the Chief Executive Officer to grant future discretionary equity-based awards under the section entitled “Stockholder Proposals forCompany’s Equity Plan (the “Equity Plan”) without the 2014 Annual Meeting — Stockholder Proposalsapproval of the Compensation Committee in an amount not to exceed $100,000 per award (and not to exceed total awards in a calendar year of $2 million) to employees who are not subject to the reporting requirements under Section 16 of the Exchange Act.
During 2015, the Compensation Committee met sixteen times (including meetings held in person and
Nominations for Directors to Be Presented at Meetings” on page 30 of this Proxy Statement.by conference call).
Nominating and Corporate Governance Committee
The Board of Directors established
We have a
nominatingstanding Nominating and
corporate governance committee in July 2011. During 2012, the nominating and corporate governance committee met three times.Our nominating and corporate governance committeeCorporate Governance Committee, which is currently comprised of Messrs. Leslie D. Michelson, Edward G. Rendell, Scott J. BowmanHenry (Chairperson) and Walter P. Lomax, Jr.,Pinover, and Ms. Richardson. The Board has determined that each of whomthe members of the Nominating and Corporate Governance Committee is an independent director. Leslie D. Michelsondirector under the rules of the NYSE.
The Nominating and Corporate Governance Committee’s purpose is
the chair of our nominating and corporate governance committee. The nominating and corporate governance committee was formed to establish and implement our corporate governance practices and to nominate individuals for election to the Board. The
charter of the nominating and corporate governance committee is available to any shareholder who sends a request to American Realty Capital Properties, Inc., 405 Park Avenue, 15th Floor, New York, NY 10022. The nominating and corporate governance committee charter is also available on the Company’s website athttp://www.arcpreit.com under “Investor Relations — Governance Documents” by clicking on “NominatingNominating and Corporate Governance
Charter.” We have not adopted a specific policy regarding the consideration of director nominees recommended to our nominating and corporate governance committee by stockholders. Our nominating and corporate governance committee will consider candidates nominated by stockholders provided that the stockholder submitting a nomination has complied with procedures set forth in the Company’s bylaws. See “Stockholder Proposals for the 2014 Annual Meeting” for additional information regarding stockholder nominations of director candidates.The nominating and corporate governance committeeCommittee is responsible for the following:
providing counsel to the Board of Directors with respect to the organization, function and composition of the Board of Directors and its committees;
overseeing the self-evaluation of the Board of Directors and the Board of Director’s evaluation of management;
periodically reviewing and, if appropriate, recommending to the Board of Directors changes to our corporate governance policies and procedures; and
identifying and recommending to the Board of Directors potential director candidates for nomination.nomination; and
overseeing and approving related person transactions.
We have not adopted a specific policy regarding the consideration of director nominees recommended to our Nominating and Corporate Governance Committee by stockholders for our proposed director slate. Our Nominating and Corporate Governance Committee will consider candidates nominated by stockholders provided that the stockholder submitting a nomination has complied with procedures set forth in the Company’s Bylaws. See “Stockholder Proposals for the 2017 Annual Meeting” for additional information regarding stockholder nominations of director candidates.
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In
making its determinations,determining appropriate candidates to nominate to the Board of Directors and in considering shareholder nominees, our
nominatingNominating and
corporate governance committeeCorporate Governance Committee may consider such criteria as it deems appropriate, which may include, without limitation, a nominee’s:
| º | personal and professional integrity, ethics and values; |
| º | experience in corporate management, such as serving as an officer or former officer of a publicly held company, and a general understanding of marketing, finance and other elements relevant to the success of a publicly-traded company in today’s business environment; |
| º | experience in the Company’s industry and with relevant social policy concerns; |
| º | experience as a board member of another publicly held company; |
| º | academic expertise in an area of the Company’s operations; |
| º | diversity of both background and experience; |
| º | practical and mature business judgment, including ability to make independent analytical inquiries; |
| º | the nature of and time involved in a director’s service on other boards and/or committees; and |
| º | with respect to any person already serving as a director, the director’s past attendance at meetings and participation in and contribution to the activities of the Board. |
personal and professional integrity, ethics and values;
experience in corporate management, such as serving as an officer or former officer of a publicly-held company, and a general understanding of marketing, finance and other elements relevant to the success of a publicly-traded company in today’s business environment;
experience in the Company’s industry and with relevant social policy concerns;
experience as a board member of another publicly-held company;
academic expertise in an area of the Company’s operations;
whether the appointment of the candidate could increase the diversity of background, skills and experience of the Board as a whole;
practical and mature business judgment, including ability to make independent analytical inquiries;
the nature of and time involved in a director’s service on other boards and/or committees and whether a candidate’s service obligations to other boards complies with the Board’s then outstanding policy on service on boards of other public companies; and
with respect to any person already serving as a director, the director’s past attendance at meetings and participation in and contribution to the activities of the Board and any committees on which he or she has served.
Our
nominatingNominating and
corporate governance committeeCorporate Governance Committee evaluates each nominee in the context of the Board as a whole, with the objective of assembling a group that can best perpetuate the success of the business and represent stockholder interests through the exercise of sound judgment using its diversity of experience in these various areas.
Compensation Committee
The Board of Directors established a compensation committee on July 6, 2011. During 2012, the compensation committee met two times.
The charter of the compensation committee is available to any shareholder who sends a request to American Realty Capital Properties, Inc., 405 Park Avenue, 15th Floor, New York, NY 10022. The compensation committee charter is also available on the Company’s website athttp://www.arcpreit.comunder “Investor Relations — Governance Documents” by clicking on “Compensation Committee Charter.” Our compensation committee is comprised of our four independent directors. In addition, all of the members of our compensation committee are “non-employee directors” within the meaning of the rules of Section 16 of the Exchange Act and “outside directors” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). The principal functions of the compensation committee are to:
approve and evaluate all compensation plans, policies and programs as they affect the Company’s executive officers;
review and oversee management’s annual process, if any, for evaluating the performance of our senior officers and review and approve on an annual basis the remuneration of our senior officers;
oversee our equity incentive plans, including, without limitation, the issuance of stock options, restricted shares of capital stock, the Manager’s Stock, restricted stock units, dividend equivalent shares and other equity-based awards;
assist the Board of Directors and the chairman in overseeing the development of executive succession plans; and
determine from time to time the remuneration for our non-executive directors.
In carrying out its responsibilities, our compensation committee may delegate any or all of its responsibilities to a subcommittee to the extent consistent with the Company’s Charter, bylaws and any other applicable laws, rules and regulations.
During 2015, the Nominating and Corporate Governance Committee met six times (including meetings held in person and by conference call).
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Role of Executive Officers in the Compensation Process
Our officers provide input and recommendations to the compensation committee for the compensation paid to each of the Company’s directors. Our compensation committee considers these recommendations when determining salary, if any, awarding incentive compensation and setting incentive opportunities for the coming year. In addition, our chief financial officer analyzes the financial implications of various executive compensation plan designs. None of our current executive officers receive any compensation directly from us.
Independent Compensation Consultant
Our compensation committee has not engaged a compensation consultant in connection with director compensation and currently has no plans to engage a compensation consultant for such purpose at any time prior to making compensation decisions for 2014.
Oversight of Conflicts of Interest
The Company does not have a standing conflicts committee. Instead, the entire Board of Directors, including our independent directors, is responsible for approving transactions, and resolving other conflicts of interest, between the Company and its subsidiaries, on the one hand, and ARC, any director, the Manager or their respective affiliates, on the other hand. The Board of Directors is responsible for reviewing and approving all transactions with affiliated parties, all purchase or leases of properties from or sales or leases to an affiliate, and reviewing and approving all agreements and amendments to agreements between the Company and affiliates, including ARC or the Manager and their subsidiaries.
During the fiscal year ended December 31, 2012, all of the members of the Board of Directors reviewed our policies and report that they are being followed by us and are in the best interests of our stockholders. Certain of the factors considered by the Board of Directors are set forth in the financial statements (including the notes thereto) and Risk Factors contained in our Annual Report on Form 10-K for the year ended December 31, 2012. The Board reviewed the material transactions between ARC, the Manager and their respective affiliates, on the one hand, and us, on the other hand, which occurred during the fiscal year ended December 31, 2012. The Board has determined that all our transactions and relationships with ARC, the Manager and their respective affiliates during the fiscal year ended December 31, 2012 were fair and were approved in accordance with the policies referenced in “Certain Relationships and Related Transactions” below.
Director Independence
The Board of Directors has considered the independence of each director and nominee for election as a director in accordance with the elements of independence set forth in the listing standards of NASDAQ. Based upon information solicited from each nominee, the Board of Directors has affirmatively determined that Leslie D. Michelson, Edward G. Rendell, Scott J. Bowman and Walter P. Lomax, Jr. have no material relationship with the Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company) other than as a director of the Company and are “independent” within the meaning of NASDAQ’s director independence standards and audit committee independence standards, as currently in effect. Our Board of Directors has determined that each of the three independent directors satisfy the listing standards for independence of NASDAQ. There are no familial relationship between any of our directors and executive officers.
Communications with the Board of Directors
The Company’s stockholders
Stockholders and all interested parties may communicate with the Board of Directors by sending writtenor any individual director regarding any matter that is within the responsibilities of the Board. Stockholders and interested parties should send their communications addressed to such personthe Board of Directors, or persons in care of American Realty Capital Properties,an individual director, c/o VEREIT, Inc., 405 Park Avenue, 15th Floor, New York, New York 10022,2325 E. Camelback Road, Suite 1100, Phoenix, Arizona 85016, Attention: Edward M. Weil,Lauren Goldberg, Executive Vice President, TreasurerGeneral Counsel and Secretary. Mr. WeilMs. Goldberg will deliver all appropriate communications to the Board of Directors or the individual director no later than the next regularly scheduled meeting of the Board of Directors. If the Board of Directors modifies this process, the revised process will be posted on the Company’s website.
EXECUTIVE OFFICERS
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COMPENSATION AND OTHER INFORMATION CONCERNING OFFICERS,
DIRECTORS AND CERTAIN STOCKHOLDERS
Compensation Discussion and Analysis
None of our current executive officers, Messrs. Nicholas S. Schorsch, Edward M. Weil, Jr, Peter M. Budko, Brian D. Jones and Brian S. Block, are employed by us or receive any compensation directly from us for the performance of their duties as executive officers of the Company. The Manager performs our day-to-day management functions. Our executive officers are all employees of the Manager. See “Certain Relationships and Related Transactions” below for a discussion of fees and expenses payable to the Manager and its affiliates.
Directors and Executive Officers
The following table presents certain informationsets forth the names and ages of each of the executive officers as of the date of this Proxy Statement concerningproxy statement and the position and office that each of our directors and executive officers serving in such capacity:
currently holds with the Company: |
| | | | |
| Name | | Age | | Principal Occupation and Positions Held |
Nicholas S. SchorschGlenn J. Rufrano | | 5266 | | Chairman and Chief Executive Officer and Director* |
Edward M. Weil, Jr.Michael J. Bartolotta | | 46 | | President, Treasurer, Secretary and Director |
Peter M. Budko | | 53 | | Executive Vice President and Chief Investment Officer |
Brian S. Block | | 4158 | | Executive Vice President and Chief Financial Officer |
Brian D. JonesLauren Goldberg | | 4448 | | Executive Vice President, General Counsel and Secretary |
| Paul H. McDowell | | 55 | | Executive Vice President and Chief Operating Officer |
William M. KahaneC. Miller | | 6546 | | DirectorExecutive Vice President, Investment Management |
Leslie D. MichelsonThomas W. Roberts | | 6257 | | Independent Director |
Edward G. Rendell | | 69 | | Independent Director |
Scott J. Bowman | | 56 | | Independent Director |
Walter P. Lomax, Jr. | | 80 | | Independent DirectorExecutive Vice President and Chief Investment Officer |
Nicholas S. Schorsch
Please see “Business Experience of Nominees” on pages 5 – 6 for biographical information about Mr. Schorsch.
Edward M. Weil, Jr.
Please see “Business Experience of Nominees” on pages 5 – 7 for biographical information about Mr. Weil.
Peter M. Budko
Peter M. Budko has been the executive vice president and chief investment officer of the Company since its formation in December 2010 and the executive vice president and chief investment officer of the Manager since its formation in November 2010. Mr. Budko served as executive vice president and chief investment officer of ARCT, the ARCT advisor and the ARCT property manager from their formation in 2007 through March 2012. Mr. Budko has also served as executive vice president and chief operating officer of NYRR since its formation in October 2009, and the NYRR property manager and the NYRR advisor since their formation in November 2009. Mr. Budko has served as executive vice president and chief investment officer of the PE-ARC advisor since its formation in December 2009. Mr. Budko has served as executive vice president and chief investment officer of ARC RCA and the ARC RCA advisor since their formation in July 2010 and May 2010, respectively. Mr. Budko has served as executive vice president, and until February 2011 as chief investment officer, of ARC HT, the ARC HT advisor and the ARC HT property manager since their formation in August 2010. Mr. Budko served as an executive officer of ARCT III, the ARCT III Advisor and the ARCT III property manager from their formation in October 2010 until the close of the ARCT III Merger in February 2013. Mr. Budko has served as an executive officer of BDCA and the BDCA advisor since their formation in May 2010 and June 2010, respectively. Mr. Budko has served as executive vice president and chief investment officer of ARC DNAV, the ARC DNAV advisor and the ARC DNAV property manager since their formation in September 2010. Mr. Budko also has been an executive officer of ARC Global, the ARC Global advisor and the ARC Global property manager since their formation in July 2011, July 2011 and January 2012, respectively. Mr. Budko has served as executive vice president and chief investment officer of
* See biographical summary under “Proposal 1: Election of Directors - Business Experience of Director Nominees”
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ARCT IV, the ARCT IV advisor and the ARCT IV property manager since their formation in February 2012. Mr. Budko
Michael J. Bartolotta has served as the executive vice presidentCompany’s Executive Vice President and Chief Financial Officer since October 2015. Mr. Bartolotta previously served as Executive Vice President and Chief Financial Officer of ARC HT II,Cushman & Wakefield Inc. (“Cushman”), a global leader in commercial real estate services, from February 2012 until September 2015. Mr. Bartolotta also served on Cushman’s Board of Directors and served as Chairman of the ARC HT II advisorAudit Committee from March 2007 until he assumed his position as Executive Vice President and Chief Financial Officer of Cushman in February 2012. Before becoming Cushman’s Chief Financial Officer, Mr. Bartolotta served as Vice President and Chief Financial Officer for EXOR, Inc., the ARC HT II property manager since their formation in OctoberU.S. arm of EXOR S.p.A. from 1991 to February 2012. Mr. BudkoBartolotta has a Bachelor of Science degree in Accounting from New York University and is a Certified Public Accountant in New York.
Lauren Goldberg has served as the executive vice president of ARC RFTCompany’s Executive Vice President, General Counsel and Secretary since May 2015. Prior to joining the ARC RFT advisor since their formation inCompany, Ms. Goldberg served as Executive Vice President, General Counsel and Chief Compliance Officer for global cosmetics company, Revlon, Inc. from March 2011 through December 2013. Ms. Goldberg served as Senior Vice President - Law for MacAndrews & Forbes Inc. from November 20122009 until February 2011, and as presidentan Assistant United States Attorney for the United States Attorney’s Office in the Southern District of ARC RFTNew York, from October 2000 until October 2009. Prior to her service in the U.S. Attorney’s Office, Ms. Goldberg worked as an associate with Stillman & Friedman, P.C. and with Fried, Frank, Harris, Shriver & Jacobson LLP. Ms. Goldberg also has prior accounting experience as an associate at Coopers & Lybrand. She received her Juris Doctor from Columbia Law School and her undergraduate degree in accounting from the ARC RFT advisor since January 2013. Mr. Budko was appointed as a directorWharton School, University of ARC RFT in January 2013. Mr. Budko Pennsylvania.
Paul H. McDowell has served as the executive vice presidentCompany’s Executive Vice President and chief investment officer of ARCT V,Chief Operating Officer since October 2015. He previously served as the ARCT V adviserCompany’s Co-Head, Real Estate from January 2015 to September 2015 and the ARCT V property manager since their formation in January 2013.Company’s President, Office and Industrial Group from November 2013 until December 2014. Prior to joining the Company, Mr. Budko hasMcDowell was a founder of CapLease Inc. (“CapLease”), a publicly traded net-lease REIT, where he served as chief investment officerChief Executive Officer from 2001 to 2014 and a directoras Senior Vice President, General Counsel and Secretary from 1994 until 2001. Mr. McDowell served on the CapLease Board of RCS Capital since February 2013. From January 2007Directors from 2003 to July 2007, Mr. Budko2014 and was chief operating officer of an affiliated American Realty Capital real estate investment firm. Mr. Budko founded and formerly served as managing director and group headelected Chairman of the Structured Asset Finance Group, a divisionBoard in December 2007. He served on the Board of Wachovia Capital Markets, LLCDirectors of CapLease’s predecessor from 1997 – 2006. The Structured Asset Finance Group structures and invests in real estate that is net leased to2001 until 2004. From 1991 until 1994, Mr. McDowell was corporate tenants. While at Wachovia, Mr. Budko acquired over $5 billioncounsel for Sumitomo Corporation of net leased real estate assets.America, the principal U.S. subsidiary of one of the world’s largest integrated trading companies. From 1987 – 1997,to 1990, Mr. Budko workedMcDowell was an associate in the Corporate Real Estate Finance Groupcorporate department at NationsBank Capital Markets (predecessor to Bankthe Boston law firm of America Securities), becoming headNutter, McClennen & Fish LLP. He received his Juris Doctor with honors from Boston University School of the groupLaw in 1990. Mr. Budko1987, and received a B.A.Bachelor of Arts from Tulane University in physics from the University of North Carolina.Brian S. Block
Brian S. Block has been the executive vice president and chief financial officer of the Company since our formation in August 2010 and executive vice president and chief financial officer of the Manager since its formation in November 2010. Mr. Block has served as executive vice president and chief financial officer of ARCT, the ARCT advisor and the ARCT property manager from their formation in 2007 through March 2012. Mr. Block has served as executive vice president and chief financial officer of NYRR since its formation in October 2009, and the NYRR property manager and the NYRR advisor since their formation in November 2009. Mr. Block has served as executive vice president and chief financial officer of the PE-ARC advisor since its formation in December 2009. Mr. Block has served as executive vice president and chief financial officer of ARC RCA and the ARC RCA advisor since their formation in July 2010 and May 2010, respectively. Mr. Block has served as executive vice president and chief financial officer of ARC HT, the ARC HT advisor and the ARC HT property manager since their formation in August 2010. Mr. Block served as an executive officer of ARCT III, the ARCT III Advisor and the ARCT III property manager from their formation in October 2010 until the close of the ARCT III Merger in February 2013. Mr. Block served as chief financial officer and treasurer of BDCA from its formation in May 2010 until February 2013, and has served as chief financial officer of the BDCA advisor from its formation in June 2010 until February 2013. Mr. Block has served as chief financial officer of ARC DNAV since its formation in September 2010. Mr. Block has served as executive vice president and chief financial officer of ARC DNAV, the ARC DNAV advisor and the ARC DNAV property manager since their formation in September 2010. Mr. Block also has been executive vice president and chief financial officer of ARC Global, the ARC Global advisor and the ARC Global property manager since their formation in July 2011, July 2011 and January 2012, respectively. Mr. Block 1982.
William C. Miller has served as the executive vice presidentCompany’s Executive Vice President, Investment Management since June 2015. In this role, Mr. Miller provides strategic direction and chiefoversees all aspects of investment management for our Cole Capital® business segment, including product development, external and internal sales, marketing, broker-dealer relations, due diligence and securities operations. Mr. Miller previously served as Senior Vice President and Chief Sales Officer of Cole Capital from March 2015 through June 2015. Mr. Miller has been in the financial officerservices business for more than 20 years and has extensive leadership experience in capital markets, real estate and distribution. Prior to joining Cole Capital, he served as Senior Vice President and Director of ARCT IV,National Accounts for American Funds, from July 2012 until March 2015, where he was responsible for leading business development, strategy and relationship management efforts for the ARCT IV advisorretail wire/regional broker dealers, as well as the global banking channel in the United States. In addition to his experience at American Funds, Mr. Miller previously served as Executive Vice President and the ARCT IV property manager since their formationManaging Director of National Products for Realty Capital Securities, LLC from May 2010 until June 2012, as Executive Vice President and Chief Sales Officer for AXA Equitable Distributors from 2006 until 2010, and in February 2012.senior leadership roles for Lincoln Financial Distributors from 2003 until 2006. Mr. BlockMiller is a graduate of Hobart College. He holds Financial Industry Regulatory Authority (FINRA) Series 7 and 24 licenses.
Thomas W. Roberts has served as the executive vice presidentCompany’s Executive Vice President and chief financial officerChief Investment Officer since October 2015. Previously he served as the Company’s Executive Vice President, Real Estate from the Company’s acquisition of ARC RFTCole Real Estate Investments, Inc., a publicly traded Maryland corporation (“Cole”), until October 2015. During his tenure at Cole and the ARC RFT advisor from November 2012 until January 2013. Mr. Block has served as a chief financial officer and executive vice president of ARCT V, the ARCT V advisor and the ARCT V property manager since their formation in January 2013. Mr. Block has served as chief financial officer, assistant secretary and a director of RCS Capital since February 2013. Mr. Block isCompany, he was responsible for the accounting, financeacquisition and reporting functions atdisposition of over $20 billion of office, industrial and retail properties. Mr. Roberts is a 30-year veteran of the American Realty Capital groupreal estate industry. Prior to joining Cole, Mr. Roberts served as President and Chief Executive Officer of companies. He has extensive experience in SEC reporting requirements, as well as REIT tax compliance matters. Mr. Block has been instrumental in developing the American Realty Capital group of companies’ infrastructure and positioning the organization for growth. Mr. Block beganOpus West Corporation (“Opus”), a Phoenix-based real estate developer, from March 1993 until May 2009. During his career at Opus, he was responsible for the design, construction and development of more than 50 million square feet of commercial real estate valued in excess of $8 billion. In July 2009, Opus filed for Chapter 11 bankruptcy protection. From 1986 until 1990, Mr. Roberts worked as Vice President, Real Estate Development for the Koll Company. Mr. Roberts earned a Bachelor of Science degree in Finance with a specialization in real estate from Arizona State University.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed Deloitte as our independent registered public accounting at Ernst & Young and Arthur Andersen from 1994firm for the fiscal year ending December 31, 2016. Deloitte was first appointed as our independent registered public accounting firm effective June 1, 2015. Stockholder ratification of the appointment of Deloitte as the Company’s independent registered public accounting firm is not required by the Company’s Bylaws or otherwise. However, the Board is submitting the appointment of Deloitte to 2000. Subsequently, Mr. Block was the chief financial officerstockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the appointment, the Audit Committee may reconsider whether or not to retain Deloitte in the future. Even if the appointment is ratified, the Audit Committee in its discretion may direct the appointment of a venture capital-backed technology company for several years priordifferent independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in the best interests of the Company.
