PROPOSAL NO. 1 -— ELECTION OF DIRECTORS
At the Annual Meeting, you and the other stockholders will vote on the election of all six members of our boardBoard of directors. With the exception of John E. Carter, as discussed below, personsDirectors. Persons elected will serve as directors until the 20212022 Annual Meeting of Stockholders and until their successors are duly elected and qualify. The boardBoard of directorsDirectors has nominated the following people for re-election as directors:
If you return a properly executed proxy card, or if you authorize your proxy by telephone or over the Internet, the individuals named as the proxies will vote your shares for the election of the nominees listed above. If any nominee becomes unable or unwilling to stand for re-election, the boardBoard of Directors may reduce its size, designate a substitute nominee, or fill the vacancy through a majority vote of the remaining directors (including a majority of the remaining independent directors if the vacancy relates to an independent director position). If a substitute is designated, proxies voting on the original nominee will be cast for the substituted nominee.
The holders of a majority of the shares of common stock of the Company entitled to vote who are present in person (virtually) or by proxy at a meeting of stockholders duly called at which a quorum is present, may, without the necessity for concurrence by the boardBoard of directors,Directors, vote to elect a director. This means that a nominee for the boardBoard of directorsDirectors needs to receive more votes for his or her election than withheld from or present but not voted in his or her election in order to be elected to the boardBoard of directors.Directors. Because of this requirement, “withheld” votes and broker non-votes will have the effect of a vote against each nominee for the boardBoard of directors.Directors. If an incumbent nominee for the boardBoard of directorsDirectors fails to receive the required number of votes for re-election, then under Maryland law, he or she will continue to serve as a “holdover” director until his or her successor is duly elected and qualifies.
IF MR. CARTER’S RESIGNATION FROM OUR BOARD OF DIRECTORS IS EFFECTIVE PRIOR TO THE DATE OF THE ANNUAL MEETING, ANY VOTES CAST WITH REGARD TO MR. CARTER’S ELECTION AS A DIRECTOR WILL HAVE NO EFFECT AND THEY WILL NOT BE COUNTED.
CERTAIN INFORMATION ABOUT OUR BOARD OF DIRECTORS AND MANAGEMENTEXECUTIVE OFFICERS
Board of Directors
In accordance with applicable law and our charter and bylaws, the business and affairs of the Company are managed under the direction of our boardBoard of directors.Directors.
Board Membership Criteria and Selection of Directors
The boardOur Board of directorsDirectors annually reviews the appropriate experience, skills and characteristics required of board members in the context of the then-current membership of the board.Board of Directors. This assessment includes, in the context of the perceived needs of the boardBoard of Directors at that time, issues of knowledge, experience, judgment and skills such as an understanding of the real estate industry or brokerage industryhealthcare and data center industries or accounting or financial management expertise. Other considerations include the candidate’s independence from conflicts of interest with the Company and the ability of the candidate to attend board meetings regularly and to devote an appropriate amount of effort in preparation for those meetings. It also is expected that independent directors nominated by the boardBoard of directorsDirectors shall be individuals who possess a reputation and hold positions or affiliations befitting a director of a large publicly held company and are actively engaged in their occupations or professions or are otherwise regularly involved in the business, professional or academic community. A majority of our directors must be independent, as defined in our charter. Moreover, as required by our charter, at least one of our independent directors must have at least three years of relevant real estate experience, and each director must have at least three years of relevant experience demonstrating the knowledge and experience required to successfully acquire and manage the type of assets we acquire and manage.
The boardOur Board of directorsDirectors is responsible for selecting its own nominees and recommending them for election by the stockholders. Each of our nominees was recommended by the Nominating and Corporate Governance Committee (the "NCG Committee"), of our boardBoard of directors.Directors. Pursuant to our charter, however, the independent directors must nominate replacements for any vacancies among the independent director positions. All director nominees then stand for election by the stockholders annually.