Change in Independent Registered Public Accounting Firm
We engaged Deloitte as our new independent registered public accounting firm on June 1, 2015 to joining AFRT in 2002. While at AFRT, Mr. Block served as senior vice president and chief accounting officer and oversawaudit the financial administrative and reporting functions of the organization. Mr. Block discontinued working for AFRT in August 2007. He is a certified public accountant and is a member of the AICPA and PICPA.
TABLE OF CONTENTS
Mr. Block serves on the REIT Committee of the Investment Program Association. Mr. Block received a B.S. from Albright College and an M.B.A. from La Salle University.
Brian D. Jones
Brian D. Jones has been the chief operating officerstatements of the Company since February 2013. Mr. Jones servedand VEREIT Operating Partnership, L.P (the “Operating Partnership”) for the fiscal year ending December 31, 2015. Deloitte’s engagement to serve as chiefour new independent registered public accounting firm was effective upon the dismissal of Grant Thornton LLP (“Grant Thornton”) on June 1, 2015. The dismissal of Grant Thornton was approved by the Audit Committee.
Grant Thornton’s audit report for the fiscal year ended December 31, 2014 on the financial
officerstatements of the Company and
treasurerthe Operating Partnership did not contain an adverse opinion or a disclaimer of
ARCT from its internalization in March 2012 untilopinion, nor was any such report qualified or modified as to uncertainty, audit scope or accounting principles. However, as further described below, Grant Thornton’s audit report on the
closeeffectiveness of
its merger with Realty Income Corporation in January 2013. Prior to ARCT’s internalization, Mr. Jones servedthe Company’s internal control over financial reporting as
senior vice president, managing director and head of
investment banking at RC Securities and ARC from September 2010 through February 2012. Prior to joining RC Securities and ARC, Mr. Jones was a director in the real estate investment banking group at Robert W. Baird & Co. from February 2008 through August 2010. From January 2005 through November 2007, Mr. Jones wasDecember 31, 2014 contained an
executive director in the real estate investment banking group at Morgan Stanley & Co. Prior to that, Mr. Jones worked in the real estate investment banking group at RBC Capital Markets from February 2004 through February 2005. From October 1997 through February 2001, Mr. Jones worked in the real estate investment banking group at PaineWebber. He also founded in February 2001 and operated through February 2004 an independent financial consulting firm focused on strategic advisory and private capital raising for real estate investment firms. From September 1990 to October 1997, Mr. Jones worked in the real estate tax advisory group at Coopers & Lybrand, LLP, where he was a manager focused on REIT and partnership tax structuring. He has more than 17 years of experience advising public and private real estate companies and executing a broad range of complex strategic and capital markets transactions, including approximately $9 billon of capital markets transactions, $10 billion of real estate acquisitions and dispositions and $35 billion of corporate mergers and acquisitions. Mr. Jones is a certified public accountant, licensed in California since 1993, and is a member of CSCPA, ULI and NAREIT. Mr. Jones also has Series 7, 24 and 63 licenses. Mr. Jones received a B.S. with honors in Agricultural and Managerial Economics from the University of California at Davis and an M.S. in Taxation from Golden State University.William M. Kahane
Please see “Business Experience of Nominees” on pages 5 for biographical information about Mr. Kahane.
Leslie D. Michelson
Please see “Business Experience of Nominees” on pages 5 for biographical information about Mr. Michelson.
Edward G. Rendell
Please see “Business Experience of Nominees” on page 5 for biographical information about Governor Rendell.
Scott J. Bowman
Please see “Business Experience of Nominees” on pages 5 for biographical information about Mr. Bowman.
Walter P. Lomax, Jr.
Please see “Business Experience of Nominees” on page 5 for biographical information about Dr. Lomax.
TABLE OF CONTENTS
Compensation of Directors
The following table sets forth information regarding compensation of our directorsadverse opinion. At no point during the fiscal year ended December 31, 2012:
2014 and the subsequent interim period through June 1, 2015 were there any “disagreements” (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company and the Operating Partnership, on the one hand, and Grant Thornton, on the other hand, on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Grant Thornton, would have caused it to make reference to the subject matter of the disagreements in connection with its report. The adverse opinion on the Company’s internal control over financial reporting described further below constituted the only “reportable event” (as defined in Item 304(a)(1)(v) of Regulation S-K) for the Company that occurred during the fiscal year ended December 31, 2014 and the subsequent interim period through June 1, 2015. No such “reportable event” has occurred with respect to the Operating Partnership. | | | | | | | | | | | | | | |
| Name | | Fees Paid
in Cash
($) | | Stock Awards
($) | | Option Awards
($) | | Non-Equity Incentive Plan Compensation
($) | | Changes in Pension Value and Nonqualified Deferred Compensation Earnings
($) | | All Other Compensation
($) | | Total Compensation
($) |
| Nicholas S. Schorsch(1) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Edward M. Weil, Jr.(1) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| William M. Kahane(1)(2) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Leslie D. Michelson(3) | | | 18,750 | | | | 38,970 | | | | — | | | | — | | | | — | | | | — | | | | 57,720 | |
| Edward G. Rendell(2)(4) | | | 33,750 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 33,750 | |
| Scott Bowman(2) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| David Gong(5) | | | 38,250 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 38,250 | |
| Walter P. Lomax, Jr.(6) | | | 58,250 | | | | 31,950 | | | | — | | | | — | | | | — | | | | — | | | | 90,200 | |
| Robin A. Ferracone(7) | | | 18,750 | | | | 38,970 | | | | — | | | | — | | | | — | | | | — | | | | 57,720 | |
As previously reported, the Company’s management concluded that its internal control over financial reporting and its disclosure controls and procedures were not effective at December 31, 2014 due to certain material weaknesses. Accordingly, Grant Thornton’s audit report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2014 contained an adverse opinion on the Company’s internal control over financial reporting due to the effect of these material weaknesses in the Company’s internal control over financial reporting, which were described in Item 9A. Controls and Procedures of the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, filed with the SEC on March 30, 2015. The Audit Committee discussed these material weaknesses in the Company’s internal control over financial reporting with Grant Thornton and the Company authorized Grant Thornton to respond fully to the inquiries of any successor accountant of the Company concerning this reportable event.
As noted above, the Audit Committee engaged Deloitte as the Company’s and the Operating Partnership’s new independent registered public accounting firm effective June 1, 2015. During the fiscal year ended December 31, 2014 and the subsequent interim period through June 1, 2015, none of the Company, the Operating Partnership or anyone on their behalves consulted Deloitte regarding either: (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered with respect to the Company’s or the Operating Partnership’s consolidated financial statements, as applicable, in connection with which either a written report or oral advice was provided to the Company or the Operating Partnership that Deloitte concluded was an important factor considered by the Company or the Operating Partnership in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a “disagreement” (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or a “reportable event” (as defined in Item 304(a)(1)(v) of Regulation S-K).
The Company’s management has re-evaluated its internal control over financial reporting and its disclosure controls and procedures and concluded that its internal control over financial reporting was effective as of December 31, 2015. Deloitte has issued an opinion to that effect in their report which was included in the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
Fees
Aggregate fees for professional services rendered by Grant Thornton during the year ended December 31, 2014 and by Deloitte for the year ended December 31, 2015 were as follows (in thousands): |
| | | | | | | | |
| | 2014 | | 2015 | |
| Type of Service | Grant Thornton | | Deloitte | |
| Audit Fees | $ | 7,225 |
| (1) | $ | 3,299 |
| (2) |
| Audit-Related Fees | — |
| | 41 |
| (3) |
| Tax Fees | — |
| | — |
| |
| All Other Fees | — |
| | — |
| |
| Total | $ | 7,225 |
| | $ | 3,340 |
| |
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| (1) | Messrs. Schorsch, Kahane, and Weil, who are executivesIncludes fees for professional services rendered for the audits of the Company’s and the Operating Partnership’s 2014 annual consolidated financial statements, the reviews of the restatements by the Company receive no additional compensation for serving as directors.and the Operating Partnership of previously-issued consolidated financial statements in connection with the Audit Committee Investigation, the reviews of the Company’s and the Operating Partnership’s 2014 quarterly consolidated financial statements and other services that are normally provided by the auditor in connection with statutory and regulatory filings or engagements. Also includes fees in connection with the spin-off of a multi-tenant shopping center business and comfort letter procedures related thereto. |
| |
| (2) | Messrs. Bowman, Rendell, and Kahane were appointed each to serve as a directorIncludes fees for professional services rendered for the audits of the Company, effective asCompany’s and the Operating Partnership’s 2015 annual consolidated financial statements, the reviews of February 28, 2013.the Company’s and the Operating Partnership’s quarterly consolidated financial statements for the quarters ended June 30, 2015 and September 30, 2015 and other services that are normally provided by the auditor in connection with statutory and regulatory filings or engagements. |
| |
| (3) | Includes fees for professional services rendered in connection with other SEC filings. |
Pre-Approval Policies and Procedures
To help ensure the independence of the independent auditor, the Audit Committee’s charter requires that the Audit Committee pre-approve all audit and non-audit services to be performed by its independent auditor prior to the engagement of such independent auditor by the Company or its subsidiaries. The Audit Committee has pre-approved all services provided to us by Grant Thornton and Deloitte.
A representative of Deloitte is expected to attend the Annual Meeting. The representative will have an opportunity to make a statement if he or she desires to do so and will be available to respond to appropriate questions.
The affirmative vote of a majority of the votes cast at the Annual Meeting is required to ratify the appointment of Deloitte as our independent registered public accounting firm.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF DELOITTE AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2016.
AUDIT COMMITTEE REPORT*
Management is responsible for the Company’s accounting and financial reporting processes, including its internal control over financial reporting, and for preparing the Company’s consolidated financial statements. Deloitte, the Company’s independent auditor, is responsible for performing an audit of our consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”) and for expressing an opinion as to whether the Company’s consolidated financial statements are fairly presented in all material respects in conformity with accounting principles generally accepted in the United States of America (“GAAP”). In this context, the responsibility of the Audit Committee is to oversee the Company’s accounting and financial reporting processes and the audits of the Company’s consolidated financial statements.
In the performance of its oversight function, the Audit Committee reviewed and discussed with management and Deloitte the Company’s audited consolidated financial statements as of and for the year ended December 31, 2015. Management and Deloitte represented to the Audit Committee that the Company’s audited consolidated financial statements as of and for the year ended December 31, 2015 were prepared in accordance with GAAP. The Audit Committee also discussed with Deloitte the matters required to be discussed by the Auditing Standard No. 16, as amended (“AS No. 16”), as adopted by the PCAOB. AS No. 16 sets forth requirements pertaining to the independent auditor’s communications with the Audit Committee regarding the conduct of the audit.
The Audit Committee received the written disclosures and a letter from Deloitte required by the applicable requirements of the PCAOB regarding Deloitte's communications with the Audit Committee concerning independence, and has discussed with Deloitte the independent accountant's independence.
Based on the Audit Committee’s review and the discussions described above, and subject to the limitations on its role and responsibilities described above and in the Audit Committee charter, the Audit Committee recommended to the Board of Directors that the audited financial statements as of and for the year ended December 31, 2015 be included in the Annual Report on Form 10-K of the Company for the year ended December 31, 2015 for filing with the SEC.
Submitted by the Audit Committee
Bruce D. Frank (Chairman)
David B. Henry
Mark S. Ordan
________________________
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| * | The information contained in the Audit Committee Report shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically incorporate it by reference in such filing. |
COMPENSATION DISCUSSION AND ANALYSIS
Introduction
In this Compensation Discussion and Analysis, we describe our 2015 compensation practices, programs and decisions for executives who served as our named executive officers (“NEOs”) during the year. In certain cases, the compensation policies and programs discussed in this Compensation Discussion and Analysis reflect compensation arrangements that were terminated due to the departure of the NEO in question, or reflect partial year or interim pay arrangements for NEOs who served in their role for less than a full year.
For 2015, our NEOs and their related service periods as a NEO were:
Former Executives
Michael J. Sodo, Executive Vice President, Chief Financial Officer and Treasurer from October 29, 2014 until October 5, 2015.
William G. Stanley, Interim Chief Executive Officer from December 15, 2014 until March 31, 2015.
Continuing Executives
Glenn Rufrano, succeeded Mr. Stanley and was appointed Chief Executive Officer effective April 1, 2015.
Michael J. Bartolotta, succeeded Mr. Sodo and was appointed Executive Vice President and Chief Financial Officer effective October 5, 2015.
Thomas W. Roberts, Executive Vice President and Chief Investment Officer.
William C. Miller, appointed Executive Vice President, Investment Management effective June 12, 2015.
Lauren Goldberg, appointed Executive Vice President, General Counsel and Secretary effective May 26, 2015.
Our 2015 Fiscal Year Highlights
The Company underwent several changes in senior leadership during 2015. The Company hired four new executive officers, including Glenn Rufrano as our Chief Executive Officer. Mr. Rufrano was selected following an extensive search process conducted by the Board of Directors with the support of Korn Ferry. Mr Rufrano is a veteran real-estate executivewho held leadership roles at New Plan Excel Realty Trust, Centro Properties Group and Cushman & Wakefield, Inc. at key points when structural changes were necessary to move forward with growth and who is known for his ability to lead companies through complex situations and turbulent times. Following Mr. Rufrano’s appointment, the Company also recruited a new General Counsel and new Chief Financial Officer. To formalize the senior management team, Mr. Rufrano appointed Mr. Miller as head of our Cole Capital business and designated Tom Roberts as Chief Investment Officer and Paul McDowell as Chief Operating Officer.
Under Mr. Rufrano’s leadership, the Company’s management team made significant progress executing on the Company’s business plan in 2015 as described below under “-Summary of 2015 Financial and Operational Results.” In addition, the Company was able to remediate all material weaknesses disclosed in the Company’s financial statements for the year ended December 31, 2014 by year end in 2015.
In addition, during 2015, the Company replaced four former directors with five new independent directors with Hugh R. Frater serving as the Company’s Non-Executive Chairman of the Board.
Our Business. We are a full-service real estate operating company that operates through two business segments, our real estate investment (“REI”) segment and our investment management segment, Cole Capital. Through our REI segment, we own and actively manage a diversified portfolio of 4,435 retail, restaurant, office and industrial real estate properties with an aggregate of 99.6 million square feet, of which 98.6% was leased as of December 31, 2015, with a weighted-average remaining lease term of 10.6 years. Through our Cole Capital segment, we are responsible for raising capital for and managing the affairs of certain non-listed real estate investment trusts (the “Cole REITs”) on a day-to-day basis, identifying and making acquisitions and investments on behalf of the Cole REITs, and recommending to the respective board of directors of each of the Cole REITs an approach for providing investors with liquidity. Cole Capital receives compensation and reimbursement for performing these services.
Summary of 2015 Financial and Operational Results. Overall, 2015 was very productive, with the Company finishing the year strong. While the economy continued its multi-year pattern of moderate but uneven growth in 2015, the Company made significant progress towards establishing a foundation for growth and was able to execute effectively on its business plan. The Company’s 2015 business plan focused on improving the Company’s operating results and strengthening its overall financial
position and, in particular, enhancing its overall portfolio, re-establishing Cole Capital’s brand value, making progress toward achieving balance sheet investment-grade metrics and establishing a sustainable dividend.
As described below, in 2015 we were able to deliver solid financial results and make progress on our business strategies as illustrated by the following highlights:
Achieved adjusted funds from operations (“AFFO”) per diluted share of $0.84, which exceeded the top end of the Company’s earnings guidance to its stockholders. (Refer to pages 50 and 51 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 for information relating to the calculation of AFFO).
Increased liquidity with $1.8 billion of capacity available under the Company’s revolving line of credit.
Strengthened our balance sheet by reducing debt by $2.4 billion.
Disposed of 228 properties for an aggregate sales price of $1.4 billion, reaching the high end of the Company’s disposition guidance.
Repositioned the Company’s portfolio through strategic dispositions to enhance diversification by product type, with over 30% of the Company’s dispositions in office properties in 2015. In line with the Company’s previously stated goals, increased the percentage of retail and industrial properties and decreased the percentage of office properties and restaurants. At year end, the Company’s portfolio was comprised of approximately 35.4% retail, 25.6% restaurants, 16.5% industrial and 22.5% office.
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| • | Reduced the Company’s exposure to Red Lobster® to approximately 9% in the fourth quarter of 2015 from 12% in the previous quarter. |
Through active portfolio management, increased occupancy during the fourth quarter of 2015 to 98.6% and same store growth by 1.2%.
Made solid progress in re-establishing the Cole Capital brand following the 2014 turmoil when certain selling agreements with broker-dealers for the Cole REITs were suspended as a result of the Audit Committee Investigation and the resulting restatements of the Company’s financial statements. During 2015, the Company reinstated certain selling agreements and entered into new selling agreements with broker-dealers resulting in increasing Cole Capital’s market share. During the fourth quarter of 2015, Cole Capital raised $116 million of new capital, a 75% increase over the previous quarter.
Established a quarterly dividend of $0.1375 per share in the third and fourth quarters of 2015, or $0.55 on an annual basis.
Despite these achievements, our Total Stockholder Return (“TSR”) for the year was a decrease of 9.4%, which lagged the overall REIT index and peers. However, we believe our accomplishments in 2015 provide a strong platform for future value creation. See the definition of TSR in “Elements of Compensation - Long-Term Equity Incentive Awards” below.
Executive Compensation Practices
In connection with the appointments of new executive officers, a newly reconstituted Compensation Committee re-examined the Company’s executive officer and director compensation programs with the assistance of a new independent compensation advisor hired directly by the Compensation Committee and undertook to make significant changes to the Company’s compensation governance framework in early 2015. The goal of these changes was to implement a best-practices compensation policy and ensure any deficiencies of the prior compensation programs were remedied or eliminated. These improvements are further described below.
Accordingly, the Company, with direction from the Compensation Committee, developed a comprehensive compensation and governance framework that is aligned with “best-in-class” market practice and standards. The sections below entitled “What We Do” and “What We Do Not Do” present: (i) the best practices the Compensation Committee has adopted; and (ii) practices which the Compensation Committee has determined are not appropriate or prior practices adopted by the Company which the Compensation Committee has determined should be eliminated.
What We Do
|
| |
| a | Tie pay to performance - Our annual incentive bonuses for executive officers are determined by the Compensation Committee in consultation with the Chief Executive Officer after reviewing individual and company performance, including specific individual performance goals. Starting in 2016, our annual incentive bonus awards will be subject to objective business metrics as well as objective and subjective individualized performance objectives and metrics. In addition, a significant portion of our long-term incentive awards for executive officers is tied to our TSR performance relative to a market index and our peers. |
| a | Engage an independent compensation consultant firm - The Compensation Committee engaged Semler Brossy Consulting Group (“Semler Brossy”) to provide independent, third-party advice on executive compensation.
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| a | Executive compensation designed to be competitive to peer group - The Compensation Committee, with the advice of Semler Brossy, uses peer group data to ensure that our pay is competitive with comparable companies based on asset size, revenue and enterprise value.
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| a | Offer limited perquisites - We provide modest perquisites to our executives, including our Chief Executive Officer and our other executive officers.
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| a | Maintain robust stock ownership requirements for our executive officers and directors - We have stock ownership guidelines for executive officers at 6x base salary for the Chief Executive Officer, 3x base salary for the Chief Financial Officer, 2x base salary for other executive officers and 5x annual cash retainers for directors, which can be achieved over a specified time period.
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| a | Double trigger vesting upon change of control - Beginning April 1, 2015, all equity awards are subject to a “double trigger” requiring a qualified termination of employment following a change in control before vesting is accelerated for executive officers.
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| a | Provide reasonable severance benefits - Severance benefits, including following a change in control for our Chief Executive Officer, have been reviewed against peer groups and are reasonable compared to market. We intend to continue to reference reasonable market practice for any future employment agreements or other arrangements.
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| a | Prohibit pledging and hedging of our securities - We have adopted a policy applicable to our directors, officers, any other individuals subject to the reporting requirements under Section 16 of the Exchange Act and any other designated employees (and any of their respective beneficially-owned entities), which prohibits: • pledging the Company’s securities for any purpose not approved by the Board of Directors or the Compensation Committee; and• engaging in short sales with respect to our securities, purchasing our securities on margin or otherwise hedging our securities, including through options or derivative transactions.
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| a | Prohibit repricing of stock options - We have adopted a policy prohibiting the Board of Directors or the Compensation Committee from reducing the aggregate exercise, base or purchase price of any award granted under an equity incentive plan of the Company without the approval of the Company’s stockholders.
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What We Intend to Do
The Compensation Committee also intends to adopt a clawback policy after the SEC adopts rules and regulations related thereto.
What We Do Not Do
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| |
| X | Gross up “golden parachute” excise taxes upon a change in control* |
| X | Gross up taxes on any standard perquisites or benefits in the future* |
| X | Provide special or supplemental retirement benefits to any executive |
| X | Grant long-term employment agreements exceeding three-year initial terms |
| X | Provide severance payments that are not in-line with the market or include large payments upon a voluntary resignation |
| X | Grant equity awards without a significant component of performance-based vesting |
*These benefits were provided to certain executives under legacy equity award and other agreements. None of the NEOs who joined the Company in 2015 received these benefits.
Stockholder Say-on-Pay Vote
We provide our stockholders with the opportunity to vote annually on a say-on-pay proposal. At our 2015 annual meeting of stockholders held on September 29, 2015, approximately 89% of the votes cast by stockholders on the advisory vote on executive compensation (the “say-on-pay proposal”) were in favor of the compensation of our NEOs. The Committee believes this favorable vote reflects the significant changes to our compensation and governance practices implemented in 2015 as outlined above, and affirms our stockholders’ support of our current approach to executive compensation. As a result, the Committee did not make material changes to the implementation of our executive compensation philosophy in 2015 or 2016, although the Committee does continue to evaluate our pay practices in consideration of good governance standards and shareholder interests and will make adjustments accordingly.
Compensation Philosophy
At the end of 2014, the Compensation Committee retained Semler Brossy, an executive compensation consulting firm, as its compensation consultant to provide independent, third-party advice on executive compensation, including advice on the design of our executive compensation program for fiscal year 2015. The Compensation Committee assessed the independence of Semler Brossy pursuant to the rules prescribed by the SEC and the NYSE and concluded that no conflict of interest existed that would prevent Semler Brossy from serving as an independent consultant to the Compensation Committee. Based on data and analysis concerning executive compensation and recommendations made by Semler Brossy, the Compensation Committee made significant changes to the Company’s compensation practices as illustrated above.
Semler Brossy also advised the Compensation Committee on the compensation and employment arrangements for certain of the Company’s current executive officers, including that of the Company’s Chief Executive Officer, Glenn J. Rufrano, and other senior management. As part of its engagement with the Compensation Committee, Semler Brossy completed a review of the peer group used to assess executive and director pay practices. Semler Brossy recommended a number of changes to the peer group to focus more specifically on peers in the retail, office and net-lease markets, rather than broad diversified REITs. The peer group presented by Semler Brossy for assessing competitive pay practices in 2015 was comprised of the following REITs: Boston Properties, Inc.; Brixmor Property Group, Inc.; DDR Corporation; Duke Realty Corporation; General Growth Properties, Inc.; HCP, Inc.; Kimco Realty Corporation; ProLogis, Inc.; Realty Income Corporation; Simon Property Group, Inc.; SL Green Realty Corp.; Spirit Realty Capital, Inc.; The Macerich Company; Ventas, Inc.; Vornado Realty Trust; Welltower Inc.; and W.P. Carey, Inc.
Under the direction of the Compensation Committee and Semler Brossy, we designed our executive compensation program and set compensation levels that are comparable to those of other companies that operate in our business or that compete for the same talent pool. We believe that the quality, skills and dedication of our NEOs are critical factors that affect the long-term value of the Company. The Compensation Committee reviewed the compensation levels from the peer group for each component of pay-annual base salary, annual incentive bonus awards and long-term equity incentive awards-and used such data as a guide in its determination of total target direct compensation, the appropriate mix of equity vs. cash, long term vs. short term, and performance-based vs. time-based awards to be paid or granted for 2015 performance for each NEO. The Compensation Committee considered each NEO’s level and job performance, his or her duties and responsibilities at the Company compared to the duties and responsibilities of executive officers in similar positions at the peer group companies and other circumstances unique to the Company, and evaluated whether the compensation elements and levels provided to our NEOs were generally appropriate relative to the compensation elements and levels provided to their counterparts at the peer groups. However, the Compensation Committee did not formulaically tie our compensation decisions to any particular range or percentile level of total compensation paid to executives at these companies.
We believe we have designed our executive compensation program to attract and retain the highest quality executive officers, directly link pay to our performance, and build value for our stockholders. Our compensation philosophy seeks to link a significant portion of each executive officer’s total compensation to Company results that will create stockholder value in both the short and long term. We use both objective and subjective criteria to evaluate Company and individual performance. This approach allows the Compensation Committee to exercise discretion and not rely solely on rigid formulas and quantitative analyses.
Elements of Compensation
Our NEOs’ compensation currently consists of three components: annual base salary, annual incentive bonus awards (which generally includes cash payments) and long-term equity incentive awards. The Compensation Committee does not have a formula for establishing a specified percentage of total compensation that each of our three components of compensation
should represent. Although we do not target a specific mix of pay, the majority of our executive officer compensation is in the form of variable pay (annual and long-term incentives) to emphasize our commitment to pay for performance.
Current Executives
Annual Base Salary
The base salary payable to each NEO provides a fixed component of compensation that reflects the executive’s position and responsibilities. During 2015, each of the NEOs was a party to an employment agreement with us that provided for the following annual base salary amounts for 2015: |
| |
| Glenn Rufrano | $1,000,000 |
| Michael J. Bartolotta | $500,000 |
| Thomas W. Roberts | $500,000 |
| William C. Miller | $450,000 |
| Lauren Goldberg | $450,000 |
Actual base salaries reflected in the Summary Compensation Table below reflect the portion of the year worked for each executive rather than the annual rates of pay outlined above. Mr. Roberts’ base salary was increased from $400,000 to $500,000, effective April 1, 2015, in part to reflect the elimination of an acquisition incentive bonus of 1.5 basis points on certain real estate acquisitions that he was previously eligible to receive.
Annual Incentive Bonus Awards
The Company pays annual cash incentive bonuses to reward executives for achieving or surpassing performance goals which are, at least in part, related to our key financial and operational objectives for the year and for execution of specific strategies of the Company. Annual bonuses are paid in cash in March, for the prior year’s performance, and are based upon the Chief Executive Officer’s assessment of the Company’s overall performance against Company goals and each executive’s individual performance against both Company and individual goals, which are reviewed by the Compensation Committee.
The annual incentive bonus opportunity for the NEOs in 2015, other than Messrs. Bartolotta and Miller, was based on a percentage of their annual base salary. Based on the terms of their employment agreements, the target annual incentive bonuses for Mr. Rufrano and Ms. Goldberg were based on their annual salary rate for 2015 rather than being pro-rated based on the actual period of employment for the year. Mr. Bartolotta joined the Company on October 5, 2015 and the Company and Mr. Bartolotta agreed that Mr. Bartolotta’s target annual cash incentive bonus would be $468,750 for the fiscal year 2015. None of the executives had a guaranteed minimum bonus.
As many of our executives joined the Company after the beginning of the fiscal year and as the 2015 business plan for the Company was not fully developed until the third quarter of the year, the Committee determined not to establish formulaic objectives for funding bonus incentives for 2015. Rather, the Compensation Committee evaluated the individual performance of the NEOs on a discretionary basis in determining the annual cash bonus to be awarded to each individual. This included a review of specific performance goals established for each executive. As part of this process, Mr. Rufrano provided assessments of each executive’s performance and achievements that were reviewed with the Compensation Committee, as outlined in more detail below. The Compensation Committee also conducted an assessment of Mr. Rufrano’s performance, followed by a review of Mr. Rufrano’s performance by the entire Board.
Based on an evaluation of the performance and contribution of each of the current NEOs, and notably the accomplishments outlined above under “Summary of 2015 Financial and Operational Results”, the Compensation Committee approved the target value of each annual bonus for Messrs. Rufrano, Bartolotta and Roberts and Ms. Goldberg.
With respect to Mr. Miller, in his capacity as an executive officer in charge of raising capital for the Cole REITs, the Compensation Committee determined that it was appropriate to tie his annual incentive bonus, at least in part, to the success of Cole Capital. Under his employment agreement, Mr. Miller was eligible to receive a sales management bonus equal to 10 basis points on capital raised by Cole REITs sponsored by Cole Capital upon achievement of a certain threshold and a selling agreement bonus if Cole Capital entered into selling agreements with primary broker-dealers affiliated with certain organizations. The Compensation Committee concluded that the Cole REITs did not achieve the capital raise threshold for Mr. Miller to qualify for a sales management bonus in 2015. Mr. Miller did, however, earn $150,000 as a selling agreement bonus. In recognition of Mr. Miller's achievements in 2015 (described below), the Compensation Committee decided to grant Mr. Miller an additional discretionary annual cash bonus of $300,000 resulting in a total annual bonus equal to 100% of his annualized base salary.
The following table shows the target annual incentive bonus for 2015 for each of our NEOs and the actual award earned, in each case expressed as a percentage of base salary. The annual cash bonuses that each NEO for 2015 received is reported in “Compensation Tables-Summary Compensation Table-Bonus Compensation” below. |
| | | |
| Name | Target Annual Bonus (as a % of Base Salary) | | Actual Annual Bonus (as a % of Base Salary) |
| Glenn Rufrano | 150% | | 150% |
| Michael J. Bartolotta | 125%(1) | | —(1) |
| Thomas W. Roberts | 100% | | 100% |
| William C. Miller | —(2) | | —(2) |
| Lauren Goldberg | 100% | | 100% |
| |
| (1) | Mr. Michelson earned fees inBartolotta is eligible for a target annual cash bonus equal to 125% of his base salary pursuant to his employment agreement. Mr. Bartolotta joined the amount of $54,250Company on October 5, 2015 and the Company and Mr. Bartolotta agreed that Mr. Bartolotta’s target annual cash bonus would be $468,750 for his services as a director during the fiscal year ended December 31, 2012 of which $18,750 were paid as of December 31, 2012. Mr. Michelson was appointed as a director on October 16, 2012.2015. |
| (4) |
| (2) | In March 2015, prior to Mr. Rendell earned feesMiller becoming Executive Vice President, Investment Management, he received a one-time signing bonus of $1.4 million, consisting of $700,000 in cash and an equity award in the amountform of $33,000restricted stock units with a target fair market value of $700,000. This is in addition to the annual cash bonus for his services as a director during the fiscal year ended December 31, 2012. The payment of $33,750 represents $33,000 and $750 for services rendered during the year ended December 31, 2012 and 2011, respectively. Mr. Rendell resigned as a director on October 16, 2012 and was reappointed in February 2013.2015 described above. |
Specific achievements considered as part of the individual assessments for each executive included:
Mr. Rufrano
During his first year as Chief Executive Officer, Mr. Rufrano successfully executed the Company’s business plan, helping lead the Company to strong operating results.
Achieved AFFO above the Company’s guidance range and the high end of the Company’s disposition guidance range.
Improved the balance sheet and made progress toward achieving investment grade metrics ending the year with reduced debt and increased liquidity.
Oversaw the successful remediation of all outstanding material weaknesses identified as of December 31, 2014.
Fostered a culture of compliance and transparency and successfully led the re-branding process to minimize any further negative potential impact to the Company and to work towards rebuilding the Company’s reputation.
Enhanced risk management and implemented key process improvements, including the oversight of internal controls, and instituted infrastructure and organizational improvements towards greater efficiency and transparency, including through the enhancement of critical policies and procedures.
Mr. Bartolotta
Oversaw the creation of the first detailed Company budget for 2016.
Achieved AFFO above the Company’s guidance range.
Improved the balance sheet and made progress towards achieving investment grade metrics ending the year with reduced debt and increased liquidity.
Oversaw the successful completion of the remediation of all outstanding material weaknesses identified as of December 31, 2014.
Made progress toward implementing the Company’s new financial reporting software system and improving Company-wide operating efficiency while developing the Company’s finance team.
Mr. Roberts
Achieved AFFO above the Company’s guidance range and the high end of the Company’s disposition guidance range.
Oversaw $1 billion of acquisitions for the Cole REITs.
| (5) |
| • | Mr. Gong earned fees inOversaw the amountstrategic disposition of $35,250over $1.4 billion of properties, including 109 Red Lobster® restaurants for his services as a director during the fiscal year ended December 31, 2012. The paymentan aggregate gross sales price of $38,250 represents $35,250$425.2 million, thereby managing market and $3,000 for services rendered during the year ended December 31, 2012 and 2011, respectively. Mr. Gong resigned as a director on October 16, 2012.credit concentration risk. |
Mr. Miller
Achieved AFFO above the Company’s guidance range.
Made progress toward re-establishing the Cole Capital brand name.
| (6) |
| • | Dr. Lomax earned feesResponsible for the steady increase in capital raised by the amount of $90,750Cole REITs, with Cole Capital being ranked fifth for his services non-listed REITs by capital raise in January 2016, up from 14th in January 2015, according to Stanger’s Market Pulse. |
Provided motivation and guidance to the capital markets teams as well as continuous efforts at strengthening relationships within the investor community.
Ms. Goldberg
Responsible for regulatory compliance and managed all legal aspects related to the investigations and litigations related to the Audit Committee Investigation.
Managed legal expenses under projected amounts.
Oversaw the implementation of key corporate governance changes, including the reconstitution of the Board and the adoption of “best in class” changes to corporate governance policies and documents.
Supervised and oversaw key corporate initiatives, including administering the Company’s 401(k) program and planning enterprise risk assessment.
Achieved AFFO above the Company’s guidance range.
The Compensation Committee believes that our NEOs were critical to the performance of the Company in 2015 and that, Mr. Rufrano, through his leadership and strategic vision, was ultimately responsible for the Company’s strong corporate performance.
Long-Term Equity Incentive Awards
The objectives of the Company’s long-term incentive compensation program are to:
reward achievement over a multi-year period;
align the interests of executives with those of stockholders by focusing executives on the stockholder return performance of the Company; and
provide a retention mechanism through multi-year vesting.
The long-term equity incentive opportunity for the 2015 executive compensation program consisted of a mix of performance-based and time-based equity awards, with a significant emphasis on performance-based awards. For all NEOs, the mix of annual awards in 2015 was two-thirds performance based and one-third time based. In addition to his annual award for 2015, Mr. Rufrano was awarded an additional time-based award of $2 million as an inducement to his employment with the Company.
The restricted stock units that are subject to time-based vesting will vest in equal installments on each of the first three anniversaries of the grant date. The restricted stock units that are subject to performance-based vesting will vest based on the achievement of certain performance conditions over a three-year performance period, subject to review and approval by the Compensation Committee.
All performance-based equity awards granted to the NEOs are eligible to vest in a number of restricted stock units ranging from 0% to 200% of the total number of restricted stock units granted, 50% based on the Company’s TSR relative to the TSR of the FTE NAREIT All Equity REITs Index, a market capitalization-weighted index of U.S. equity REITs (the “NAREIT Equity Market Index”) during the performance period, and 50% based on the Company’s TSR relative to the stockholder return of the peer group during the performance period, subject to each executive’s continued service. For purposes of relative total stockholder return, the Company selected REITs that are in the triple net lease business for inclusion in the performance peer group consisting of: Realty Income Corporation, National Retail Properties, Inc., W.P. Carey, Inc., Lexington Realty Trust, Agree Realty Corp., Spirit Realty Capital, Inc. and STORE Capital Corporation. TSR means the stock price appreciation from the beginning of the period, plus dividends and distributions declared (assuming such dividends or distributions are reinvested in common stock) during the period, expressed as a percentage return. If performance falls between the points specified below, the percentage of restricted stock units that will vest will be determined using linear interpolation between such points.
NAREIT Equity Market Index (50% Weighting)
|
| |
| Company TSR Percentile | Vesting Percentage (as a director during the fiscal year ended December 31, 2012. The paymentpercentage of $58,250 represents $54,500 and $3,750 for services rendered during the year ended December 31, 2012 and 2011, respectively.Target Award) |
> 75th Percentile | 200% |
65th Percentile | 150% |
55th Percentile | 100% |
45th Percentile | 75% |
> 35th Percentile | 50% |
< 35th Percentile | 0% |
Peer Group (50% Weighting)
|
(7) | Ms. Ferracone earned fees in the amount of $54,750 for her services |
Company TSR vs. Peer Group Percentile (Percentage Point Difference) | Vesting Percentage (as a director during the fiscal year ended December 31, 2012. The paymentpercentage of $18,750 represents $18,750 for services rendered during the year ended December 31, 2012. Ms. Ferracone was appointed as a director on October 16, 2012 and resigned in February 2013.Target Award) |
> + 10% points | 200% |
| + 5% points | 150% |
0% points (performance = 55th percentile) | 100% |
| -2.5% points | 75% |
| -5% points | 50% |
| < 5% points | 0% |
We
Both the time-based and performance-based restricted stock units include an individual’s right to receive dividend equivalent rights with respect to the shares subject to the award, which are subject to the same vesting conditions as the underlying shares.
During 2015, the Compensation Committee awarded an aggregate of 941,146 restricted stock units to our current NEOs under the Equity Plan. Equity awards granted to the NEOs under the Equity Plan in 2015 are included under “Compensation Tables-Grants of Plan Based Awards.” For information on individual awards that were granted to the NEOs, see a summary of the employment agreements below in “Employment Agreements.”
Former Executives
Compensation for Mr. Stanley, who was previously our Interim Chief Executive Officer, and for Mr. Sodo, who was previously our Executive Vice President, Chief Financial Officer and Treasurer, was determined by the full Board of Directors based upon the recommendation of Semler Brossy, which had completed an analysis of pay to eachpractices of our independent directors an annual feeinterim chief executive officers and chief financial officers for his or her servicesthe Board of $30,000, payableDirectors’ review.
Below is a summary of the Company’s compensation for the former NEOs.
William G. Stanley
Mr. Stanley served in quarterly installments in conjunction with quarterly meetingsthe full-time positions of Interim Chief Executive Officer and Interim Chairman of the Board from December 15, 2014 through March 31, 2015. During this period, as approved by the Board of Directors, plus $2,000in consultation with Semler Brossy, Mr. Stanley received $150,000 per month for each board or board committee meeting the director attends in person ($2,500 for attendance by the chairpersonhis services (in lieu of the audit committee at each meeting of the audit committee) and $1,500 for each meeting the director attends by telephone. If there is a meeting of the board and one or more committees in a single day, the fees are limited to $2,500 per day ($3,000 for the chairperson of the audit committee if there is a meeting of such committee). Each of our non-executive directors may elect to forego receipt of all or any portion of theother cash or equity compensation payable to themdirectors) and was entitled to receive the equity retainer to be paid to directors in respect of this period. Mr. Stanley was also eligible to be considered for additional discretionary compensation at the conclusion of his interim service, as one of our directors and direct that we pay such amounts to a charitable cause or institution designated by such director. We also reimburse directors for their travel expenses incurred in connection with their attendance at full board of directors and committee meetings. Thebut ultimately the Board of Directors also may approve the acquisition of real property anddetermined not to pay any additional discretionary compensation to Mr. Stanley or any other related investments valued
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at $20,000,000 or less, and any portfolio of properties valued in the aggregate at $75,000,000 or less, via electronic board meetings whereby the directors cast their votes in favor of or against a proposed acquisition via email. The independent directors are entitled to receive $750 for each transaction reviewed and voted upon electronically with a maximum of $2,250 for three or more transactions reviewed and voted upon per electronic meeting.
We also will pay each independent director for each external seminar, conference, panel, forum or other industry-related event attended in person and in which the independent director actively participates, solely in his or her capacitydirectors. Mr. Stanley served as an independent director of the Company from April 1, 2015 until he declined to seek re-election at the September 29, 2015 stockholders’ annual meeting.
Michael J. Sodo
Mr. Sodo served as Executive Vice President, Chief Financial Officer and Treasurer of the Company from October 29, 2014 to October 5, 2015. In connection with his appointment as Chief Financial Officer, the Company entered into an employment agreement with Mr. Sodo, dated as of January 9, 2015. Pursuant to the employment agreement, Mr. Sodo was entitled to an annual base salary of $450,000 and a cash bonus award of $275,000 on each of May 31, 2015 and May 31, 2016. On April 1, 2015, Mr. Sodo received a one-time equity award in the following amounts:form of restricted stock units with a face value on the date of grant of $650,000, which were subject to time-based and performance based vesting restrictions. In connection with his departure, Mr. Sodo received a cash severance of $1.4 million and his outstanding unvested restricted shares of common stock and time-based restricted stock units vested in full. The outstanding performance criteria underlying Mr. Sodo’s performance-based restricted stock units had not been satisfied and, accordingly, such performance-based restricted stock units were forfeited in full.
$2,500Executive Equity Ownership Guidelines
In order to further foster the strong ownership culture among our senior executive management team and ensure the continued direct alignment of management and stockholder interests, and consistent with emerging corporate governance trends, we have adopted executive equity ownership guidelines requiring that our executive officers maintain a minimum ownership level of equity in the Company. The equity ownership requirements for our executives are as follows:
|
| | |
| Chief Executive Officer | | 6 times his annual base salary |
| Chief Financial Officer | | 3 times his annual base salary |
| All Other Executive Officers | | 2 times their annual base salary |
Executive officers have five years from the date of becoming an executive officer to satisfy the ownership requirement.
We have also adopted equity ownership guidelines for our Board of Directors. See “Compensation of the Board of Directors-Director Stock Ownership Guidelines.”
Employment Agreements
Below is a summary of the employment agreements with our NEOs.