In its nomination review process, our boardBoard of directorsDirectors solicits candidate recommendations from its own members and management of the Company. We have not and do not currentlyFrom time to time, we may employ or pay a fee to anya third party to identify or evaluate, or assist in identifying or evaluating, potential director nominees, although we are not prohibited from doing so if we determine such action to be in the best interests of the Company. Our boardIn 2020, the NCG Committee engaged Ferguson Partners, an executive search firm and an affiliate of directorsFPL Associates, L.P., to assist us in the search for a new director. Ferguson Partners identified, and the Board of Directors subsequently elected as a director of the Company, Adrienne Kirby, who is nominated for re-election at the annual meeting. The fees paid to Ferguson Partners are discussed below under “Role of the Compensation Consultant.”
The NCG Committee of our Board of Directors also will consider recommendations made by stockholders for director nominees who meet the established director criteria set forth above. In order to be considered by our board of directors, recommendations madeThe NCG Committee’s process for identifying and evaluating nominees for director, including nominees recommended by stockholders, must be submitted withininvolves (with or without the time frame requiredassistance of a retained search firm) compiling names of potentially eligible candidates, vetting candidates’ qualifications, conducting background and reference checks, conducting interviews with candidates and/or others (as schedules permit), meeting to request a proposalconsider and recommend final candidates to be includedthe Board and, as appropriate, preparing and presenting to the Board an analysis with regard to particular, recommended candidates. It is the policy of the NCG Committee to consider any director candidates recommended by stockholders of the Company in the proxy materials. See “Stockholder Proposals” below for moresame manner in which it evaluates other potential nominees, so long as the information on procedures to be followedregarding director candidates recommended by our stockholders is submitted in submitting such recommendations. In evaluatingcompliance with the persons recommended as potential directors, our board of directors will consider each candidate without regard to the source of the recommendationCompany’s charter and take into account those factors that our board of directors determines are relevant.bylaws. Stockholders may directly nominate potential directors for consideration at an annual meeting (without the recommendation of our boardBoard of directors)Directors) by satisfying the procedural requirements for such nomination as provided in Article II, Section 11 of our bylaws.
In considering possible candidates for election as a director, the boardBoard of directorsDirectors is guided by the principle that each director shouldshould: (i) be an individual of high character and integrity; (ii) be accomplished in his or her respective field, with superior credentials and recognition; (iii) have relevant expertise and experience upon which to base advice and guidance to management in the conduct of our real estate investment and management activities; (iv) have sufficient time available to devote to our affairs; and (v) represent the long-term interests of our stockholders as a whole. Our boardBoard of directors may also consider an assessmentDirectors regularly assesses the composition and diversity of its diversity,members, in itsthe broadest sense, reflecting, but not limited to, age, experience, skills, geography, gender and ethnicity. While we do not have a formal diversity policy, we believe that the backgrounds and qualifications of our directors, considered as a group, should provide a significant composite mix of experience, knowledge and abilities that will allow our boardBoard of directorsDirectors to fulfill its responsibilities.
Director Nominees
Our boardBoard of directorsDirectors has nominated each of the following individuals for election as a director to serve until our 20212022 Annual Meeting of Stockholders and until their successors are duly elected and qualify. Messrs. Kuchin, Greene, Pratt and Rayevich areand Ms. Kirby qualify as independent directors.
Upon the execution of the Purchase Agreement, Mr. Carter resigned as the Chairman of our board of directors. In connection with Mr. Carter’s resignation as Chairman of our board of directors, on July 28, 2020, our board of directors designated Mr. Kuchin, a current independent director of our board of directors and the chairman of our audit committee, to serve as the Chairman of our board of directors, effective immediately.