Glenn Rufrano
Pursuant to an employment agreement with the Company, dated March 10, 2015, which became effective April 1, 2015 and has a three-year term, Mr. Rufrano will receive an annual base salary of not less than $1,000,000. Commencing in 2016, Mr. Rufrano’s base salary will be reviewed at least annually to determine if his base salary should be increased in the discretion of the Compensation Committee. Mr. Rufrano will also be eligible to receive an annual cash bonus with a target annual payment equal to 150% of his annual base salary based upon the achievement of performance goals established by the Compensation Committee. Mr. Rufrano received a one-time equity award with a fair market value as of the date of grant of $2,000,000 on April 1, 2015 in the form of restricted stock units, which will vest over a three-year period. In addition, Mr. Rufrano will receive an annual long-term incentive equity award with respect to shares of common stock for each daycalendar year during the term of an external seminar, conference, panel, forumhis employment (an “Annual LTI Award”). Mr. Rufrano’s initial Annual LTI Award, granted April 1, 2015, had a target fair market value as of the date of the grant of $4,000,000 and was issued in the form of restricted stock units and, beginning in 2016, the Annual LTI Award will be in the form of restricted stock or other industry-relatedrestricted stock units and have a target fair market value as of the date of the grant of not less than $6,000,000. Subject to Mr. Rufrano’s continued employment, one-third of each of the Annual LTI Awards will be subject to time-based vesting in equal installments on each of the first three anniversaries of the grant date, and two-thirds of each such award will vest based on the achievement of certain performance conditions from April 1, 2015 through December 31, 2017. The performance measures for the Annual LTI Awards granted in 2015 are based equally on the Company’s TSR relative to a specified triple net lease peer group of companies described above and relative to the NAREIT Equity Market Index. Performance-based awards for each of 2016 and 2017 are expected to be made to Mr. Rufrano on similar terms. Annual LTI Awards will include Mr. Rufrano’s right to receive dividend or dividend equivalent rights with respect to the shares subject to the award, which will be subject to the same vesting conditions as the underlying shares.
Mr. Rufrano is subject to non-compete and non-solicitation for a period of two years after his termination of employment (or for a period of one year thereafter, in the event that the Company does not exceed four hours, orrenew Mr. Rufrano’s employment term other than during a Change in Control Period (as defined in his employment agreement)).
$5,000Michael J. Bartolotta
Pursuant to an employment agreement with the Company, effective as of October 5, 2015, Mr. Bartolotta is entitled to a minimum annual base salary of $500,000 and is eligible to receive a target annual cash bonus equal to 125% of his base salary. For the 2015 year, Mr. Bartolotta’s target annual cash bonus was $468,750. Mr. Bartolotta is also entitled to receive annual long-term incentive equity awards for each daycalendar year of an external seminar, conference, panel, forum or other industry-related event that exceeds four hours.
In eitheremployment, as may be determined by the Compensation Committee in consultation with the Chief Executive Officer. On October 5, 2015, Mr. Bartolotta received restricted stock units with a target fair market value of $700,000. Subject to Mr. Bartolotta’s continued employment, one-third of the award will vest in equal installments on each of the three anniversaries of the grant date and two-thirds of the award will vest based upon the achievement of certain performance conditions from April 1, 2015 through December 31, 2017. The performance measures are based equally on the Company’s TSR relative to a specified triple net lease peer group of companies described above cases, we will reimburse,and relative to the extent not otherwise reimbursed,NAREIT Equity Market Index.
Mr. Bartolotta is subject to twelve months of non-compete and non-solicitation following the termination of his employment.
Thomas W. Roberts
Pursuant to an
independent director’s reasonable expenses associatedemployment agreement with
attendance at such external seminar, conference, panel, forum or other industry-related event. An independent director cannot be paid or reimbursed for attendance at a single external seminar, conference, panel, forum or other industry-related event by us and another company for which he or she is a director.Each non-executive directorthe Company, effective as of April 1, 2015, Mr. Roberts is entitled to receive an annual base salary of $500,000 and is eligible to receive an annual bonus of up to 100% of his base salary and an annual long-term incentive equity award of 3,000up to 200% of his base salary. Any annual long-term incentive equity awards made to Mr. Roberts may be subject to vesting and other terms and conditions as may be determined by the Compensation Committee and will be determined on the same basis as equity awards made generally to other senior executives of the Company. Effective April 1, 2015, Mr. Roberts was granted a long-term equity incentive award in the form of restricted stock units with a target fair market value of $1,000,000. Subject to Mr. Robert’s continued employment, one-third of the award will vest in equal installments on each of the three anniversaries of the grant date and two-thirds of the award will vest based upon the achievement of certain performance conditions from April 1, 2015 through December 31, 2017. The performance measures are based equally on the Company’s TSR relative to a specified triple net lease peer group of companies described above and relative to the NAREIT Equity Market Index.
On February 23, 2016, Mr. Roberts entered into a new employment agreement. The new employment agreement entitles Mr. Roberts to an annual base salary of $500,000 and a target annual cash bonus equal to 100% of his base salary. He will be eligible to receive annual long-term equity awards for each calendar year of employment, as may be determined by the Compensation Committee in consultation with the Chief Executive Officer.
Mr. Roberts is subject to twelve months of non-compete and non-solicitation following the termination of his employment.
William C. Miller
Pursuant to an employment agreement with the Company, effective as of June 10, 2015, Mr. Miller is entitled to receive an annual base salary of $450,000. Mr. Miller is eligible to receive a sales management bonus equal to 10 basis points on all capital raised by the Cole REITs sponsored by Cole Capital (excluding capital raised pursuant to each such REIT’s dividend reinvestment plan) but only after the total capital raise for the applicable year exceeds $450 million. Mr. Miller is also eligible to receive certain selling agreement bonuses that are payable in connection with Cole Capital Corporation entering into a selling agreement with the primary broker-dealer affiliate of certain identified organizations on or before December 31, 2016; provided that no more than $825,000 of selling agreement bonuses shall be paid in total. On March 31, 2015, Mr. Miller received a one-time signing bonus of $1.4 million, consisting of $700,000 in cash and an equity award in the form of restricted stock units with a target fair market value of $700,000. Subject to Mr. Miller’s continued employment, one-third of the award will vest in equal installments on each of the three anniversaries of Mr. Miller’s employment commencement date and two-thirds of the award will vest based upon the achievement of certain performance conditions from April 1, 2015 through December 31, 2017. The performance measures are based equally on the Company’s TSR relative to a specified triple net lease peer group of companies described above and relative to the NAREIT Equity Market Index.
On February 23, 2016, Mr. Miller entered into a new employment agreement. The new employment agreement entitles Mr. Miller to an annual base salary of $450,000 and a target annual cash bonus equal to 100% of his base salary. He will also be eligible to receive a sales management bonus equal to 10 basis points on all capital raised by the Cole REITs sponsored by Cole Capital (excluding capital raised pursuant to each such REIT’s dividend reinvestment plan) but only after the total capital raise for the applicable year exceeds $450 million and only on the amount of capital raised above the $450 million threshold, up to a maximum threshold of $1 billion. In addition, he will be eligible to receive annual long-term equity awards for each calendar year of employment, as may be determined by the Compensation Committee in consultation with the Chief Executive Officer.
Mr. Miller is subject to twelve months of non-compete and non-solicitation following the termination of his employment.
Lauren Goldberg
Pursuant to an employment agreement with the Company, effective as of May 26, 2015, Ms. Goldberg is entitled to receive an annual base salary of $450,000 and is eligible to receive a target annual bonus equal to 100% of her base salary. She will be eligible to receive annual long-term equity awards for each calendar year of employment, as may be determined by the Compensation Committee in consultation with the Chief Executive Officer. On May 26, 2015, Ms. Goldberg was granted a long-term equity incentive award in the form of restricted stock units with a target fair market value of $600,000. Subject to Ms. Goldberg’s continued employment, one-third of the award will vest in equal installments on each of the three anniversaries of the grant date and two-thirds of the award will vest based upon the achievement of certain performance conditions from April 1, 2015 through December 31, 2017. The performance measures are based equally on the Company’s TSR relative to a specified triple net lease peer group of companies described above and relative to the NAREIT Equity Market Index.
Ms. Goldberg is subject to twelve months of non-compete and non-solicitation following the termination of her employment.
Analysis of Risk Associated with Our Executive Compensation Program
Our Compensation Committee has discussed the concept of risk as it relates to our executive compensation program and the Compensation Committee does not believe our executive compensation program encourages excessive or inappropriate risk taking for the reasons stated below.
We structure our pay to consist of both fixed and variable compensation. The fixed portion (base salary) of compensation is designed to provide a base level of income regardless of our financial or share price performance. The variable portions of compensation (cash incentive and equity) are designed to encourage and reward both short and long-term corporate performance. For short-term performance, cash incentives are awarded based on assessments of performance during the prior year. For long-term performance, equity awards generally vest over three years and only have value over certain time periods or if certain performance criteria are met. We believe that these variable elements of compensation are a sufficient percentage of total compensation to provide incentives to executives to produce superior short and long-term corporate results, while the fixed element is also sufficiently high that the executives are not encouraged to take unnecessary or excessive risks in doing so.
As demonstrated above, our executive compensation program is structured to achieve its objectives by (i) providing incentives to our NEOs to manage the Company for the creation of long-term shareholder value, (ii) avoiding the type of disproportionately large short-term incentives that could encourage our NEOs to take risks that may not be in the Company’s long-term interests, (iii) requiring our NEOs to maintain a significant investment in the Company and (iv) evaluating annually an array of performance criteria in determining executive compensation rather than focusing on a singular metric that may encourage unnecessary risk taking. We believe this combination of factors encourages our NEOs to manage the Company prudently.
Deductibility of Executive Compensation
The Compensation Committee’s policy is to consider the tax treatment of compensation paid to our executive officers while simultaneously seeking to provide our executives with appropriate rewards for their performance. Under Section 162(m) of the Code, a publicly-held corporation may not deduct compensation of more than $1 million paid to any “covered employee” unless certain exceptions are met, primarily relating to performance-based compensation. Substantially all of the services rendered by our executive officers are performed on behalf of the Operating Partnership, of which we are the sole general partner (or its subsidiaries, including one or more of our taxable REIT subsidiaries). The Internal Revenue Service has issued a series of private letter rulings which indicate that compensation paid by an operating partnership to executive officers of a REIT that serves as its general partner is not subject to the limitation under Section 162(m) to the extent such compensation is attributable to services rendered to the operating partnership. We have not obtained a ruling on this issue, but have no reason to believe that the same conclusion would not apply to us. To the extent that compensation paid to our executive officers is subject to and does not qualify for deduction under Section 162(m), our Compensation Committee is prepared to exceed the limit on deductibility under Section 162(m) to the extent necessary to establish compensation programs that we believe provide appropriate incentives and reward our executives relative to their performance. Because we qualify as a REIT under the Code and we generally distribute at least 100% of our REIT taxable income each year, we do not pay federal income tax on our REIT taxable income. However, our taxable REIT subsidiaries are subject to federal corporate income tax. As a result, and based on the level of cash compensation paid to our executive officers, the possible loss of a federal tax deduction could have a material impact on us to the extent that such compensation is allocated to and otherwise deductible by our taxable REIT subsidiaries.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
Compensation Committee
Julie G. Richardson (Chairperson)
Bruce D. Frank
Mark S. Ordan
COMPENSATION TABLES
Summary Compensation Table
The following table summarizes the total compensation paid to or earned by our current and former Chief Executive Officers and Chief Financial Officers and each of our three other most highly compensated executive officers for the years ended December 31, 2015 and 2014. None of the former or current executive officers were employed by the Company in 2013 |
| | | | | | | | | | | | | | | | | | | | |
| Name and Principal Position | | Year | | Salary(1) ($) | | Bonus ($)(3) | | Stock Awards(2) ($) | | Non-Equity Incentive Plan Compensation ($) | | All Other Compensation(4) ($) | | Total Compensation ($) |
| Current Executives | | | | | | | | | | | | | | |
Glenn Rufrano(5) Chief Executive Officer | | 2015 | | 750,000 |
| | 1,500,000 |
| | 6,545,845 |
| | — |
| | 75,820 |
| | 8,871,665 |
|
Michael J. Bartolotta(6) Executive Vice President and Chief Financial Officer | | 2015 | | 121,154 |
| | 468,750 |
| | 712,666 |
| | — |
| | 9,661 |
| | 1,312,231 |
|
Thomas W. Roberts Executive Vice President and Chief Investment Officer | | 2015 | | 475,000 |
| | 500,000 |
| | 1,136,729 |
| | — |
| | 70,528 |
| | 2,182,257 |
|
| | 2014 | | 389,146 |
| | 1,896,921(11) |
| | 2,787,291 |
| | — |
| | 123,016 |
| | 5,196,374 |
|
William C. Miller(7) Executive Vice President, Investment Management | | 2015 | | 362,171 |
| | 1,000,000(12) |
| | 795,692(14) |
| | 150,000(16) |
| | 7,314 |
| | 2,315,177 |
|
Lauren Goldberg(8) Executive Vice President, General Counsel and Secretary | | 2015 | | 269,423 |
| | 450,000 |
| | 659,233 |
| | — |
| | 28,906 |
| | 1,407,562 |
|
| Former Executives | | | | | | | | | | | | | | |
William G. Stanley(9) Interim Chief Executive Officer | | 2015 | | 450,000 |
| | — |
| | — |
| | — |
| | — |
| | 450,000 |
|
| | 2014 | | 82,258 |
| | — |
| | — |
| | — |
| | — |
| | 82,258 |
|
Michael J. Sodo(10) Executive Vice President, Chief Financial Officer and Treasurer | | 2015 | | 380,192 |
| | 275,000(13) |
| | 637,438(15) |
| | — |
| | 1,435,519 |
| | 2,728,149(17) |
|
| | 2014 | | 154,539 |
| | 292,500 |
| | 200,018 |
| | — |
| | 35,283 |
| | 682,340 |
|
| |
| (1) | Reflects actual salary earned while employed by the Company. None of the current or former executive officers, other than Mr. Roberts, was employed by the Company for the full year in 2015. |
| |
| (2) | Reflects the grant date fair value of stock awards computed in accordance with ASC Topic 718, without regard to forfeitures. For further information on how we account for stock-based compensation and the assumptions used, see “Note 17 - Equity-based Compensation” to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 filed with the SEC on February 24, 2016. These amounts reflect the Company’s accounting expense for these awards and do not correspond to the actual values, if any, that will be realized by the current executives or, in the case of the former executives, the values that were actually realized. The underlying grants are presented in further detail in the “-Grants of Plan-Based Awards” table below. The maximum payouts under the performance-based portion of the equity awards for each of the NEOs would be as follows: Mr Rufrano - $5.3 million, Mr. Bartolotta - $0.9 million, Mr. Roberts - $1.3 million, Mr. Miller - $0.9 million and Ms. Goldberg - $0.8 million. |
| |
| (3) | Represents performance-based annual cash bonuses that were earned during the specified year and paid in the following year. See “Compensation Discussion and Analysis-Elements of Compensation-Annual Incentive Bonus Awards” for a discussion of each NEO’s actual cash bonus relative to his or her target bonus for 2015. |
| |
| (4) | The table below shows the components of “All Other Compensation” for 2015, which includes dividends or dividend equivalents paid on stock awards, vacation benefits, 401(k) matching contributions and other taxable fringe benefits. |
|
| | | | | | | | | | | | | | | |
| Name | | Dividends/Dividend Equivalents Paid on Stock Awards ($) | | Vacation Benefits($) | | 401(k) Match($) | | Other($)± | | Total($) |
| Current Executives | | | | | | | | | | |
| Glenn Rufrano | | — |
| | — |
| | — |
| | 75,820* |
| | 75,820 |
|
| Michael J. Bartolotta | | — |
| | — |
| | — |
| | 9,661* |
| | 9,661 |
|
| Thomas W. Roberts | | 51,521 |
| | — |
| | 6,750 |
| | 12,257** |
| | 70,528 |
|
| William C. Miller | | — |
| | — |
| | 6,270 |
| | 1,044 |
| | 7,314 |
|
| Lauren Goldberg | | — |
| | — |
| | 6,750 |
| | 22,156* |
| | 28,906 |
|
| | | | | | | | | | | |
| Former Executives | | | | | | | | | | |
| William G. Stanley | | — |
| | — |
| | — |
| | — |
| | — |
|
| Michael J. Sodo | | 5,723 |
| | 21,923 |
| | 6,750 |
| | 1,401,123*** |
| | 1,435,519 |
|
__________________________
*Includes the Company’s reimbursement of legal fees incurred by the NEO in connection with the negotiation and documentation of his or her employment agreement.
**Includes the Company’s reimbursement of Mr. Roberts’ Medicare tax liability on his restricted stock award that vested on October 15, 2015.
***Includes cash severance that Mr. Sodo will receive pursuant to his separation agreement.
± Includes the long-term disability and group term life insurance premiums paid by the Company.
| |
| (5) | Mr. Rufrano commenced his employment on April 1, 2015. |
| |
| (6) | Mr. Bartolotta commenced his employment on October 5, 2015. |
| |
| (7) | Mr. Miller commenced his employment on March 16, 2015. |
| |
| (8) | Ms. Goldberg commenced her employment on May 26, 2015. |
| |
| (9) | Mr. Stanley resigned as Interim Chief Executive Officer on March 31, 2015. Total compensation does not include any fees he received for serving as a director of the Company. |
| |
| (10) | Mr. Sodo resigned as Executive Vice President, Chief Financial Officer and Treasurer effective October 5, 2015, and remained employed by the Company until November 4, 2015 to facilitate the transition. |
| |
| (11) | Includes a one time retention bonus of $800,000. |
| |
| (12) | Includes a one time cash signing bonus of $700,000 pursuant to Mr. Miller’s employment agreement. |
| |
| (13) | Reflects a promotion cash bonus award of $275,000 pursuant to Mr. Sodo’s employment agreement. |
| |
| (14) | Reflects a one time signing bonus awarded in equity pursuant to Mr. Miller’s employment agreement. |
| |
| (15) | Includes 35,912 performance-based restricted stock units with a grant date fair value of $296,274 that were forfeited by Mr. Sodo upon his departure. |
| |
| (16) | Reflects a bonus in connection with Cole Capital Corporation entering into a selling agreement with the primary broker-dealer affiliate of certain identified organizations pursuant to Mr. Miller’s employment agreement. |
| |
| (17) | Mr. Sodo did not retain the full compensation awarded to him during the fiscal year 2015 as he forfeited $296,274 in performance-based restricted stock units upon his departure. The net total compensation that Mr. Sodo received was $2,431,875. |
Grants of Plan-Based Awards
The following table sets forth information with respect to awards granted to current and former executive officers during the fiscal year ended December 31, 2015. No other grants of plan-based awards were made to the NEOs during the fiscal year ended December 31, 2015.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Grant Date | | Approval Date | | Estimated Possible Payouts under Non-Equity Incentive Plan Awards | | Estimated Future Payouts under Equity Incentive Plan Awards(1) | | All Other Stock Awards: Number of Shares of Stock or Units (#)(2) | | Grant Date Fair Value of Stock and Option Awards ($)(3) |
| | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | |
| Current Executives | | | | | | | | | | | | | | | | | | |
| Glenn Rufrano | | April 1, 2015 | | March 27, 2015 | | — |
| | — |
| | — |
| | 68,271 |
| | 273,085 |
| | 546,170 |
| | — |
| | 3,214,210 |
|
| | | April 1, 2015 | | March 27, 2015 | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 341,356 |
| | 3,331,635 |
|
| Michael J. Bartolotta | | October 5, 2015 | | September 29, 2015 | | — |
| | — |
| | — |
| | 14,386 |
| | 57,542 |
| | 115,084 |
| | — |
| | 479,325 |
|
| | October 5, 2015 | | September 29, 2015 | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 28,772 |
| | 233,341 |
|
| Thomas W. Roberts | | April 1, 2015 | | March 27, 2015 | | — |
| | — |
| | — |
| | 17,068 |
| | 68,272 |
| | 136,544 |
| | — |
| | 803,561 |
|
| | April 1, 2015 | | March 27, 2015 | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 34,136 |
| | 333,167 |
|
| William C. Miller | | April 1, 2015 | | March 27, 2015 | | 75,000 |
| | 150,000(4) |
| | 1,375,000(4) |
| | 11,947 |
| | 47,789 |
| | 95,578 |
| | — |
| | 562,477 |
|
| | April 1, 2015 | | March 27, 2015 | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 23,895 |
| | 233,215 |
|
| Lauren Goldberg | | May 26, 2015 | | May 21, 2015 | | — |
| | — |
| | — |
| | 11,050 |
| | 44,199 |
| | 88,398 |
| | — |
| | 459,228 |
|
| | May 26, 2015 | | May 21, 2015 | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 22,100 |
| | 200,005 |
|
| Former Executives | | | | | | | | | | | | | | | | | | |
William G. Stanley(5) | | N/A | | N/A | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Michael J. Sodo | | April 1, 2015 | | March 27, 2015 | | — |
| | — |
| | — |
| | — |
| | 35,912 |
| | — |
| | 35,912 |
| | 637,438(6) |
|
__________________________
| |
| (1) | Represents performance-based restricted stock units granted under the Equity Plan. These restricted stock units vest based on the achievement of certain performance conditions over a three-year period. These amounts exclude dividend equivalent units which are eligible to vest upon the conclusion of the applicable performance period. The target and maximum amounts correspond to the number of restricted stock units that would have been earned in the event that specified performance goals were achieved. For more information on performance-based restricted stock units, see “Compensation Discussion and Analysis-Elements of Compensation-Long-Term Equity Incentive Award.” |
| |
| (2) | Represents time-based restricted stock units granted under the Equity Plan during 2015. These restricted stock units vest in equal installments on each of the first three anniversaries of the grant date or commencement date, as applicable. For more information on time-based restricted stock units, see “Compensation Discussion and Analysis-Elements of Compensation-Long-Term Equity Incentive Award.” |
| |
| (3) | Represents time-based and performance-based restricted stock units granted under the Equity Plan. The grant date fair value of each award was computed in accordance with ASC Topic 718, without regard to forfeitures. These amounts reflect the Company’s accounting expense for these awards and do not correspond to the actual values, if any, that will be realized by the current officers, or in the case of the former executives, the values, that were actually realized. |
| |
| (4) | Under his employment agreement, Mr. Miller is eligible to receive a commission-based sales management bonus and selling agreement bonus as described above under “Compensation Discussion and Analysis-Employment Agreements.” |
| |
| (5) | Mr. Stanley received no stock awards in respect of his service as Interim Chief Executive Officer. For his services as a member of the Board in 2015, he received 12,049 deferred stock units, which settled on September 29, 2015, the date of his departure. For more information regarding the fees he received as a director of the Company, see “Compensation of the Board of Directors-Director Compensation Table for 2015.” |
| |
| (6) | Upon Mr. Sodo’s departure, all 35,912 performance-based restricted stock units were forfeited. |
OUTSTANDING EQUITY AWARDS
The following table provides a summary of restricted shares of Common Stockcommon stock or restricted stock units issued to current and former executive officers, which had not vested as of December 31, 2015. The market value of restricted stock awards is based on the closing price of the Company’s common stock on December 31, 2015, which was $7.92.
|
| | | | | | | | | | | | |
| | | Stock Awards |
| Name | | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock That Have Not Vested ($) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(1) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
| Current Executives | | | | | | | | |
| Glenn Rufrano | | 341,356 |
| (2) | 2,703,540 |
| | 273,085 |
| | 2,162,833 |
|
| Michael J. Bartolotta | | 28,772 |
| (3) | 227,874 |
| | 57,542 |
| | 455,733 |
|
| Thomas W. Roberts | | 193,366 |
| (4) | 1,531,459 |
| | 68,272 |
| | 540,714 |
|
| William C. Miller | | 23,895 |
| (2) | 189,248 |
| | 47,789 |
| | 378,489 |
|
| Lauren Goldberg | | 22,100 |
| (5) | 175,032 |
| | 44,199 |
| | 350,056 |
|
| | | | | | | | | |
| Former Executives | | | | | | | | |
| William G. Stanley | | — |
| (6) | — |
| | — |
| | — |
|
| Michael J. Sodo | | — |
| (7) | — |
| | — |
| | — |
|
__________________________
| |
| (1) | Represents restricted stock units that will vest subject to the achievement of certain performance conditions, which are based on the Company’s TSR relative to its peers and the NAREIT Equity Market Index. The performance period began April 1, 2015 and will end December 31, 2017. |
| |
| (2) | Represents restricted stock units granted on April 1, 2015 that will vest in three equal installments on each of the first, second and third anniversaries of the grant date. |
| |
| (3) | Represents restricted stock units granted on October 5, 2015 that will vest in three equal installments on each of the first, second and third anniversaries of the grant date. |
| |
| (4) | Comprised of 46,748 remaining unvested restricted shares of common stock that were granted on February 14, 2014 which will vest in four equal installments on the second, third, fourth and fifth anniversaries of the grant date and 112,482 remaining unvested restricted shares of common stock that were granted on October 15, 2014 which will vest in two equal installments on the second and third anniversaries of the grant date. Also comprised of 34,136 restricted stock units that were granted on April 1, 2015 which will vest in three equal installments on each of the first, second and third anniversaries of the grant date. |
| |
| (5) | Represents restricted stock units granted on May 26, 2015 that will vest in three equal installments on each of the first, second and third anniversaries of the grant date. |
| |
| (6) | 9,841 restricted shares of common stock vested in full on September 29, 2015, the date of his departure. All remaining unvested restricted shares of common stock were forfeited when Mr. Stanley declined to seek re-election at the 2015 stockholders’ annual meeting. |
| |
| (7) | All unvested performance-based restricted stock units were forfeited upon Mr. Sodo’s departure in October 2015. |
STOCK VESTED
The following table provides a summary of the restricted shares of common stock and restricted stock units issued to current and former executive officers, which vested during the fiscal year ended December 31, 2015.
|
| | | | | |
| Name | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($)(1) |
| Current Executives | | | |
| Glenn Rufrano | — |
| | — |
|
| Michael J. Bartolotta | — |
| | — |
|
| Thomas W. Roberts | 67,929(2) |
| | 576,105 |
|
| William C. Miller | — |
| | — |
|
| Lauren Goldberg | — |
| | — |
|
| | | |
| Former Executives | | | |
| William G. Stanley | 31,811(3) |
| | 262,088 |
|
| Michael J. Sodo | 43,523(4) |
| | 370,315 |
|
| |
| (1) | Value realized on vesting is calculated based on the per share closing market price of the Company’s common stock on the respective vesting date. |
| |
| (2) | Reflects 11,688 restricted shares of common stock that vested on February 14, 2015 and 56,241 restricted shares of common stock that vested on October 15, 2015. |
| |
| (3) | Reflects 8,000 restricted shares of common stock that vested on January 8, 2015, 1,921 restricted shares of common stock that vested on February 7, 2015, 9,841 restricted shares of common stock that vested on September 29, 2015 and 12,049 deferred stock units that settled on September 29, 2015. |
| |
| (4) | Reflects 1,903 restricted shares of common stock that vested on August 5, 2015, 11,971 restricted stock units that vested on October 29, 2015, 5,708 restricted shares of common stock that vested on November 4, 2015 and 23,941 restricted stock units that vested on November 4, 2015. |
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Current Executives
Glenn Rufrano
Mr. Rufrano is party to an employment agreement with the Company which became effective on April 1, 2015. Details of his termination scenarios are presented below.
Death or Disability. If Mr. Rufrano’s employment is terminated due to his death or at the election of the Company due to his Disability (as defined in his employment agreement), Mr. Rufrano will be entitled to “Accrued Benefits” comprised of (i) any earned and accrued but unpaid base salary through the termination date, (ii) reimbursement for any unreimbursed business expenses incurred through the termination date and (iii) all other applicable payments or benefits to which Mr. Rufrano is entitled under the terms of any applicable compensation arrangement, benefit plan or program. Mr. Rufrano will also be entitled to any accrued but unpaid annual cash bonus for the year prior to the year of termination, if applicable, and all outstanding and unvested equity award granted to Mr. Rufrano will vest on a pro rata basis calculated by dividing the amount of months elapsed since issuance by the applicable term of a time-based award or the performance measurement period of a performance-based award (with performance criteria assumed to be achieved at target levels).
Termination by the Company without Cause or Resignation for Good Reason (other than during a Change in Control Period). If Mr. Rufrano’s employment is terminated other than during a Change in Control Period (as defined in his employment agreement) by the Company without Cause (as defined in his employment agreement) or if Mr. Rufrano resigns for Good Reason (as defined in his employment agreement), Mr. Rufrano will be entitled to (i) Accrued Benefits, (ii) any earned and accrued but unpaid annual cash bonus for the year prior to the year of termination, (iii) an amount equal to two times the sum of his then-effective annual base salary and target annual cash bonus for the year of termination (provided that for purposes of calculating this amount, the target annual cash bonus shall not be less than 150% of Mr. Rufrano’s annual rate of base salary amount), (iv) vesting of 100% (or, after the initial three-year term of the agreement, a pro rata portion) of his then-outstanding unvested equity awards (with performance criteria assumed to be achieved at target levels) and (v) continued group medical coverage for up to 18 months following the termination date.
Termination by the Company without Cause or Resignation for Good Reason (during a Change in Control Period). If Mr. Rufrano’s employment is terminated during a Change in Control Period by the Company without Cause or due to the non-renewal of the employment agreement by the Company or if Mr. Rufrano resigns for Good Reason, Rufrano will be entitled to (i) Accrued Benefits, (ii) any earned and accrued but unpaid annual cash bonus for the year prior to the year of termination, (iii)
an amount equal to three times the sum of his then-effective annual base salary and target annual cash bonus for the year of termination (provided that for purposes of calculating this amount, the target annual cash bonus shall not be less than 150% of Mr. Rufrano’s annual rate of base salary amount) and (iv) vesting of 100% of his then-outstanding unvested equity awards (with performance criteria assumed to be achieved at target levels).
Termination by the Company for Cause, Resignation without Good Reason or Non-Renewal by Mr. Rufrano. If Mr. Rufrano’s employment is terminated by the Company for Cause, by Mr. Rufrano without Good Reason or upon the non-renewal of the employment term by Mr. Rufrano, the Company will pay Mr. Rufrano only Accrued Benefits and Mr. Rufrano will forfeit all unvested equity awards.
Termination by Non-Renewal by the Company. If Mr. Rufrano’s employment is terminated upon the non-renewal of the employment agreement by the Company (other than during a Change in Control Period), Mr. Rufrano will be entitled to (i) Accrued Benefits, (ii) any earned and accrued but unpaid annual cash bonus for the year prior to the year of termination and (iii) an amount equal to the sum of his annual base salary and target annual cash bonus (payable in installments).
Michael J. Bartolotta
Mr. Bartolotta is party to an employment agreement with the Company which became effective on October 5, 2015. Details of his termination scenarios are presented below.
Death or Disability. If Mr. Bartolotta’s employment is terminated due to his death or disability, then Mr. Bartolotta will be entitled to “Accrued Benefits” comprised of (i) any unpaid base salary through the termination date, (ii) any accrued but unpaid annual bonus for the year prior to the year of termination, (iii) reimbursement for any unreimbursed business expenses incurred through the termination date and (iv) all other payments or benefits to which Mr. Bartolotta is entitled under the terms of any applicable compensation arrangement or benefit plan or program. In addition, any outstanding equity awards granted to Mr. Bartolotta prior to the third anniversary of the effective date will vest on a pro rata basis calculated by dividing the amount of months elapsed since issuance by the applicable term of a time-based award or the performance measurement period of a performance-based award (assuming the performance criteria had been achieved at target levels for such period).
Termination by the Company without Cause or by Mr. Bartolotta for Good Reason. If Mr. Bartolotta’s employment is terminated by the Company without Cause (as defined in his employment agreement) or by Mr. Bartolotta for Good Reason (as defined in his employment agreement), then Mr. Bartolotta will be entitled to (i) the Accrued Benefits, (ii) an amount equal to the sum of his annual base salary and target bonus for the year of termination and (iii) continued medical coverage, at the same cost to Mr. Bartolotta as if he were an active employee, until the earliest of: (x) one year following the date of appointmentthe termination; (y) such time as Mr. Bartolotta secures other medical coverage or (z) the COBRA continuation period. In addition, all outstanding and unvested time-based equity awards granted to Mr. Bartolotta prior to the third anniversary of the effective date will vest in full and performance-based equity awards will vest at each annual stockholder’s meetingtarget levels (assuming the performance criteria had been achieved at target levels for such period).
Termination by the Company for Cause or Resignation without Good Reason. If Mr. Bartolotta’s employment is terminated by the Company for Cause or Mr. Bartolotta voluntarily resigns without good reason, then Mr. Bartolotta will be entitled only to Accrued Benefits and he will forfeit all unvested equity awards.
Thomas W. Roberts
Mr. Roberts was party to an employment agreement with the Company which became effective on April 1, 2015. On February 23, 2016, Mr. Roberts entered into a new employment agreement with the Company. For purposes of the “-Termination Scenario Table” below, we have presented Mr. Roberts’ termination scenarios as set forth in his employment agreement that was in effect as of December 31, 2015.
Death or Disability. If Mr. Roberts’ employment is terminated due to his death or at the election of the Company due to his disability, to the extent equity awards issued to Mr. Roberts provided for vesting upon his death or disability, Mr. Roberts’ equity issued pursuant to such awards will vest.
Termination by the American Realty Capital Properties, Inc.Company without Cause. If Mr. Roberts’ employment is terminated by the Company without Cause (as defined in his employment agreement), Mr. Roberts will be entitled to an amount equal to his trailing 12 months’ total annual cash compensation (inclusive of his then current base salary, together with any annual cash bonus paid in the 12-month period prior to his termination but excluding any retention bonuses or other equity or stock bonuses or grants). Additionally, he will be entitled to pro rata vesting of his unvested equity awards, determined by multiplying the total number of equity awards
of a fraction, the numerator of which is the number of whole months elapsed from the grant date until the date of such termination, and the denominator of which is 36 (for time-based equity awards) and 33 (for performance-based equity awards).
Resignation by Mr. Roberts for Cause or Good Reason. Although Mr. Roberts’ employment agreement does not provide additional payouts in connection with his resignation from the Company with Good Reason, certain of Mr. Roberts’ equity will accelerate and become fully vested should he resign with Good Reason (as defined in the applicable equity award).
Mr. Roberts’ termination scenarios as set forth in his new employment agreement are substantially consistent with the termination scenarios set forth above for Mr. Bartolotta.
William C. Miller
Mr. Miller was party to an employment agreement with the Company which became effective on June 10, 2015. On February 23, 2016, Mr. Miller entered into a new employment agreement with the Company. For purposes of the “-Termination Scenario Table” below, we have presented Mr. Miller’s termination scenarios as set forth in his employment agreement that was in effect as of December 31, 2015.
Termination by the Company for Cause or Voluntary Resignation by Mr. Miller. If Mr. Miller is terminated by the Company for Cause (as defined in his employment agreement) or if he voluntarily resigns without Good Reason (as defined in his employment agreement), Mr. Miller will forfeit any unvested equity awards granted to him and if the termination occurs prior to the completion of twelve months of his start date, 100% of his cash award (i.e., $700,000) will be forfeited and returned to the Company or if the termination occurs after twelve months but prior to the completion of 24 months of service from his start date, 50% of his cash award (i.e., $350,000) will be forfeited and returned to the Company.
Termination by the Company without Cause or Resignation for Good Reason. If Mr. Miller is terminated by the Company without Cause or if Mr. Miller resigns for Good Reason outside of a Change in Control Period (as defined in his employment agreement), Mr. Miller will be entitled to a monthly severance payment equal to his average monthly earnings over the two-year period preceding the termination date (excluding, for the avoidance of doubt, the cash award and any selling agreement bonuses paid during the period) for a period of six months. In the event of termination by the Company without Cause or by Mr. Miller for Good Reason during a Change in Control Period, the severance period will be increased to twelve months. Additionally, whether during or outside of the Change in Control Period, Mr. Miller will be entitled to vesting in full of all of the outstanding and unvested time-based equity awards and performance-based equity awards granted to him (assuming the performance criteria had been achieved at target levels for the relevant performance period).
Mr. Miller’s termination scenarios as set forth in his new employment agreement are substantially consistent with the termination scenarios set forth above for Mr. Bartolotta.
Lauren Goldberg
Ms. Goldberg is party to an employment agreement with the Company which became effective on May 26, 2015. Details of her termination scenarios are presented below.
Death or Disability. If Ms. Goldberg’s employment is terminated due to her death or disability, then Ms. Goldberg will be entitled to “Accrued Benefits” comprised of (i) any unpaid base salary through the termination date, (ii) any accrued but unpaid annual bonus for the year prior to the year of termination, (iii) reimbursement for any unreimbursed business expenses incurred through the termination date and (iv) all other payments or benefits to which Ms. Goldberg is entitled under the terms of any applicable compensation arrangement or benefit plan or program. In addition, any outstanding equity awards granted to Ms. Goldberg prior to the third anniversary of the effective date will vest on a pro rata basis calculated by dividing the amount of months elapsed since issuance by the applicable term of a time-based award or the performance measurement period of a performance-based award (assuming the performance criteria had been achieved at target levels for such period).
Termination by the Company without Cause or by Ms. Goldberg for Good Reason. If Ms. Goldberg’s employment is terminated by the Company without Cause (as defined in his employment agreement) or by Ms. Goldberg for Good Reason (as defined in his employment agreement), then Ms. Goldberg will be entitled to (i) the Accrued Benefits, (ii) an amount equal to the sum of her annual base salary and target bonus for the year of termination and (iii) continued medical coverage, at the same cost to Ms. Goldberg as if she were an active employee, until the earliest of: (x) one year following the date of the termination; (y) such time as Ms. Goldberg secures other medical coverage or (z) the COBRA continuation period. In addition, all outstanding and unvested time-based equity awards granted to Ms. Goldberg prior to the third anniversary of the effective date will vest in full and performance-based equity awards will vest at target levels (assuming the performance criteria had been achieved at target levels for such period).
Termination by the Company for Cause or Resignation without Good Reason. If Ms. Goldberg’s employment is terminated by the Company for Cause or Ms. Goldberg voluntarily resigns without good reason, then Ms. Goldberg will be entitled only to Accrued Benefits and she will forfeit all unvested equity awards.
Former Executives
As depicted in “- Termination Scenario Table” below, each of William G. Stanley and Michael J. Sodo departed the Company prior to December 31, 2015. Therefore, in the table, we have only presented the actual payouts made to each of these individuals in connection with their departures. The details of the actual payments are further described below.
William G. Stanley
On December 15, 2014, the Board appointed William G. Stanley, then the Company’s Lead Independent Director, to serve in the full-time positions of Interim Chief Executive Officer and Interim Chairman of the Board. While in this role, Mr. Stanley received $150,000 per month (the “Monthly Retainer”) in lieu of any other Board cash retainers and cash fees. Mr. Stanley continued to be eligible to receive the equity retainer payable to directors. In connection with the appointments of Glenn J. Rufrano as Chief Executive Officer and Hugh R. Frater as Non-Executive Chairman of the Board, each effective April 1, 2015, Mr. Stanley resigned from his positions as Interim Chief Executive Officer and Interim Chairman of the Board on such date. Mr. Stanley’s position as Interim Chief Executive Officer was not documented in a formal employment agreement and he was due no additional fees or benefits upon his resignation on April 1, 2015, aside from any accrued and unpaid amounts of his Monthly Retainer.
Michael J. Sodo
In connection with his departure, Michael J. Sodo entered into a separation agreement with the Company, pursuant to which, effective October 5, 2015, Mr. Sodo was no longer the Company’s Executive Vice President, Chief Financial Officer and Treasurer. Mr. Sodo remained employed by the Company until November 4, 2015 to assist in the transition. Pursuant to Mr. Sodo’s employment agreement with the Company, dated January 9, 2015, he was entitled to (A) an amount equal to the sum of (i) twelve months base salary plus (ii) an amount equal to the target annual cash bonus and (B) the unpaid portion of the promotion cash bonus in the amount of $275,000. In addition, he was entitled to accelerated vesting on his outstanding unvested restricted shares of common stock and time-based restricted stock units. The performance condition underlying Mr. Sodo’s unvested performance-based restricted stock units were not satisfied and, accordingly, such performance-based restricted stock units were forfeited in full.
TERMINATION SCENARIO TABLE
The table below provides certain estimates of the payments and benefits that would be provided to our NEOs in the event that a qualifying termination of employment or a change in control occurs, assuming that the triggering event took place on December 31, 2015. The value of vested equity is based on the closing price of the Company’s common stock on December 31, 2015 of $7.92. |
| | | | | | | | | | | | | | | | | | | | | |
| Name and Termination Scenario | | Accrued Salary ($) | | Accrued Bonus ($) | | Severance ($) | | Vested Equity Awards ($) | | Accrued Benefits ($)(1) | | Other(2) | | Total Payout ($) |
| Current Executives | | | | | | | | | | | | | | |
| Glenn Rufrano | | | | | | | | | | | | | | |
| Death or Disability | | — |
| | 1,500,000 |
| | — |
| | 1,265,748 |
| | 51,548 |
| | 43,950 |
| | 2,861,246 |
|
| Without Cause or Resignation for Good Reason (no Change in Control) | | — |
| | 1,500,000 |
| | 5,000,000 |
| | 4,866,373 |
| | 82,048 |
| | 168,971 |
| | 11,617,392 |
|
| Without Cause or Resignation for Good Reason (Change in Control) | | — |
| | 1,500,000 |
| | 7,500,000 |
| | 4,866,373 |
| | 51,548 |
| | 168,971 |
| | 14,086,892 |
|
| For Cause or Voluntary Resignation | | — |
| | — |
| | — |
| | — |
| | 51,548 |
| | — |
| | 51,548 |
|
| Non-Renewal by the Company | | — |
| | 1,500,000 |
| | 2,500,000 |
| | — |
| | 51,548 |
| | — |
| | 4,051,548 |
|
| Michael J. Bartolotta | | | | | | | | | | | | | | |
| Death or Disability | | — |
| | 468,750 |
| | — |
| | 47,716 |
| | 1,114 |
| | 828 |
| | 518,408 |
|
| Without Cause or Resignation for Good Reason (with or without Change in Control) | | — |
| | 468,750 |
| | 968,750 |
| | 683,607 |
| | 19,334 |
| | 11,868 |
| | 2,152,309 |
|
| For Cause or Voluntary Resignation | | — |
| | — |
| | — |
| | — |
| | 1,114 |
| | — |
| | 1,114 |
|
| Thomas W. Roberts | | | | | | | | | | | | | | |
| Death or Disability | | — |
| | — |
| | — |
| | 370,244 |
| | 36,647 |
| | — |
| | 406,891 |
|
| Without Cause or Resignation for Good Reason (with or without Change in Control) | | — |
| | — |
| | 1,096,921 |
| | 1,452,263 |
| | 36,647 |
| | 6,638 |
| | 2,592,469 |
|
| For Cause or Voluntary Resignation | | — |
| | — |
| | — |
| | — |
| | 36,647 |
| | — |
| | 36,647 |
|
Change in Control(3) | | — |
| | — |
| | — |
| | 1,261,102 |
| | — |
| | — |
| | 1,261,102 |
|
| William C. Miller | | | | | | | | | | | | | | |
| Death or Disability | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Without Cause or Resignation for Good Reason (no Change in Control) | | — |
| | — |
| | 725,000 |
| | 567,737 |
| | 14,351 |
| | 19,713 |
| | 1,326,801 |
|
| Without Cause or Resignation for Good Reason (Change in Control) | | — |
| | — |
| | 1,450,000 |
| | 567,737 |
| | 14,351 |
| | 19,713 |
| | 2,051,801 |
|
| For Cause or Voluntary Resignation | | — |
| | — |
| | — |
| | — |
| | 14,351 |
| | — |
| | —(4) |
|
| Lauren Goldberg | | | | | | | | | | | | | | |
| Death or Disability | | — |
| | 450,000 |
| | — |
| | 113,079 |
| | 18,889 |
| | 3,926 |
| | 585,894 |
|
| Without Cause or Resignation for Good Reason (with or without Change in Control) | | — |
| | 450,000 |
| | 900,000 |
| | 525,088 |
| | 25,007 |
| | 18,232 |
| | 1,918,327 |
|
| For Cause or Voluntary Resignation | | — |
| | — |
| | — |
| | — |
| | 18,889 |
| | — |
| | 18,889 |
|
| Former Executives | | | | | | | | | | | | | | |
William G. Stanley(5) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Michael J. Sodo(6) | | 5,192 |
| | — |
| | 1,400,000(6) |
| | 253,499(7) |
| | 21,923 |
| | 3,292 |
| | 1,683,906 |
|
__________________________
| |
| (1) | Reflects accrued vacation, unreimbursed business expenses and/or medical coverage for the executive and his or her spouse and then-covered dependents. |
| |
| (2) | Includes dividend equivalents on restricted stock units. |
| |
| (3) | Certain legacy equity award agreements contain a change in control provision that provides for the automatic vesting of all outstanding and unvested equity awards upon a Change of Control (as defined in the Company’s Equity Plan). |
| |
| (4) | Mr. Miller would be required to forfeit and repay $700,000 that he received under his employment agreement. |
| |
| (5) | As noted in “—Payments upon Termination or Change in Control” above, Mr. Stanley did not enter into a formal employment agreement with the Company upon his appointment as Interim Chief Executive Officer on December 15, 2014 and was only entitled to the monthly retainer of $150,000. Therefore, no amounts have been presented for Mr. Stanley in connection with the termination of his service as Interim Chief Executive Officer. |
| |
| (6) | As noted in “—Payments upon Termination or Change in Control” above,” Mr. Sodo entered into a separation agreement with the Company pursuant to which he received a cash severance in the amount of $1,400,000, comprised of a base salary of $450,000, an annual bonus of $675,000 and a cash promotion grant of $275,000. |
| |
| (7) | Reflects 5,708 restricted shares of common stock and 23,941 restricted stock units that vested upon Mr. Sodo’s departure. |
COMPENSATION OF THE BOARD OF DIRECTORS
Director Stock PlanCompensation
In January 2015, the Compensation Committee completed a review of the compensation arrangements for the Board of Directors as part of the overall review of the Company’s compensation practices and policies. The Compensation Committee engaged Semler Brossy to conduct a study of market practices based on the peer group approved for reviewing executive pay. Semler Brossy recommended a number of changes to make the compensation for directors consistent with best practices among the Company’s peers and the Compensation Committee recommended these changes to the full Board of Directors.