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| | | | | | | | | | | | | |
| Name | | Age | | Positions |
| Jonathan Kuchin | | 69 | | Chairman of the Board (Independent) |
| Randall Greene | | 7172 | | Director (Independent) |
| Adrienne Kirby | | 67 | | Director (Independent) |
| Roger Pratt | | 6768 | | Director (Independent) |
| Ronald Rayevich | | 7778 | | Director (Independent) |
| Michael A. Seton | | 48 | | Chief Executive Officer, President and Director |
John E. Carter | | 60 | | Director |
Jonathan Kuchin has been an independent director since 2014, the chairman of our audit committeeSila Realty Trust, Inc. since April 2014 and chairman of our board of directors since July, 2020.2014. Mr. Kuchin a certified public accountant, has more than 29 years of experience in public accounting, focusing on public companies and their financial and tax issues, including accounting for income taxes, initial public offerings, public financings, mergers and acquisitions, executive compensation issues, (i.e., options, warrants, phantom stock, restricted stock), and implementation and compliance with the Sarbanes-Oxley Act of 2002, or SOX.2002. Mr. Kuchin served as an independent director of Carter Validus Mission Critical REIT, Inc. from March 2011 to October 2019. On June 30,From 1997 until his retirement in 2010, Mr. Kuchin retiredserved in various positions with PricewaterhouseCoopers, most recently as a tax partner, from PricewaterhouseCoopers, or PwC. At retirement, he was a real estate tax partner in the New York City office,2004 – 2010, where he focused on public and private REIT clients, and on SEC reporting aspects of public REITs, including accounting for income taxes and uncertainty of income taxes, as well as compliance with SOX. He served in that capacity from June 2006 until his retirement date. From September 2004 to June 2006, Mr. Kuchin was a tax service partner for large corporations at PwC in the New York City office, where he focused on PwC audit clients and their issues relating to accounting for income taxes, compliance with SOX, deferred tax studies, first SEC filings and conversion to GAAP. Prior to June 2006, Mr. Kuchin served as the tax partner in charge of the PwC Seattle office and focused his practice on large public companies and the issues related to SEC filings, accounting for income taxes, SOX, and all other tax issues for public companies. In addition to his client responsibilities in Seattle, he managed the tax practice of 85 tax professionals including partners specializing in international tax, state and local tax, financial service tax and private companies.Sarbanes-Oxley Act. From October 1988 to July 1997, when he was admitted to the Coopers and Lybrand partnership, Mr. Kuchin held various positions with Coopers & Lybrand.Lybrand, culminating in partnership. Mr. Kuchin obtained a Bachelor of Sciencebachelor’s in business economics from the University of California, Santa Barbara in March of 1981.1981 and is licensed as a certified public accountant. Mr. Kuchin was selected to serve as an independent director because of his significant real estate industry experience and his expansive knowledge in the public accounting and real estate industries.tax.
Randall Greene has been ouran independent director and a member of our audit committeeSila Realty Trust, Inc. since April 2014. HeMr. Greene has over 40 years of experience in real estate management, mortgage banking, construction and property development. Mr. Greene served as Vice President of Charter Mortgage Co.development and as President of its subsidiary, St. John’s Management Company, from 1975has been an executive coach for almost 20 years to 1977, where he managed more than 3,500 multifamily units and 300,000 square feet of commercial and retail space throughout Florida. He also was President and Chief Executive Officer of Coastland Corporation of Florida (formerly Nasdaq: CLFL), a community developer in Florida, from 1976 to 1986, in which he supervised the development of more than 2000 acres of residential and commercial properties, the construction of more than 500 homes and a number of commercial and retail developments. From 1986 to 1993, Mr. Greene was the President and a director of Beggins/Greene, Inc., which was the principal developer of Symphony Isles, a waterfront community in Apollo Beach,Tampa-area chief executive officers through Vistage Florida. From 1992 to 1995, Mr. Greene was a consultant for Eastbrokers, A.B., in which he consulted on the acquisition of hotels and commercial properties throughout Eastern Europe.Since 1999, Mr. Greene has served as the Director and an Audit Committee Member for Carter Multifamily Growth & Income Fund since December 2017 and an Audit Committee Member for Carter Multifamily Growth & Income Fund II since March 2020. Also, Mr. Greene currently serves as the Managing Partner and a director forof Greene Capital Partners, LLC, an investment and advisory firm, and has been in this position since 1999, as well as President and a Directordirector of ITR Capital Management, LLC, an investment management firm, positions he has held since September 2009. Mr. Greene alsohas served as a director of Carter Multifamily Growth & Income Fund since December 2017. Mr. Greene served as a director of Carter Validus Mission Critical REIT, Inc. from July 2010 to October 2019. Prior to that, Mr. Greene served as the Chief Operating Officer of the Florida Department of Environmental Protection from September 2011 through Marchto 2015. Earlier in his career, Mr. Greene also served as an independentheld various positions involving the acquisition, development and oversight of residential and commercial properties: (1) consultant with Eastbrokers, A.B. (1992 – 1995); (2) President and director of Carter Validus Mission Critical REIT,Beggins/Greene, Inc. from July 2010 to October 2019.(1986 – 1993); (3) President and Chief Executive Officer of Coastland Corporation of Florida (formerly Nasdaq: CLFL) (1976 – 1986); and Vice President of and Charter Mortgage Co. and President of its subsidiary, St. John’s Management Company (1975 –1977). Mr. Greene has also been an executive coach for more than 50 Tampa-area CEOs through Vistage Florida since November 2004, and currently coaches 20 CEOs. Mr. Greene was a member ofactive in various private organizations, including the Florida Chapter of the Young Presidents’
Organization, from 1980 to 1999 and served as Florida Chapter Chairman in 1995. He is a member of the World Presidents’ Organization, Tampa Young Presidents’ Organization Forum III, Association for Corporate Growth, Leadership Tampa, Alumni, and the Financial Planning Association. Mr. Greene is also a Certified Financial Planner. He has been honored as an Outstanding Young Man of America, as an Alumnus of the Year byAssociation, Phi Kappa Tau Fraternity, and is a member of Florida Blue Key. Mr. Greene obtained a Bachelorbachelor of Sciencescience with distinction from Eckerd College in St. Petersburg, Florida in 1986 and a Mastermaster of Business Administrationbusiness administration from The Wharton School, University of Pennsylvania in Philadelphia, Pennsylvania in 1988. Mr. Greene is a certified financial planner. Mr. Greene was selected to serve as a director due tobecause of his extensive knowledge of the real estate and mortgage banking industries and his previous serviceprior role as the president and chief executive officer of a public company community developer.
Adrienne Kirby became an independent director and member of the Audit Committee and the Nominating and Corporate Governance Committee of Sila Realty Trust, Inc. in April 2021. Since 2019, Ms. Kirby has served on the board of directors of three private companies, Trellis Rx, MedVet, and Greenway Health. Most recently, Ms. Kirby served in several capacities with Cooper University Health Care: Executive Chairman and Chief Executive Officer (2018 – 2019), President and Chief Executive Officer (2013 –2018), and Senior Vice President and Chief Operating Officer (2012 – 2013). In these roles, Ms. Kirby led the implementation of a public company thatstrategic partnership and strategic plan resulting in key growth outcomes, the transformation from a safety net hospital to a regional academic tertiary care center with a new medical school and advanced programs in cancer, cardiac, trauma and surgical care, extensive facility acquisition, development and expansion initiatives, and other pivotal partnerships, initiatives and transformations, significantly improving the company’s financial performance and achieving unprecedented volume growth. From 2010 to 2012, Ms. Kirby worked for MedStar Health, a nine hospital healthcare system with operations in Washington, D.C. and throughout Maryland, as Senior Vice President, MedStar then President, Franklin Square Medical Center. Previously, Ms. Kirby worked for VIRTUA Health, the largest health system in
southern New Jersey, performing in various roles from 1999 to 2010, culminating as Chief Operating Officer. Earlier in her career, Ms. Kirby held various positions with Christina Care, the University of Pennsylvania Medical Center, and Hahnemann University. Ms. Kirby earned a bachelor’s degree in nursing from Rutgers University and a master’s degree in nursing and a Ph.D. from the University of Pennsylvania. Ms. Kirby was a community developer. Mr. Greene’sselected to serve as an independent director because of her significant experience assists the company in managingleading and operating as a public company in the real estate industry.healthcare systems.