Effective January 1, 2015, upon consideration of and consistent with the recommendations of the Compensation Committee and Semler Brossy, the Board of Directors approved and adopted the following retainers and fees for each independent director:
$60,000 annual cash retainer (the “Director Stock Plan”“Annual Cash Board Retainer”);
meeting fees of $2,000 per in-person meeting and $1,500 per telephonic meeting for each meeting of the Board and of an established committee of the Board (the “Meeting Fees” and, together with the Annual Cash Board Retainer, the “Board Cash Compensation”); and
$110,000 annual equity retainer in the form of deferred stock units (the “Annual Equity Board Retainer”).
In addition, the director who serves as the non-Executive Chairman of the Board receives an annual cash retainer of $150,000; the director who serves as the chair of the Audit Committee receives an annual cash retainer of $20,000; the director who serves as the chair of the Compensation Committee receives an annual cash retainer of $15,000; and the director who serves as the chair of the Nominating and Corporate Governance receives an annual cash retainer of $10,000.
The Board Cash Compensation for 2015 was paid to the independent directors quarterly in arrears commencing with the end of the quarter ended March 31, 2015. The Annual Equity Board Retainer for 2015 was granted to each independent director on May 15, 2015 who was serving on such date (and a pro rata portion was granted to Messrs. Ordan, Henry and Pinover on the respective dates they joined the Board). The awardsAnnual Equity Board Retainer will be made in subsequent years in connection with each regularly scheduled annual meeting of restrictedstockholders and if an independent director is elected to the Board between annual meetings of stockholders, a pro-rata Annual Equity Board Retainer will be made at such independent director’s election measured from the effective date of the election to the one-year anniversary of the previous year’s annual meeting of stockholders.
The Annual Equity Board Retainer consisted of deferred stock granted under the Director Stock Planunits. The deferred stock units, which vest ratably over a five-year period following the first anniversary ofupon issuance, will be settled three years from the date of grant in incrementsor, if a director ends his or her tenure for any reason prior thereto, the end of 20% per annum, subjecthis or her tenure. The deferred stock units entitle the holder to dividend equivalent payments consistent with the director’s continued servicedividends paid on ourthe Company’s common stock.
In addition, on January 12, 2015, the Board of Directors, in consultation with Semler Brossy, established interim compensation arrangements for independent directors who substantially increased their time commitments and provideleadership responsibilities while the Company completed its restatements, became current in its reporting obligations and transitioned to a permanent Chief Executive Officer. The Board also established interim compensation arrangements for “distribution equivalents” with respect to this restricted stock, whether or not vested, attwo members of the same timeAudit Committee in recognition of their respective roles and effort in overseeing the same amounts as distributions are paid toAudit Committee Investigation and the process of the Company becoming current in its SEC reporting obligations. These compensation arrangements ended on March 31, 2015.
Director Compensation Table for 2015
The following table sets forth the information regarding the compensation of our stockholders.Share-Based Compensation
current and former directors who served during the fiscal year ended December 31, 2015:
|
| | | | | | | | | | | | | | |
| Name | | Fees Earned or Paid in Cash ($)(1) | | Stock Awards ($)(2) | | Non-Equity Incentive Plan Compensation ($) | | All Other Compensation ($)(3) | | Total Compensation ($) |
| Current Directors | | | | | | | | | | |
Glenn Rufrano(4) | | — |
| | — |
| | — | | — |
| | — |
|
| Hugh R. Frater | | 191,000 |
| | 110,007 |
| | — | | 3,313 |
| | 304,320 |
|
| Bruce D. Frank | | 310,443(5) |
| | 129,772 |
| | — | | 4,049 |
| | 444,264 |
|
| David B. Henry | | 25,880 |
| | 69,015 |
| | — | | 2,474 |
| | 97,369 |
|
| Mark S. Ordan | | 52,808 |
| | 100,361 |
| | — | | 3,255 |
| | 156,424 |
|
| Eugene A. Pinover | | 21,326 |
| | 69,015 |
| | — | | 2,474 |
| | 92,815 |
|
| Julie G. Richardson | | 83,332 |
| | 110,007 |
| | — | | 3,313 |
| | 196,652 |
|
| Former Directors | | | | | | | | | | |
| Thomas A. Andruskevich | | 438,288(6) |
| | 110,007 |
| | — | | — |
| | 548,295 |
|
| Leslie D. Michelson | | 63,000 |
| | 27,494 |
| | — | | — |
| | 90,494 |
|
| Edward G. Rendell | | 77,000 |
| | 27,494 |
| | — | | — |
| | 104,494 |
|
William G. Stanley (7) | | 50,174 |
| | 110,007 |
| | — | | — |
| | 160,181 |
|
| |
| (1) | For a description of the annual non-employee director retainer fees and related payments, please see “Compensation of the Board of Directors—Director Compensation.” |
| |
| (2) | Reflects the grant date fair value of stock awards computed in accordance with ASC Topic 718, without regard to forfeitures. For further information on how we account for stock-based compensation and the assumptions used, see Note 19 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 filed with the SEC on February 24, 2016. These amounts reflect the Company’s accounting expense for these awards and do not correspond to the actual amounts, if any, that will be recognized by the directors. |
| |
| (3) | Reflects dividends on restricted shares of common stock and dividend equivalents on deferred stock units. |
| |
| (4) | Mr. Rufrano did not receive any fees for serving as director in 2015. |
| |
| (5) | Includes special interim compensation of $148,438 paid to Mr. Frank for his substantially increased time commitments and leadership responsibilities while the Company completed the restatement of its financial statements, became current in its reporting obligations and transitioned to a permanent Chief Executive Officer. |
| |
| (6) | Includes $300,000 that Mr. Andruskevich received as interim lead independent director in lieu of the annual retainer of the lead independent director and fees for any Board or committee meetings principally devoted to the search for a permanent Chief Executive Officer and permanent independent Chairman of the Board and the Board’s oversight of the Company’s operations. |
| |
| (7) | Excludes compensation paid while serving as Interim Chief Executive Officer. Refer to “—Summary Compensation Table” above for amounts paid while serving in the capacity of Interim Chief Executive Officer. As a result of his decision not to stand for re-election at the September 29, 2015 stockholders’ annual meeting, Mr. Stanley voluntarily forfeited 26,000 of the remaining 32,000 unvested shares from previous equity awards. |
Director Stock
PlanWe haveOwnership Guidelines
In 2015, our Board adopted
the Director Stock Plan, which provides for the issuance of restricted or unrestrictedguidelines encouraging each director to hold shares of
our Common Stockthe Company’s common stock. Each non-employee director of the Company is required to own common stock of the Company with a fair market value of at least five times the cash portion of his or
restricted stock units. The Director Stock Plan is intended, in part, to implement our programher annual retainer. Each non-employee director has a phase-in period of
non-executive director compensation. Please see “— Compensation of Directors” on page 18 for a description of our program of non-executive director compensation. We have authorized and reserved a total of 99,000 shares of Common Stock for issuance under the Director Stock Plan. Awards of restricted stock under the Director Stock Plan will vest ratably over a five-year period following the first anniversary offive years from the date of
grant in increments of 20% per annum, subjecthis or her election to the
director’s continuedBoard to achieve the required minimum share ownership level. Starting in 2016, independent directors may elect to receive deferred stock units in lieu of the Annual Cash Board Retainer and any annual cash retainer for serving as Non-Executive Chairman or as chair of any of the Board committees. If a director makes this election, he or she will receive a quarterly issuance of deferred stock units equal to his or her aggregate deferred retainer(s) for the prior calendar quarter divided by the closing price of the Company’s common stock on the NYSE on the third business day following a quarter end. The deferred stock units will be granted under the Equity Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The table below presents the members of the Compensation Committee and their respective service terms beginning January 1, 2015. None of these persons had, at any time, served as an officer or employee of the Company and none of these persons had any relationships with the Company requiring disclosure under applicable rules and regulations of the SEC. |
| | | |
| Name | | Dates |
| Edward G. Rendell (Former Independent Director)* | | January 1, 2015 - April 1, 2015 |
Thomas A. Andruskevich (Former Independent Director)*(1) | | January 1, 2015 - September 29, 2015 |
| Bruce D. Frank (Independent Director)* | | January 1, 2015 - Present |
Julie G. Richardson (Independent Director)(2) | | April 1, 2015 - Present |
| Mark S. Ordan (Independent Director) | | September 29, 2015 - Present |
__________________________
* Tenure on the Compensation Committee began prior to January 1, 2015.
(1) Mr. Andruskevich served as a member and Chairperson of the Compensation Committee from November 20, 2014 until September 29, 2015.
(2) Ms. Richardson has served as the Chairperson of the Compensation Committee since September 29, 2015.
PROPOSAL 3
NON-BINDING, ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION
Pursuant to Section 14A of the Exchange Act, the Company is providing its stockholders with the opportunity to vote on a non-binding advisory resolution approving the named executive officers’ compensation described herein. This proposal, known as a “say on pay” proposal, gives the Company’s stockholders the opportunity to express their views on named executive officer’s compensation.
The Board believes that the information provided in the Compensation Discussion and Analysis demonstrates that our Boardexecutive compensation program was designed appropriately and is working to ensure that management’s interests are aligned with our stockholders’ interests to support long-term value creation. In accordance with Section 14A of Directors,the Exchange Act, and shall provide for “distribution equivalents” with respectas a matter of good corporate governance, we are asking stockholders to this restricted stock, whether or not vested,approve, on a non-binding, advisory basis, the following resolution at the same time and in the same amounts as distributions are paid to our stockholders. If any awards under the Director Stock Plan are cancelled, forfeited or otherwise terminated, the shares that were subject to such award will be available for re-issuance under the Director Stock Plan. Shares issued under the Director Stock Plan may be authorized but unissued shares or shares that have been reacquired by us. In the eventAnnual Meeting:
“RESOLVED, that the compensation committee determines that any dividend or other distribution (whetherpaid to the Company’s named executive officers, as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K, including in the formCompensation Discussion and Analysis, the compensation table and related narrative discussion, is hereby approved.”
While the say-on-pay vote is advisory and will be non-binding, the Compensation Committee does value the opinions of cash, Common Stock, or other property), recapitalization, stock split, reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, or share exchange, or other similar corporate transaction or event, affectsour stockholders and intends to take the Common Stock such that an adjustment is appropriate in order to prevent dilution or enlargementresults of the rights of participants under the Director Stock Plan, thenvote on this proposal into account in its future decisions regarding the compensation committeeof our named executive officers. Unless the Board modifies its policy on the frequency of future say-on-pay advisory votes, the next say-on-pay advisory vote will make equitable changes or adjustmentsbe held at the 2017 annual meeting of stockholders, and the next advisory vote on the frequency of holding a say-on-pay vote will occur no later than the 2020 annual meeting of stockholders.
We are asking our stockholders to any or all of: (i) the number and kind of shares of stock or other property (including cash) that may thereafter be issuedindicate their support for our named executive officers’ compensation as described in connection with awards; (ii) the number and kind of shares of stock or other property (including cash) issued or issuable in respect of outstanding awards; and (iii) the performance goals, if any, applicable to outstanding awards. In addition, the compensation committee may determine that any such equitable adjustment may be accomplished by making a payment to the award holder, in the form of cash or other property (including butthis proxy statement. This non-binding advisory vote is not limited to sharesany specific item of stock). Awards undercompensation, but rather addresses the Director Stock Plan are intendedoverall compensation of our named executive officers and our philosophy, policies and practices relating to either be exempt from, or comply with, Section 409Atheir compensation as described in this proxy statement pursuant to Item 402 of Regulation S-K.
The affirmative vote of a majority of the Code.votes cast at the Annual Meeting for the adoption of this resolution is required to approve the compensation of the named executive officers as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THIS RESOLUTION.
TABLE OF CONTENTS
Equity Plan
We have adopted the American Realty Capital Properties, Inc. Equity Plan (the “Equity Plan”), which provides for the grant of stock options, restricted shares of Common Stock, restricted stock units, dividend equivalent rights and other equity-based awards to the Manager, non-executive directors, officers and other employees and independent contractors, including employees or directors of the Manager and its affiliates who are providing services to us.
Concurrently with the closing of our initial public offering (“IPO”), we granted to the Manager 167,400 restricted shares of Manager’s Stock pursuant to our Equity Plan. Such shares have fully vested and have been converted into an equal number of shares of Common Stock. We also have reserved a total number of shares equal to 10.0% of the total number of issued and outstanding shares of Common Stock (on a fully diluted basis assuming the redemption of all limited partner units of the Company’s operating partnership (“OP Units”), ARC Properties Operating Partnership, L.P. (our “Operating Partnership”) for shares of Common Stock) at any time under the Equity Plan for equity incentive awards other than the initial grant to the Manager. All such awards of shares will vest ratably on an annual basis over a three-year period beginning on the first anniversary of the date of grant and shall provide for “distribution equivalents” with respect to this restricted stock, whether or not vested, at the same time and in the same amounts as distributions are paid to our stockholders.
TABLE OF CONTENTS
STOCK OWNERSHIP BY DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN STOCKHOLDERS
The following table sets forth information regarding the beneficial ownership of the Company’s Common Stockcommon stock as of April 23, 2013,March 9, 2016, in each case including shares of Common Stockcommon stock which may be acquired by such persons have a right to acquire within 60 days, by:
each person known by the Company to be the beneficial owner of more than 5% of its outstanding shares of Common Stockits common stock based solely upon the amounts and percentages contained in the public filings of such persons;
each of the Company’s executive officers and directors; and
all of the Company’s executive officers and directors as a group.
| | | | |
| | Percentage of Common Stock |
| Name of Beneficial Owner(1) | | Shares Owned(2) | | Percentage(3) |
| Nicholas S. Schorsch(4) | | | 1,431,853 | | | | * | |
| William M. Kahane(5) | | | 367,456 | | | | * | |
| Brian S. Block(6) | | | 74,373 | | | | * | |
| Peter M. Budko(7) | | | 378,680 | | | | * | |
| Edward M. Weil, Jr.(8) | | | 92,612 | | | | * | |
| Brian D. Jones | | | 21,586 | | | | * | |
| Leslie D. Michelson(9) | | | 3,000 | | | | * | |
| Dr. Walter P. Lomax, Jr. | | | 6,000 | | | | * | |
| Scott J. Bowman(9) | | | 11,610 | | | | * | |
| Edward G. Rendell(9) | | | 9,300 | | | | * | |
| All directors and executive officers as a group | | | 2,396,470 | | | | 1.5 | % |
|
| | | | | | |
| | | Percentage of Common Stock |
| Name of Beneficial Owner | | Shares Owned (1) | | Percentage (2) |
The Vanguard Group(3) | | 130,549,044 |
| | 14.1 | % |
Corvex Management LP(4) | | 78,821,280 |
| | 8.5 | % |
Blackrock Inc.(5) | | 61,088,692 |
| | 6.6 | % |
FMR LLC(6) | | 48,673,565 |
| | 5.2 | % |
Directors and Executive Officers(7) | | | | |
Hugh R. Frater(8) | | 74,049 |
| | * |
|
Bruce D. Frank(9) | | 16,059 |
| | * |
|
David B. Henry(10) | | 8,998 |
| | * |
|
Mark S. Ordan(11) | | 11,835 |
| | * |
|
Eugene A. Pinover(12) | | 21,298 |
| | * |
|
Julie G. Richardson(13) | | 29,449 |
| | * |
|
Glenn J. Rufrano(14) | | 248,786 |
| | * |
|
| Michael J. Bartolotta | | 30,500 |
| | * |
|
| Lauren Goldberg | | — |
| | * |
|
Paul H. McDowell(15) | | 43,433 |
| | * |
|
William C. Miller(16) | | 7,965 |
| | * |
|
Thomas W. Roberts(17) | | 326,882 |
| | * |
|
| All directors and executive officers as a group | | 819,254 |
| | * |
|
| (12 persons) | | | | |
__________________________
* Represents less than 1% of the shares of the Company’s common stock outstanding.