Roger Pratt has been ouran independent director and member of our audit committeethe Audit Committee of Sila Realty Trust, Inc. since July 2018. Mr. Pratt currently serves as Senior Advisor to the Elite International Investment Fund.Fund (2016 – present). Mr. Pratt was the Managing Director for Prudential Real Estate Investors (PREI) from 1995 until his retirement in 2014. In this capacity, he served as a senior leader at PREI, which over the course of his 32-year career with PREI became a global real estate manager with over $50 billion in gross assets under management.assets. Mr. Pratt served as aheld various roles with PREI and entities affiliated with Prudential: (1) member of PREI’sthe U.S., Latin American and Global Investment and Management Committees. Mr. Pratt directed open-end, closed-end, and single client account funds, and played a leading role in raising capital from more than 100 institutional investors including public, corporate and union funds as well as foundations and endowments. As theCommittees of PREI (1995 – 2013); (2) Co-Chief Risk & Investment Officer atof PREI from 2012 to 2014, Mr. Pratt developed a strategic plan for PREI’s global proprietary capital portfolio, initiated a global portfolio review process, revamped and standardized the firm’s investment committee cases, created a Global Investment Committee, and instituted a “scorecard” for new products and funds. As a(2012 – 2014); (3) US Senior Portfolio Manager atof PREI from 1995 to 2011, he directed open-end, closed-end and single client funds with gross assets over $13 billion during his tenure. From 1992 to 1995, he was the Portfolio Manager, and from 1995 to 2011 the Senior Portfolio Manager, of Prudential’s enhanced core equity real estate portfolio, PRISA II. On behalf of PRISA II, he served on the board of trustees of Starwood Hotels and Resorts Worldwide, Inc. from 1997 to 1999 (formerly NYSE: HOT). In 2003, Mr. Pratt developed and launched PRISA III, serving as its Senior Portfolio Manager until 2010. He also directed(1995 – 2011); (4) directing role for PREI’s US Single Client accounts from 1997 to 2011, and its(1997 – 2011); (5) directing role for PREI’s Senior Housing platform from 2003(2003 – 2010); (6) Co-founder and Senior Portfolio Manager of PRISA III (2003 – 2010); (7) Senior Portfolio Manager of PRISA II (1995 – 2011); and (8) Portfolio Manager of PREI (1992 – 1995). From 1982 to 2010.1992, Mr. Pratt began his careerserved in various capacities with the Prudential Realty Group (PRG) in 1982 as an asset manager and later served as the head of PRG’s New Jersey regional office and co-head of PRG’s national development portfolio. On behalf of PRISA II, Mr. Pratt earned a Masterserved on the board of Regional Planning in 1976 from the Universitytrustees of North CarolinaStarwood Hotels and a Master of Business Administration in 1982 as a Dean’s Scholar from the University of North Carolina. He received his B.A. as a Phi Beta Kappa graduate of the College of William and Mary in Williamsburg, Virginia in 1974. From 1976 to 1980,Resorts Worldwide, Inc. (1997 – 1999) (formerly NYSE: HOT). Previously, he served as a Community Development Planner for the State of North Carolina.Carolina (1976 – 1980). Mr. Pratt serves on the Wood Center Real Estate Studies Advisory Board at the University of North Carolina, the Foundation Board of the Mason School of Business at the College of William and Mary, the Board of Directors of the Schumann Fund for New Jersey, and the Board of Directors of The George Washington University Museum and The Textile Museum in Washington, D.C. Mr. Pratt earned a master of regional planning in 1976 from the University of North Carolina, a master of business administration in 1982 as a Dean’s Scholar from the University of North Carolina, and a bachelor of arts degree from the College of William and Mary in 1974, graduating Phi Beta Kappa. Mr. Pratt was selected to serve as an independent director because of his significant real estate and capital markets experience.
Ronald Rayevich has been ouran independent director and a member of our audit committeeSila Realty Trust, Inc. since April 2014. He has been active inmore than 55 years of residential and commercial real estate and investment management since 1965. In 1995, following an early retirement,experience. Mr. Rayevich formed Raymar Associates, Inc. in 1995, following an early retirement, and since that time has been active as acontinues to provide consulting services to commercial real estate consultant. Recent clients include Carlyle Realty, L.P., a Washington, DC based real estate investment arm of the Carlyle Group (1996 to 2011) and Advance Realty, a New Jersey based real estate investment and development company (1995 through 2012 and 2015 to 2019), where he served as a member of its Advisory Board.clients. Mr. Rayevich also served as an independent director of Carter Validus Mission Critical REIT, Inc. from July(July 2010 to– October 2019.2019). Previously, Mr. Rayevich spent most of his career withworked for Prudential Insurance Company (now Prudential Financial) (1965 to 1979– 1979) and from 1985 to the end of(1985 – 1994), last serving as President and COOChief Operating Officer of The Prudential Realty Group with responsibility for the management of the insurance company’s then $6.5 billion commercial real estate portfolio. From 1982 to 1985,Group. Previously, Mr. Rayevich wasserved as the Managing Director, Investment Banking, withof Prudential-Bache Securities (now Wells Fargo Advisors) (1982 – 1986). From 1979 to 1982, heHe served as Vice President for Investments at Columbia University with management responsibility for the university’s entire endowment.endowment (1979 –1982). Mr. Rayevich holds a Bachelor of Arts in history from The Citadel (1964) and a Master of Business Administration with a specialization in Finance from Florida State University (1971). In 1997 hepreviously served as National President (now-Chairman)and a Director Emeritus of NAIOP, the Commercial Real Estate Development Association. As a Director Emeritus of this 19,000-member commercial real estate association,In these roles, he wasfounded the founder of itsNAIOP National Forums programProgram and foundingfounded and served as the Chairman and Governor of the NAIOP Research Foundation, where heFoundation. He continues to be activeserve as the Chair of itsthe NAIOP Research Foundation’s Audit and Investment Committees. Since 1991 heMr. Rayevich has been a Full Member of the Urban Land Institute. He hasInstitute since 1991. From 2003 to 2015, he served for 12 years (2003 to 2015) as a member of The Citadel Trust, which manages a $90 million portion of The Citadel’sthe university’s endowment, and was elected its Chairman for the maximum terma six year term. Mr. Rayevich obtained a bachelor of six years.arts in history from The Citadel in 1964 and a master of business administration with a specialization in finance from Florida State University in 1971. Mr. Rayevich was selected to serve as an independent director due to his significant experience in the real estate and financial services industries and he brings valuable knowledge and insight into the real estate investment process.
Michael A. Seton has served as oura director of Sila Realty Trust, Inc. since July 2018, Chief Executive Officer since April 2018 and as our President since March 2015. Mr. Seton has more than 25 years of real estate investment and finance experience. He also previouslyhas served asin various roles with the Company and entities affiliated with the Company: (1) Chief Executive Officer of Carter Validus Mission Critical REIT, Inc. from April(April 2018 until its sale in– October 20192019) and as thePresident (March 2015 – October 2019); (2) President of Carter Carter/Validus Mission Critical REIT, Inc. from March 2015 until its sale inAdvisors, LLC (April 2012 – October 2019. Mr. Seton also served as a2019), member of the Investment Committee of Carter/Validus Advisors, LLC from(November 2010 – October 2019), Chief Executive Officer (April 2018 – October 2019), Co-Chief Executive Officer (August 2015 –April 2018), Chief Investment Officer and Executive Vice President (July 2011 – April 2012), Vice President (November 2010 – July 2011), Chief Financial Officer (March 2010 – November 2010 until its sale in October 2019. He also serves as2010); (3) Chief Executive Officer of Carter Validus Advisors II, LLC served as(April 2018 – September 