| * | Represents less than 1% of the shares of Common Stock outstanding. |
| (1) | The address for each of the persons named in this table is c/o American Realty Capital Properties, Inc., 405 Park Avenue, New York, New York 10022. |
| (2) | Beneficial ownership is determined in accordance with Rule 13d-3 of the Exchange Act. A person is deemed to be the beneficial owner of any shares of Common Stockthe Company’s common stock if that person has or shares voting power ofor investment power with respect to those shares, or has the right to acquire beneficial ownership at any time within 60 days of the date of the table. As used herein, “voting power” is the power to vote or direct the voting of shares and “investment power” is the power to dispose or direct the disposition of shares. |
| (3) |
| (2) | The total number ofBased on 928,618,254 shares of Common Stock includes 154,940,679 sharescommon stock outstanding as of April 23, 2013, which includes 6,000 sharesMarch 9, 2016. Includes 65,978 deferred stock units that settle three years from the date of Common Stock granted to our four independent directors that are subject to certain vesting restrictions. |
| (4) | Includes 197,042grant or, if a director ends his or her tenure for any reason prior thereto, the end of his or her tenure, and 23,763,797 OP Units that are currently exchangeable for cash or, at the option of our Operating Partnership,into shares of our Common Stock on a one-to-one basis. Excludes (i) 4,182,614 OP Units that will become exchangeable on February 28, 2014, (ii) 428,474 Class B Units in our Operating Partnership that are exchangeable into OP Units upon the satisfaction of certain conditions and (iii) and 8,241,101 LTIP Units (as defined below in “Certain Relationships and Related Transactions — Multi-Year Performance Plan”) held by the Manager that are earned and exchangeable as described below under the section “Certain Relationships and Related Transactions — Multi Year Performance Plan.”Company’s common stock. OP Units are exchangeable, except under certain limited circumstances, beginning one year from the date of issuance, which includesissuance. Holders of the holding period of anydeferred stock units that were converted intoand OP Units (e.g., Class B OP Units and LTIP Units) and have no expiration date.are not entitled to voting rights. |
| (5) |
| (3) | Includes 10,800 shares held by AR Capital, LLC, of which Mr. KahaneThe information with respect to The Vanguard Group is an equity holderbased solely on the Schedule 13G/A filed with the SEC on February 11, 2016 and a manager and 41,902 OP Units that are currently exchangeable for cash or, at the option of our Operating Partnership,includes 65,194,800 shares of our Common Stockcommon stock beneficially owned by the Vanguard Specialized Funds - Vanguard REIT Index Fund (the “Index Fund”). The number of shares beneficially owned by the Index Fund is based upon information filed separately by the Index Fund with the SEC on a one-to-one basis. Excludes (i) 889,451 OP Units that will become exchangeableSchedule 13G/A on February 28, 2014, (ii) 91,117 Class B Units in our Operating Partnership that are exchangeable into OP Units upon the satisfaction of certain conditions and (iii) and 8,241,101 LTIP Units held by the Manager that are earned and exchangeable as described below under the section |
TABLE OF CONTENTS
| | “Certain Relationships and Related Transactions — Multi Year Performance Plan.” OP Units are exchangeable, except under certain limited circumstances, beginning one year from the date of issuance, which includes the holding period of any units that were converted into OP Units (e.g.9, 2016. The address for The Vanguard Group is 100 Vanguard Blvd., Class B OP Units and LTIP Units) and have no expiration date.Malvern, Pennsylvania 19355. |
| (6) |
| (4) | Includes 9,325 OP Units that are currently exchangeable for cash or, atThe information with respect to Corvex Management LP is based on the optionSchedule 13D/A filed with the SEC on September 25, 2015 and a subsequent Schedule 13D/A filed with the SEC on March 18, 2016. Corvex Management LP reduced its position to 44,360,189 shares owned as of our Operating Partnership,March 17, 2016, which represents 4.8% of the shares of our Common Stock on a one-to-one basis. Excludes (i) 197,931 OP Units that will become exchangeable on February 28, 2014, (ii) 57,363 Class B Units in our Operating Partnership that are exchangeable into OP Units upon the satisfaction of certain conditions and (iii) and 8,241,101 LTIP Units held by the Manager that are earned and exchangeable as described below under the section “Certain Relationships and Related Transactions — Multi Year Performance Plan.” OP Units are exchangeable, except under certain limited circumstances, beginning one year from the date of issuance, which includes the holding period of any units that were converted into OP Units (e.g., Class B OP Units and LTIP Units) and have no expiration date.Company’s common stock outstanding. The address for Corvex Management LP is 712 Fifth Avenue, 23rd Floor, New York, New York, 10019. |
| (7) |
| (5) | Includes 13,100 shares held by AR Capital, LLC, of which Mr. BudkoThe information with respect to BlackRock Inc. is an equity holder, and 50,826 OP Units that are currently exchangeable for cash or, atbased solely on the option of our Operating Partnership, shares of our Common Stock on a one-to-one basis. Excludes (i) 1,078,886 OP Units that will become exchangeableSchedule 13G/A filed with the SEC on February 28, 2014, (ii) 110,523 Class B Units in our Operating Partnership that are exchangeable into OP Units upon the satisfaction of certain conditions and (iii) and 8,241,101 LTIP Units held by the Manager that are earned and exchangeable as described below under the section “Certain Relationships and Related Transactions — Multi Year Performance Plan.” OP Units are exchangeable, except under certain limited circumstances, beginning one year from the date of issuance, which includes the holding period of any units that were converted into OP Units (e.g., Class B OP Units and LTIP Units) and have no expiration date.10, 2016. The address for BlackRock Inc. is 55 East 52nd Street, New York, New York, 10055. |
| (8) |
| (6) | Includes 10,905 OP Units that are currently exchangeable for cash or, atThe information with respect to the optionholdings of our Operating Partnership, shares of our Common StockFMR LLC is based solely on a one-to-one basis. Excludes (i) 753,441 OP Units that will become exchangeablethe Schedule 13G filed with the SEC on February 28, 2014, (ii) 23,713 Class B Units in our Operating Partnership that are exchangeable into OP Units upon the satisfaction of certain conditions and (iii) and 8,241,101 LTIP Units held by the Manager that are earned and exchangeable as described below under the section “Certain Relationships and Related Transactions — Multi Year Performance Plan.” OP Units are exchangeable, except under certain limited circumstances, beginning one year from the date of issuance, which includes the holding period of any units that were converted into OP Units (e.g., Class B OP Units and LTIP Units) and have no expiration date.12, 2016. The address for FMR LLC is 245 Summer Street, Boston, Massachusetts 02210. |
| (9) |
| (7) | Includes 3,000 restricted shares which vest annually over a five-year period in equal installments beginning with the anniversaryThe address for each of the date of grant.these persons is c/o VEREIT, Inc., 2325 E. Camelback Road, Suite 1100, Phoenix, Arizona 85016. |
| |
| (8) | Includes 12,049 deferred stock units issued in connection with such individual’s service as a member of the Board and 62,000 shares held in a revocable trust of which Mr. Frater and his wife are trustees. |
| |
| (9) | Includes 12,049 deferred stock units issued in connection with such individual’s service as a member of the Board. |
| |
| (10) | AR Capital, LLC is owned by Nicholas S. Schorsch, William M. Kahane, Peter M. Budko, Brian S. Block, and Edward M. Weil, Jr., and controlled by Nicholas S. Schorsch and William M. Kahane.Includes 8,998 deferred stock units issued in connection with such individual’s service as a member of the Board. |
| |
| (11) | Includes 11,835 deferred stock units issued in connection with such individual’s service as a member of the Board. |
| |
| (12) | Includes 8,998 deferred stock units issued in connection with such individual’s service as a member of the Board. |
| |
| (13) | Includes 17,400 aggregate shares of the Company’s common stock which were purchased in three separate tranches of 5,800 shares for three separate trusts of which Ms. Richardson is the trustee. Each trust benefits a separate child of Ms. Richardson. Also includes 12,049 deferred stock units issued in connection with such individual’s service as a member of the Board. |
| |
| (14) | Includes 113,786 time-based restricted stock units that are scheduled to vest on April 1, 2016. |
| |
| (15) | Includes 3,414 time-based restricted stock units that are scheduled to vest on April 1, 2016. Mr. McDowell holds 25,164 of his shares in a margin account with a brokerage firm. |
| |
| (16) | Includes 7,965 time-based restricted stock units that vested on March 16, 2016. |
| |
| (17) | Includes 11,379 time-based restricted stock units that are scheduled to vest on April 1, 2016. |
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC. Based solely upon a review of the copies of such forms furnished to us and written representations from our executive officers and directors, we believe that during the year ended December 31, 2015, all persons subject to the reporting requirements of Section 16(a) filed the required reports on a timely basis, other than in relation to the following reports: Form 4s for Michael T. Ezzell, Paul H. McDowell and Thomas W. Roberts that were filed on July 1, 2015 in connection with restricted stock units that were awarded under the Equity Plan on April 1, 2015 for Messrs. Ezzell and McDowell and May 11, 2015 for Mr. Roberts. The late filings all occurred as a result of clerical oversights in connection with the change in management.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Management Agreement
We
Related Party Transactions with the Cole REITs in the Ordinary Course of Cole Capital’s Business
As part of the Company’s operation of its Cole Capital segment, it is contractually responsible for managing the affairs of the following Cole REITs — Cole Credit Property Trust IV, Inc. (“CCPT IV”), Cole Real Estate Income Strategy (Daily NAV), Inc. (“INAV”), Cole Office & Industrial REIT (CCIT II), Inc. (“CCIT II”) and Cole Credit Property Trust V, Inc. (“CCPT V) — on a day-to-day basis, identifying and making acquisitions and investments on behalf of the Cole REITs, and recommending to the respective board of directors of each of the Cole REITs an approach for providing investors with liquidity. In addition, the Company distributes the shares of common stock for certain Cole REITs and advises them regarding offerings, manages relationships with participating broker dealers and financial advisors, and provides assistance in connection with compliance matters relating to the offerings. The Company receives compensation and reimbursement for services relating to the Cole REITs’ offerings and the investment, management and disposition of their respective assets, as applicable. The Company also provided these services to Cole Corporate Income Trust, Inc. (“CCIT”) until the fund completed its liquidation event on January 29, 2015.
Information contained herein in respect to the Cole REITs is presented through December 31, 2015; however, these arrangements are ongoing.
Advisory Agreements
The Company, through directly or indirectly controlled affiliate entities, was a party to an amended and restated management agreementadvisory agreements with the Cole REITs during the year ended December 31, 2015 and with CCIT, until the date of its liquidation event. The Company earns fees related to the acquisition, development or construction of properties on behalf of the respective Cole REITs pursuant to these advisory agreements. The Company is reimbursed for acquisition expenses incurred in the process of acquiring properties up to certain limits provided in each Cole REIT’s respective advisory agreement. The Company is not reimbursed for personnel costs in connection with services for which it receives acquisition fees or real estate commissions. The Company may also earn disposition fees related to the sale of one or more properties, including those held indirectly through joint ventures, on behalf of a Managed REIT and certain joint ventures.
In addition, the Company earns advisory and asset and property management fees from the Cole REITs and certain joint ventures. The Company may be reimbursed for expenses incurred in providing advisory and asset and property management services, subject to certain limitations. The Company recorded fees and expense reimbursements as shown in the table below for services provided to the Cole REITs and certain joint ventures during the year ended December 31, 2015 (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, 2015 |
| | CCPT IV | | CCPT V | | CCIT | | CCIT II | | INAV | | Joint Ventures | | Total |
| Transaction service fees and reimbursements | | | | | | | | | | | | | |
| Acquisition fees | 12,244 |
| | 1,735 |
| | — |
| | 4,763 |
| | — |
| | — |
| | 18,742 |
|
Disposition fees (1) | — |
| | — |
| | 4,350 |
| | — |
| | — |
| | 624 |
| | 4,974 |
|
| Reimbursement revenues | 989 |
| | 432 |
| | 15 |
| | 319 |
| | 410 |
| | — |
| | 2,165 |
|
| Total transaction service fees and reimbursements | 13,233 |
| | 2,167 |
| | 4,365 |
| | 5,082 |
| | 410 |
| | 624 |
| | 25,881 |
|
| | | | | | | | | | | | | | |
| Management fees and reimbursements | | | | | | | | | | | | | |
| Asset and property management fees and leasing fees | — |
| | — |
| | — |
| | — |
| | — |
| | 452 |
| | 452 |
|
| Advisory and performance fee revenue | 32,140 |
| | 3,336 |
| | 1,557 |
| | 5,379 |
| | 2,536 |
| | — |
| | 44,948 |
|
| Reimbursement revenues | 8,682 |
| | 2,326 |
| | 325 |
| | 2,510 |
| | — |
| | — |
| | 13,843 |
|
| Total management fees and reimbursements | 40,822 |
| | 5,662 |
| | 1,882 |
| | 7,889 |
| | 2,536 |
| | 452 |
| | 59,243 |
|
| Total transaction service and management fees and reimbursements | $ | 54,055 |
| | $ | 7,829 |
| | $ | 6,247 |
| | $ | 12,971 |
| | $ | 2,946 |
| | $ | 1,076 |
| | $ | 85,124 |
|
| |
| (1) | The Company earned a disposition fee of $4.4 million on behalf of CCIT when it merged with Select Income REIT on January 29, 2015 and a $0.6 million disposition fee in connection with the sale of one property owned by a consolidated joint venture. |
Dealer Manager wherebyAgreements
Cole Capital Corporation, an indirectly-controlled affiliate of the Manager manages our day-to-day operations.Company, generally receives a selling commission of up to 7.0% of gross offering proceeds related to the sale of shares of CCIT II and CCPT V common stock in their primary offerings, before reallowance of commissions earned by participating broker dealers. The Company reallowed 100% of selling commissions earned to participating broker dealers. In return, weaddition, the Company generally receives 2.0% of gross offering proceeds in the primary offerings, before reallowance to participating broker dealers, as a dealer manager fee in connection with the sale of CCIT II and CCPT V shares of common stock. The Company, in its sole discretion, may reallow all or a portion of its dealer manager fee to such participating broker dealers as a marketing and due diligence expense reimbursement, based on factors such as the volume of shares sold by such participating broker dealers and the amount of marketing support provided by such participating broker dealers. No selling commissions or dealer manager fees are paid to the Company or other broker dealers with respect to shares sold under the respective Managed REIT’s distribution reinvestment plan, under which the stockholders may elect to have agreed to paydistributions reinvested in additional shares.
In connection with the Managersale of INAV shares of common stock, the Company receives an annual base managementasset-based dealer manager fee that is payable in arrears on a monthly basis and accrues daily in an amount equal to (i) 1/365th of 0.55% of the net asset value (“NAV”) for Wrap Class shares of common stock (“W Shares”) for such day, (ii) 1/365th of 0.55% of the NAV for Advisor Class shares of common stock (“A Shares”) for such day and (iii) 1/365th of 0.25% of the NAV for Institutional Class shares of common stock (“I Shares”) for such day. The Company, in its sole discretion, may reallow a portion of its dealer manager fee received on W Shares, A Shares and I Shares to participating broker dealers. In addition, the Company receives a selling commission on A Shares sold in the primary offering of up to 3.75% of the offering price per share for A Shares. The Company reallowed 100% of selling commissions earned to participating broker dealers. The Company also receives an asset-based distribution fee for A Shares that is payable in arrears on a monthly basis and accrues daily in an amount equal to 1/365th of 0.50% of the average unadjusted book valueNAV for A Shares for such day. The Company, in its sole discretion, may reallow a portion of our real estate assetsthe distribution fee to participating broker dealers. No selling commissions are paid to the Company or other broker dealers with respect to W Shares or I Shares or on shares of any class of INAV common stock sold pursuant to INAV’s distribution reinvestment plan, under which the stockholders may elect to have distributions reinvested in additional shares, and no distribution fees are paid to the Company or other broker dealers with respect to W Shares or I Shares.
All other organization and offering expenses associated with the sale of the Cole REITs’ common stock are paid for in advance by the Company and subject to reimbursement by the Cole REITs, up to $3.0 billioncertain limits in accordance with their respective advisory agreements and 0.40%charters. As these costs are incurred, they are recorded as reimbursement revenue, up to the respective limit, and are included in offering-related revenues in the financial results for Cole Capital. Expenses paid on behalf of the average unadjusted book valueCole REITs in excess of our real assets greater than $3.0 billion, in each case calculatedthese limits that are expected to be collected based on future estimated offering proceeds are recorded as program development costs. As of December 31, 2015, the Company had organization and payable monthly in advance,offering costs of $12.9 million, which were net of reserves of $34.8 million.
The table below reflects the gross offering-related fees and reimbursereimbursements from the Manager for all out of pocket costs actually incurred by the Manager related to us.Our Manager uses the proceeds from its management fee in part to pay compensation to its officers and personnel who, notwithstanding that certain of them also are our officers, receive no cash compensation directly from us. The management fee is payable independent of the performance of our portfolio. Asset management fees of $1.0 million were incurredCole REITs for the year ended December 31, 2012; however, the Manager elected to waive (not defer) such asset management fees, and the Manager will determine if a portion or all of such fees will be waived in subsequent periods on a quarter-to-quarter basis.
We also will pay the Manager an incentive fee with respect to each calendar quarter (or part thereof that the management agreement is in effect) in arrears. The incentive fee will be an amount, not less than zero, equal to the difference between (1) the product of (x) 20% and (y) the difference between (i) our Core Earnings (as defined below) for the previous 12-month period, and (ii) the product of (A) the weighted average of the issue price per share of our Common Stock of all of our public offerings of Common Stock multiplied by the number of all shares of Common Stock outstanding (including any restricted shares of Common Stock and any other shares of Common Stock underlying awards granted under our equity incentive plans) in the previous 12-month period, and (B) 8% and (2) the sum of any incentive fee paid to the Manager with respect to the first three calendar quarters of such previous 12-month period; provided, however, that no incentive fee is payable with respect to any calendar quarter unless Core Earnings for the 12 most recently completed calendar quarters is greater than zero. No incentive fees were paid to the Manager in 2012.
Core Earnings is a non-generally accepted accounting principles (“GAAP”) measure and is defined as GAAP net income (loss) excluding non-cash equity compensation expense, the incentive fee, acquisition fees, financing fees, depreciation and amortization, any unrealized gains, losses or other non-cash items recorded in net income for the period, regardless of whether such items are included in other comprehensive income or loss, or in net income. The amount will be adjusted to exclude one-time events pursuant to changes in GAAP and certain other non-cash charges after discussions between the Manager and our independent directors and after approval by a majority of our independent directors.
Nicholas S. Schorsch, our chief executive officer and chairman of our Board of Directors, is the chief executive officer of the Manager. Edward M. Weil, Jr., our president and secretary, is the president, chief operating officer and secretary of the Manager. Peter M. Budko, our executive vice president and chief investment officer is the executive vice president and chief investment officer of the Manager. Brian S. Block, our executive vice president and chief financial officer, is the executive vice president and chief financial officer of the Manager.
The Manager is directly wholly owned by ARC. All the equity interests in ARC are owned by current officers and/or directors of the Company as follows: Nicholas S. Schorsch, our chairman and chief executive officer, and William M. Kahane, a director own a controlling interest in ARC, and each of Peter M. Budko, our chief investment officer, Brian S. Block, our chief financial officer and Edward M. Weil, Jr., our president, treasurer, secretary and officer are equity holders of ARC.
2015 (in thousands). |
| | | | | | | | | | | | | | | |
| | Year Ended December 31, 2015 |
| | CCPT V | | CCIT II | | INAV | | Total |
| Offering-related fees and reimbursements | | | | | | | |
Selling commissions (1) | $ | 3,263 |
| | $ | 10,538 |
| | $ | 300 |
| | $ | 14,101 |
|
Dealer manager and distribution fee revenue (2) | 1,025 |
| | 3,252 |
| | 854 |
| | 5,131 |
|
| Reimbursement revenue | 1,192 |
| | 3,519 |
| | 467 |
| | 5,178 |
|
| Total offering-related fees and reimbursements | $ | 5,480 |
| | $ | 17,309 |
| | $ | 1,621 |
| | $ | 24,410 |
|
| |
| (1) | The Company reallows 100% of selling commissions earned to participating broker-dealers. |
| |
| (2) | During the year ended December 31, 2015, the Company reallowed $2.0 million of dealer manager fees to participating broker dealers as a marketing and due diligence expense reimbursement. |
Due from Affiliates
TABLE OF CONTENTS
Multi-Year Performance Plan
We have entered into a 2013 Advisor Multi-Year Outperformance Agreement (the “OPP”) with our Operating Partnership and the Manager. Under the OPP, the Manager was granted 8,241,101 of target long term incentive plan units (“LTIP Units”) of the Operating Partnership which will be earned or forfeited based on the level of achievement of the performance metrics under the OPP. The performance period under the OPP commenced on December 11, 2012 and will end on December 31, 2015, with interim measurement periods ending on December 31, 2013 and 2014. Any LTIP Units earned under the OPP will vest .333 on eachAs of December 31, 2015, 2016 and 2017 and within 30 days following each vesting date, the Manager will$60.6 million was expected to be entitled to convert an LTIP Unit into an OP Unit. In addition, the final OPP provides for accelerated earning and vesting of LTIP Units if the Manager is terminated or if we experience a change in control. The Manager will be entitled to receive a tax gross-up in the event that any amounts paid to itcollected from affiliates, including $50.0 million outstanding under the OPP constitute “parachute payments” as defined in Section 280GCole REITs’ lines of the Code.
The Manager is directly wholly owned by ARC. For the ownership interests of the Company’s officers and directors in ARC, see “— Management Agreement” above.
Acquisition and Capital Services Agreement
The Company was party to an acquisition and capital services agreement with ARC, which terminated on February 28, 2013. Pursuant to this agreement, the Manager was provided with access to, among other things, ARC’s portfolio management, asset valuation, risk management and asset management services,credit, as well as administration$10.6 million for services addressing legal, compliance, investor relationsprovided by the Company and information technologies necessaryexpenses subject to reimbursement by the Cole REITs in accordance with their respective advisory and property management agreements.
As of December 31, 2015, the Company had revolving line of credit agreements in place that provide for
maximum borrowings of $60.0 million to each of CCIT II and CCPT V. The lines of credit bear interest at variable rates of one-month LIBOR plus 2.20%. The line of credit with CCPT V matures in March 2016. Subsequent to December 31, 2015, the
performanceCompany extended the maturity date of the
Manager’s dutiesCCIT II line of credit to June 30, 2016 and reduced the maximum borrowing to $30.0 million. As of December 31, 2015, there was $50.0 million in
exchange fortotal outstanding on the lines of credit. Additionally, the Company
paying ARChad a revolving line of credit agreement with INAV that matured in December 2015. There was no balance outstanding on INAV’s line of credit at the
following fees and expense reimbursements:an acquisition fee equal to 1.0%time of the contract purchase price (including assumed indebtedness) of each property we acquire which is originated by ARC;
a financing fee equal to 0.75% of the amount available under any secured mortgage financing or refinancing that we obtain and use for the acquisition of properties that is arranged by ARC;
reimbursement for all out of pocket costs actually incurred by ARC related to us. Those reimbursements were made in cash on a monthly basis following the end of each month.
Total acquisition and financing fees incurred formaturity. During the year ended December 31, 2012 were $2.4 million and $0.8 million, respectively. Through December 31, 2012, we incurred from ARC $0.12015, the Company recorded $1.3 million of other expense reimbursements.
The Manager is directly wholly owned by ARC. For the ownership interests of the Company’s officers and directors in ARC, see “— Management Agreement” above.
Tax Protection Agreement
We are party to a tax protection agreement with ARC Real Estate Partners, LLC (the “Contributor”), an affiliate of ARC, which contributed its 100% indirect ownership interests in 63 of our properties to our Operating Partnership in the formation transactionsinterest income related to our IPO. Pursuant to the tax protection agreement, we have agreed to indemnify the Contributor for its tax liabilities (plus an additional amount equal to the taxes incurred as a resultthese lines of such indemnity payment) attributable to its built-in gain, as of the closing of the formation transactions, with respect to its interests in the contributed properties (other than two vacant properties contributed), if we sell, convey, transfer or otherwise dispose of all or any portion of these interests in a taxable transaction on or prior to September 6, 2021. The sole and exclusive rights and remedies of the Contributor under the tax protection agreement will be a claim against our Operating Partnership for the Contributor’s tax liabilities as calculated in the tax protection agreement, and the Contributor shall not be entitled to pursue a claim for specific performance or bring a claim against any person that acquires a protected party from our Operating Partnership in violation of the tax protection agreement. For the ownership interests of the Company’s officers and directors in ARC, see “— Management Agreement” above.
credit.
TABLE OF CONTENTS
Indemnification
ARC had provided customary guarantees of certain exceptions to the non-recourse provisions typically included in mortgage loans, such as fraud, misrepresentation of a material fact, misappropriation, material waste of the property, failure to deliver insurance or condemnation proceeds or awards or any security deposit to the lender, gross negligence, willful misconduct or criminal acts negatively impacting the property, filing for bankruptcy, and violation of any transfer covenants. We assumed these guarantees or otherwise became liable for them as of the closing of, and in connection with, the formation transactions in connection with the IPO. In connection with the assumption of a loan related to our property leased by us to Home Depot, we have agreed to indemnify ARC and our principals from any liability (contingent or otherwise) in respect of the $13.9 million mortgage, as of December 31, 2012, secured by our property leased to Home Depot. Our indemnification in respect of these non-recourse carve-out guarantees is effective as of the closing of the formation transactions and does not apply to actions prior to the closing of the formation transactions.