2020), Co-Chief Executive Officer from August(August 2015 to– April 2018,2018), President (January 2013 – September 2020), and has served as the President and a member of the Investment Committee of Carter Validus Advisors II, LLC since January 2013. Mr. Seton co-founded(January 2013 – September 2020); (4) Co-founder and serves as the Chief Executive Officer of our sponsor, Carter Validus REIT Management Company II, LLC and served as(June 2012 – September 2020), Co-Chief Executive Officer from July(July 2015 to– April 20182018), and as President since January 2013. Mr. Seton served as the Chief Executive Officer of Carter/Validus Advisors, LLC from April 2018 until its sale in October 2019, served as the Co-Chief Executive Officer from August 2015 to April 2018, as the Chief Investment Officer from July 2011 to April 2012,(January 2013 – September 2020); (5) Co-founder and has served as the President of Carter/Validus Advisors, LLC from December 2009 until its sale in October 2019. He co-founded and served as Chief Executive Officer of Carter/Validus REIT Investment Management Company, LLC until its sale in(August 2009 – October 2019, served as2019), Co-Chief Executive Officer from July(July 2015 to– April 20182018), and served as President of Carter/Validus REIT Investment Management Company, LLC from December(December 2009 until its sale in– October 2019. Mr. Seton has served as the2019); (6) Chief Executive Officer of CV REIT
Management Company, LLC since March(March 2018 – September 2020) and served as Co-Chief Executive Officer from October(October 2015 to– April 2018. Mr. Seton previously served as2018); (7) Chief Executive Officer of CV Data Center Growth & Income Fund Manager, LLC from May(May 2018 its inception, until the sale– December 2019); and (8) member of its management business in December 2019. He also served on the Investment Committee of CV Data Center Growth & Income REIT Advisors, LLC from May(May 2018 until– December 2019. Mr. Seton has 25 years of real estate investment and finance experience. From December 1996 until June 2009, Mr. Seton worked for Eurohypo AG (including its predecessor organizations) in New York, New York. At Eurohypo AG,2019). Previously, Mr. Seton was a Managing Director and Division Head in the Originations Group leadingat Eurohypo AG (including its predecessor organizations, now part of Commerzbank AG) from December 1996 until June 2009. In this role, Mr. Seton led a team of professionals in the origination, structuring, documentation, closing and syndication of real estate financings for private developers, traded and non-traded public real estate investment trusts, and real estate operating companies. Real estate finance transactions in which Mr. Seton was involved included both on and off-balance sheet executions, including senior debt and mezzanine financings. Mr. Seton has been directly involved in over $35 billion in acquisitions and financings during his real estate career. Mr. Seton obtained a Bachelor of Science in economics from Vanderbilt University in Nashville, Tennessee in 1994.
John E. Carter has served as our director since April 2014 and the chairman of our board of directors from January 2013 through July 28, 2020. Mr. Carter served as our Chief Executive Officer from January 2013 to April 2018. Mr. Carter founded and served as the chairman of the board of directors of Carter Validus Mission Critical REIT, Inc. from December 2009 to October 2019 and Chief Executive Officer of Carter Validus Mission Critical REIT, Inc. from December 2009 to April 2018. Mr. Carter also served as our President from January 2013 to March 2015 and served as President of Carter Validus Mission Critical REIT, Inc. from December 2009 to March 2015. He also serves as Executive Chairman of Carter Validus Advisors II, LLC. He has served as Chief Executive Officer from January 2013 to July 2015 and Co-Chief Executive Officer of Carter Validus Advisors II, LLC from August 2015 to April 2018, and is a member of the Investment Committee of Carter Validus Advisors II, LLC and Chief Executive Officer of Carter Validus Real Estate Management Services II, LLC since January 2013. Mr. Carter serves as Executive Chairman of our sponsor, Carter Validus REIT Management Company II, LLC. He has served as Chief Executive Officer from January 2013 to July 2015 and as Co-Chief Executive Officer of Carter Validus REIT Management Company II, LLC, from July 2015 to April 