Administrative Support Agreement
The Company, at no cost to itself, had entered into an administrative support agreement with ARC, which expired in accordance with its terms on September 6, 2012. Under this agreement, ARC had agreed to pay or reimburse us for our general and administrative expenses, including, without limitation, legal fees, audit fees, board of director fees, insurance, marketing and investor relation fees, until September 6, 2012, which was one year after the closing of our IPO, to the extent the amount of our adjusted funds from operations (“AFFO”) was less than the amount of distributions declared by us in respect of our OP Units during such one year period. The amounts paid by ARC pursuant to this agreement are not subject to reimbursement by us. $164,000 in fees were incurred under the Administrative Support Agreement in 2012. For the ownership interests of the Company’s officers and directors in ARC, see “— Management Agreement” above.
Acquisition of ARCT III
On February 28, 2013, the Company acquired ARCT III pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated as of December 14, 2012, by and among ARCP, ARCT III, Tiger Acquisition, LLC, a Delaware limited liability company and wholly owned subsidiary of ARCP, the ARCT III operating partnership and our Operating Partnership. In addition, pursuant to the Merger Agreement, the ARCT III operating partnership completed its merger with and into our Operating Partnership, with our Operating Partnership being the surviving entity (the “Partnership Merger”).
In connection with the consummation of the ARCT III Merger and the Partnership Merger, ARC and certain entities directly or indirectly owned by ARC at the time received the following amounts from the Company or its subsidiary:
| | | | |
| Recipient | | Description | | Amount |
| American Realty Capital Advisors III, LLC | | | Sale of certain furniture, fixtures, equipment and other assets and reimbursement of certain costs, pursuant to an Asset Purchase and Sale Agreement | | | $ | 5,800,000 | |
| ARC Advisory Services, LLC | | | Provision of legal support services prior to the date of the ARCT III Merger Agreement pursuant to a Legal Services Reimbursement Agreement | | | $ | 500,000 | |
| Realty Capital Securities, LLC and ARC Advisory Services, LLC | | | Retention as non-exclusive financial advisor and information agent, respectively, to the Company in connection with the ARCT III Merger, pursuant to a Letter Agreement | | | $ | 640,000 | |
| ARC Advisory Services, LLC | | | Provision of certain transition services in connection with the ARCT III Merger Agreement, pursuant to a Transition Services Agreement | | | $ | 2,000,000 | |
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In addition, on February 28, 2013, our Operating Partnership entered into a Contribution and Exchange Agreement (the “Contribution and Exchange Agreement”) with the ARCT III operating partnership and American Realty Capital Trust III Special Limited Partner, LLC (the “Special Limited Partner”), the holder of the special limited partner interest (the “SLP Interest”) in the ARCT III operating partnership. The SLP Interest entitles the Special Limited Partner to receive certain distributions from the ARCT III operating partnership, including a subordinated distribution of net sales proceeds resulting from an “investment liquidity event” (as defined in the agreement of limited partnership of the ARCT III operating partnership). The ARCT III Merger constitutes an “investment liquidity event,” as a result of which the Special Limited Partner, in connection with management’s successful attainment of a 6% performance hurdle and the return to ARCT III’s stockholders of $557.3 million in addition to their initial investment, was entitled to receive a subordinated distribution of net sales proceeds from the ARCT III operating partnership in an amount equal to approximately $98.4 million (the “Subordinated Distribution Amount”). Pursuant to the Contribution and Exchange Agreement, the Special Limited Partner contributed its SLP Interest (with a value equal to the Subordinated Distribution Amount), together with $750,000 in cash, to the ARCT III operating partnership in exchange for an amount of common units of equity ownership of the ARCT III operating partnership equivalent to 7,318,356 common units of equity ownership of our Operating Partnership, which were automatically converted into such OP Units upon consummation of the Partnership Merger. ARC directly or indirectly wholly owns the Special Limited Partner. For the ownership interests of the Company’s officers and directors in ARC, see “— Management Agreement” above.
Certain Conflict Resolution Procedures
Transactions with ARC. In order to avoid any actual or perceived conflicts of interest between the Manager, ARC, any of their affiliates or any investment vehicle sponsored or managed by ARC or any of its affiliates, which we refer to as the ARC parties, and us, the approval of a majority of our independent directors will be required to approve (i) any purchase of our assets by any of the affiliated parties, and (ii) any purchase by us of any assets of any of the affiliated parties.
Limitations on Personal Investments. Our
In 2011, our Board of Directors
has adopted a policy
with respect to anythat permitted proposed investments by our directors or officers,
or the officers of the Manager, which we referreferred to as the
covered“covered persons,
” in our target properties. This policy
provides that anypermitted a proposed investment by a covered person for his or her own account in any of our target properties
will be permitted if the capital required for the investment does not exceed the lesser of (i) $5 million or (ii) 1% of our total stockholders’ equity as of the most recent month end
or the personal(the “personal investment
limit.limit”). To the extent that a proposed investment exceeds the personal investment limit, our Board of Directors will only permit the covered person to make the investment (i) upon the approval of the disinterested directors, or (ii) if the proposed investment otherwise complies with the terms of any other related party transaction policy our Board of Directors may adopt in the future.
Lease Transactions. In This policy was in effect throughout 2015 although no such investments were made by any of our directors or officers. On March 9, 2016, our Board of Directors passed a resolution eliminating this policy, thereby not permitting such investments in the event we are competing with another property controlled by ARC, or controlled by a present or future REIT or fund managed by ARC, for a lease from the same tenant, the management agreement requires our Manager to advise our independent directors of this potential conflict. After being advised of this potential conflict, our independent directors will determine if the potential lease is in our best interests and, if so, our independent directors (and not our Manager) will take responsibility for negotiating the lease with the potential tenant.
future.
Operating Partnership.
We have adopted policies that are designed to eliminate or minimize certain potential conflicts of interest, and the limited partners of ourthe Operating Partnership have agreed that in the event of a conflict between the duties owed by our directors to the Company and the Company’s duties, in its capacity as the general partner of ourthe Operating Partnership, to such limited partners, we are under no obligation to give priority to the interests of such limited partners.
Real Estate Allocation Policy with the Cole REITs
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PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED ACCOUNTING FIRM
The audit committeeCole Capital currently manages four Cole REITs which have investment objectives and investment strategies similar to our own. As a result, we may be seeking to acquire properties and real estate-related investments at the same time as the Cole REITs. In addition, certain of our officers are also officers of the Board of Directors has selectedCole REITs and, appointed Grant Thornton as our independent registered public accounting firm to audit our consolidated financial statements for 2013. Grant Thornton has audited our consolidated financial statements since March 21, 2011. Although ratification by stockholders is not required by law or by our bylaws, the audit committee believes that submission of its selection to stockholders is a matter of good corporate governance. Even if the appointment is ratified, the audit committee, in its discretion, may select a different independent registered public accounting firm at any time if the audit committee believes that such, a change would be in the best interests the Company and its stockholders. If our stockholders do not ratify the appointment of Grant Thornton, the audit committee will take that fact into consideration, together with such other factors it deems relevant, in determining its next selection of independent auditors.
A representative of Grant Thornton will attend the Annual Meeting andthey will have an opportunityduties to make a statement if he or she desires to do so and will be available to respond to appropriate questions.
The proxy holder named on the enclosed proxy card intends to vote “FOR” the ratification of the appointment of the independent auditor. If you do not wish your shares to be voted for such ratification, please vote “AGAINST” or “ABSTAIN” on the appropriate question on the proxy card or, if you are authorizing a proxy to vote your shares by telephone or the Internet, follow the instructions provided when you authorize a proxy. The appointment of the independent auditor will be ratified if a majority of votes cast at the Annual Meeting vote “FOR” such ratification, provided that a quorum is present. Any shares not voted (whether by abstention, broker non-vote, or otherwise) have no impact on the vote.
Fees
Aggregate fees for professional services rendered by Grant Thornton for the years ended December 31, 2012 and 2011 were as follows:
Audit Fees
Audit fees billed were $296,082 and $411,310 for the fiscal years ended December 31, 2012 and 2011, respectively. The fees were for professional services rendered for audits of the Company’s annual consolidated financial statements and for reviews of the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.
Audit Related Fees
There were no audit related fees billed for the fiscal years ended December 31, 2012 and 2011.
Tax Fees
There were no tax fees billed for the fiscal years ended December 31, 2012 and 2011.
All Other Fees
There were no other fees billed for the fiscal years ended December 31, 2012 or December 31, 2011.
The aggregate fees billed by the independent auditor for the fiscal years ended December 31, 2012 and 2011 were $296,082 and $411,310, respectively.
Pre-Approval Policies and Procedures
In considering the nature of the services provided by the independent auditor, the audit committee determined that such services are compatible with the provision of independent audit services. The audit committee discussed these services with the independent auditor and the Company’s management to determine that they are permitted under the rules and regulations concerning auditor independence promulgated by the SEC to implement the related requirements of the Sarbanes-Oxley Act of 2002, as amended,us as well as to the American InstituteCole REITs. We have implemented certain procedures to help manage any perceived or actual conflicts among us and the Cole REITs, including a process to allocate property acquisitions among us and the Cole REITs based on the following factors:
the investment objective of Certified Public Accountants (“AICPA”). All services rendered by Grant Thornton were pre-approved by each entity;
the
audit committee.THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDER VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF GRANT THORNTON AS THE COMPANY’S INDEPENDENT AUDITOR.
anticipated operating cash flows of each entity and the cash requirements of each entity;
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AUDIT COMMITTEE REPORT
The Audit Committeethe effect of the Boardpotential acquisition both on diversification of Directorseach entity’s investments by type of property, geographic area and tenant concentration;
the amount of funds available to each entity and the length of time such funds have been available for investment;
the policy of each entity relating to leverage of properties;
the income tax effects of the purchase to each entity; and
the size of the investment.
If we determine that an investment opportunity may be equally appropriate for more than one entity, then the entity that has furnishedhad the following report on its activities during the fiscal year ended December 31, 2012. The report is not deemedlongest period of time elapse since it was allocated an investment opportunity of a similar size and type (e.g., office, industrial, multi-tenant or single tenant retail) will first be offered such investment opportunity. If, in our judgment, a subsequent development causes an investment opportunity to be “soliciting material”more appropriate for an entity other than the entity to which the investment was initially allocated, we may determine that we will make such investment.
In addition, we have a right of first refusal over CCIT II and CCPT V with respect to all opportunities to acquire majority single-tenant real estate and real estate related assets or
“filed”portfolios with
the SEC or subjecta purchase price greater than $100.0 million. There can be no assurance that these policies will be adequate to
the SEC’s proxy rules or to the liabilities of Section 18address all of the
Exchange Act, and the report shall not be deemedconflicts that may arise or will address such conflicts in a manner that is favorable to
be incorporated by reference into any prior or subsequent filing under the Securities Act of 1933, as amended, or the Exchange Act except to the extent that the Company specifically incorporates it by reference into any such filing.To the Directors of American Realty Capital Properties, Inc.:
We have reviewed and discussed with management American Realty Capital Properties, Inc.’s audited financial statements as of and for the year ended December 31, 2012.
We have discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61, Communication with Audit Committees, as amended (AICPA, Professional Standards, Vol. 1 AU Section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.
We have received and reviewed the written disclosures and the letter from the independent auditors required by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, as amended, by the Independence Standards Board, and have discussed with the auditors the auditors’ independence.
Based on the reviews and discussions referred to above, we recommend to the Board of Directors that the financial statements referred to above be included in American Realty Capital Properties, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012.
Audit Committee
Leslie D. Michelson (Chairman)
Edward G. Rendell
Scott J. Bowman
Walter P. Lomax, Jr.
us.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the executive officers and directors of the Company, and persons who own more than 10% of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than 10% beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely on our review of the copies of such reports furnished to us and written representations that no other reports were required during the fiscal year ended December 31, 2012, all Section 16(a) filing requirements applicable to our executive officers, directors and greater than 10% beneficial owners were timely satisfied, except for Form 4’s filed on March 18, 2013 for each of Nicholas S. Schorsch, Peter M, Budko, Edward M. Weil, Jr., Brian S. Block and ARC.
CODE OF ETHICS
The Board of Directors has adopted an amended and restated code of business conduct and ethics effective as of July 30, 2012 (the “Code of Ethics”) that applies to our officers and directors and to the Manager’s officers, and any personnel of ARC or its affiliates, when such individuals are acting for or on the Company’s behalf. Among other matters, our code of business conduct and ethics is designed to deter wrongdoing and to promote:
honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
full, fair, accurate, timely and understandable disclosure in our SEC reports and other public communications;
compliance with applicable governmental laws, rules and regulations;
prompt internal reporting of violations of the code to appropriate persons identified in the code; and
accountability for adherence to the code.
The Code of Ethics is available on the Company’s website athttp://www.arcpreit.com under “Investor Relations — Governance Documents” by clicking on “Code of Ethics.” You may also obtain a copy of the Code of Ethics by writing to our secretary at: American Realty Capital Properties, Inc., 405 Park Avenue, 15th Floor, New York, New York 10022, Attention: Edward M. Weil. A waiver of the Code of Ethics for our executive officers or directors may be made only by the Board of Directors or the appropriate committee of the Board of Directors and will be promptly disclosed to the extent required by law or NASDAQ regulations.
COMPENSATION COMMITTEE REPORT
The Board of Directors has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Board of Directors recommended that the Compensation Discussion and Analysis be included in this Proxy Statement.
Leslie D. Michelson
Edward G. Rendell
Scott J. Bowman
Walter P. Lomax, Jr.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company established a compensation committee on July 6, 2011. The current members of the compensation committee are Leslie D. Michelson, Edward G. Rendell, Scott J. Bowman and Walter P. Lomax, Jr. None of these persons has at any time served as an officer or employee of the Company. None of these persons had any relationships with the Company requiring disclosure under applicable rules and regulations of the SEC.
Our Board of Directors does not intend to present for consideration at the Annual Meeting any matter other than those specifically set forth in the Notice of Annual Meeting of Stockholders. If any other matter is properly presented for consideration at the meeting, the persons named in the proxy will vote thereon pursuant to the discretionary authority conferred by the proxy.
ATTENDANCE AT THE 2016 ANNUAL MEETING
All stockholders of record of shares of the Company’s common stock at the close of business on the record date, or their designated proxies, are authorized to attend the Annual Meeting. If you are not a stockholder of record but hold shares through a broker, bank or similar organization, you should provide proof of beneficial ownership as of the record date, such as an account statement reflecting your stock ownership as of the record date, a copy of the voting instruction card provided by your broker, bank or other record holder, or other similar evidence of ownership. If you do not have proof of ownership, you may not be admitted to the Annual Meeting. Each stockholder and proxy may be asked to present a valid government-issued photo identification, such as a driver’s license or passport, before being admitted. Cameras, recording devices and other electronic devices will not be permitted, and attendees may be subject to security inspections and other security precautions.
STOCKHOLDER PROPOSALS FOR THE
20142017 ANNUAL MEETING
Stockholder Proposals in the Proxy Statement
Rule 14a-8 under the Exchange Act addresses when a company must include a stockholder’s proposal in its proxy statement and identify the proposal in its form of proxy when
the companyit holds an annual or special meeting of stockholders. Under Rule 14a-8, in order for a stockholder proposal to be considered for inclusion in the proxy statement and proxy card relating to our
20142017 annual stockholders’ meeting, the proposal must be received at our principal executive offices no later than 5:00 p.m., Eastern Time, on
December 31, 2013. Anythe date which is 120 days prior to the anniversary of the date of this proxy statement (or November 23, 2016). We will not be required to include in our proxy statement and proxy card any stockholder proposal
that does not
receivedmeet all the requirements for such inclusion established by the
applicable time in the previous sentence will be considered untimely.SEC’s proxy rules and Maryland corporate law.
Stockholder Proposals and Nominations for Directors to
Bebe Presented at
Meetingsthe 2017 Annual Meeting
For any proposal that is not submitted for inclusion in our proxy material for the 20142017 annual stockholders’ meeting but is instead sought to be presented directly at that meeting, Rule 14a-4(c) under the Exchange Act permits our management to exercise discretionary voting authority under proxies it solicits unless we receive timely notice of the proposal in accordance with the procedures set forth in our bylaws. Under our bylaws, forBylaws permit such a stockholder proposal to be properly submitted for presentation at our 2014 annual meeting of stockholders,if (1) our secretary must receivereceives written notice of the proposal at our principal executive offices during the period beginning atnot earlier than 5:00 p.m., Eastern Time, on December 1, 2013 and ending atOctober 24, 2016 nor later than 5:00 p.m., Eastern Time, on December 31, 2013November 23, 2016 and must contain information specified in our bylaws, including: | 1. | as to each individual whom the stockholder proposes to nominate for election or reelection as a director (each, a “Proposed Nominee”), all information relating to the Proposed Nominee that would be required to be disclosed in connection with the solicitation of proxies for the election of the Proposed Nominee as a director in an election contest (even if an election contest is not involved), or would otherwise be required in connection with such solicitation, in each case pursuant to Regulation 14A (or any successor provision) of the Exchange Act; |
| 2. | as to any other business that the stockholder proposes to bring before the meeting: |
a description(2) it meets the requirements of the businessBylaws and the SEC for submittal. In the event that the date of the 2017 annual stockholders’ meeting is advanced or delayed by more than 30 days from the first anniversary of the date of this year’s Annual Meeting, notice by the stockholder to be brought beforetimely must be delivered not earlier than 5:00 p.m., Eastern time, on the meeting;
the proposing stockholder’s reasons for proposing such business at the meeting;
any material interest in such business that the proposing stockholder (and certain persons, which we refer to as “Stockholder Associated Persons” (as defined below), if any) may have, individually or in the aggregate, including any anticipated benefit150th day prior to the proposing stockholder (and the Stockholder Associated Persons, if any); and
| 3. | as to the stockholder giving the notice, any Proposed Nominee and any Stockholder Associated Person |
the class, series and number of all shares of stock or other securitiesdate of the Company or any affiliate thereof (collectively, “Company Securities”)meeting and not later than 5:00 p.m., if any, which are owned (beneficially orEastern Time, on the later of record) by such stockholder, Proposed Nominee or Stockholder Associated Persons,the 120th day prior to the date of the meeting, as originally convened, or the 10th day following the day on which each such Company Security was acquired and the investment intent of such acquisition, and any short interest (including any opportunity to profit or share in any benefit from any decrease in the price of such stock or other security) in any Company Securities of any such person; and
the nominee holder for, and number of, any Company Securities owned beneficially but not of record by the proposing stockholder, Proposed Nominee or Stockholder Associated Person; and
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whether and the extent to which such stockholder, Proposed Nominee or Stockholder Associated Person, directly or indirectly (through brokers, nominees or otherwise), is subject to or during the last six months has engaged in any hedging, derivative or other transaction or series of transactions or entered into any other agreement, arrangement or understanding (including any short interest, any borrowing or lending of securities or any proxy or voting agreement), the effect or intent of which is to (x) manage risk or benefit of changes in the price of (I) Company Securities, or (II) any security of any entity that was listed in the “Peer Group” in the stock performance graph in the most recent annual report to security holderspublic announcement of the Company (a “Peer Group Company”) for such stockholder, Proposed Nominee or Stockholder Associated Person, or (y) increase or decrease the voting power of such stockholder, Proposed Nominee or Stockholder Associated Person in the Corporation or any affiliate thereof (or, as applicable, in any Peer Group Company) disproportionately to such person’s economic interest in the Company Securities (or, as applicable, in any Peer Group Company); and
any substantial interest, direct or indirect (including, without limitation, any existing or prospective commercial, business or contractual relationship with the Company), by security holdings or otherwise, of such stockholder, Proposed Nominee or Stockholder Associated Person, in the Corporation or any affiliate thereof, other than an interest arising from the ownership of Company Securities where such stockholder, Proposed Nominee or Stockholder Associated Person receives no extra or special benefit not shared on a pro rata basis by all other holdersdate of the same class or series.
| 4. | as to the stockholder giving the notice, any Stockholder Associated Person with an interest or ownership referred to in clauses (2) or (3) above, and any Proposed Nominee: |
the name and address of the proposing stockholder, as they appear on the Company’s stock ledger, and current name and business address, if different, of each such Stockholder Associated Person and any Proposed Nominee; andmeeting is first made.
the investment strategy or objective, if any, of such stockholder and each such Stockholder Associated Person who is not an individual and a copy of the prospectus, offering memorandum or similar document, if any, provided to investors or potential investors in such stockholder and each such Stockholder Associated Person; and
| 5. | the name and address of any person who contacted or was contacted by the proposing stockholder or any Stockholder Associated Person about the Proposed Nominee or other business proposed prior to the date of the proposing stockholder’s notice; and |
| 6. | to the extent known by the stockholder giving the notice, the name and address of any other stockholder supporting the Proposed Nominee for election or reelection as a director or the proposal of other business on the date of the proposing stockholder’s notice. |
A “Stockholder Associated Person” means (i) any person acting in concert with the proposing stockholder, (ii) any beneficial owner of shares of stock of the Company owned by the proposing stockholder (other than a stockholder that is a depositary), and (iii) any person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common by, or is control with such Stockholder Associated Person.
All nominations must also comply with the Charter.our charter. All proposals should be sent via registered, certified or express mail to our secretary at our principal executive offices at: American Realty Capital Properties,VEREIT, Inc., 405 Park Avenue, 15th Floor, New York, NY 10022,2325 E. Camelback Road, Suite 1100, Phoenix, Arizona 85016, Attention: Edward M. Weil (telephone: (212) 415-6500)Lauren Goldberg (Telephone: (877) 405-2653).
| | |
| | By Order of the Board of Directors, |
| | /s/ Edward M. Weil, Jr.
Edward M. Weil, Jr.
President, TreasurerBy Order of the Board of Directors, Lauren Goldberg Executive Vice President, General Counsel and Secretary |
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