2018. Mr. Carter founded and served as Executive Chairman of Carter/Validus Advisors, LLC until October 2019 and has served as Chief Executive Officer from December 2009 to August 2015 and Co-Chief Executive Officer from August 2015 to April 2018, a member of the Investment Management Committee of Carter/Validus Advisors, LLC and Chief Executive Officer of Carter Validus Real Estate Management Services, LLC from December 2009 to October 2019. Mr. Carter founded and served as Executive Chairman of Carter/Validus REIT Investment Management Company, LLC until October 2019 and has served as Chief Executive Officer from December 2009 to July 2015 and Co-Chief Executive Officer of Carter/Validus REIT Investment Management Company from July 2015 to April 2018. Mr. Carter served as Executive Chairman of CV REIT Management Company, LLC until October 2019 and served as Co-Chief Executive Officer from October 2015 to April 2018. Mr. Carter also served on the Board of Managers for Validus/Strategic Capital Partners, LLC (now Strategic Capital Management Holdings, LLC) from November 2010 to August 2014. Mr. Carter founded and serves as Chairman of the board of directors of Carter Multifamily Growth & Income Fund, LLC. He also serves as Executive Chairman and as a member of the investment committee of the advisor, Carter Multifamily Growth & Income Advisors, LLC, and as Executive Chairman of the sponsor, Carter Multifamily Fund Management Company, LLC. In March 2019, Mr. Carter founded and serves as Executive Chairman and member of the Investment Committee at Carter Exchange Fund Management, LLC. He also serves as Executive Chairman of CX Reagan Crossing Manager, LLC. Mr. Carter also serves as Executive Chairman of Carter Funds and Allegiant Management, which was formed in November 2019 to provide property management services to the Carter Fund Properties. Mr. Carter also serves as Chairman of the board of directors of Carter Multifamily Growth & Income Fund II, LLC. He also serves as Executive Chairman and as a member of the investment committee of the advisor of Carter Multifamily Growth & Income Fund II, LLC. Mr. Carter has more than 38 years of real estate experience in all aspects of leasing, asset management, acquisitions, finance, investment and corporate advisory services.
Mr. Carter served as Vice Chairman and a principal of Carter & Associates, L.L.C., or Carter & Associates, one of the principals of our sponsor, from January 2000 to June 2016. Mr. Carter has served in such capacities since he merged his company, Newport Partners, LLC, or Newport Partners, to Carter & Associates in January 2000. Mr. Carter founded Newport Partners in November 1989 and grew the company into a full-service real estate firm with approximately 63 associates throughout Florida. Prior to November 1989, Mr. Carter worked for two years at Trammel Crow Company. In the early 1980s, he spent five years at Citicorp where he focused primarily on tax shelter, Industrial Revenue Bonds (IRBs) and other real estate financing transactions. He also was a founding board member of GulfShore Bank (currently Seacoast Bank), a community bank located in Tampa, Florida, serving on the Board from August 2007 until the Bank was sold in April 2017. Mr. Carter is a licensed real estate broker, a member of the IPA Board and Executive Committee, a member of IPA’s PAC Board and is a member of NAREIT’s Public Non-Listed REIT Council Executive Committee. Mr. Carter obtained a Bachelor of Science in economics with a minor in mathematics from St. Lawrence University in Canton, New York in 1982 and a Master of Business Administration from Harvard University in Cambridge, Massachusetts in 1989. Mr. Carter was selected to serve as a director because he has significant real estate experience in various areas. He has expansive knowledge of the real estate industry and has relationships with chief executives and other senior management at numerous real estate companies. Mr. Carter brings a unique and valuable perspective to our board of directors.
Attendance at Board Meetings and the Annual Stockholder Meeting
The boardOur Board of directorsDirectors held 13eight meetings during the fiscal year ended December 31, 2019.2020. Each of our incumbent directors (excluding Ms. Kirby who was not a director in 2020) attended at least 85%100% of the aggregate total number of meetings of our boardBoard of directorsDirectors held during the period for which he served as a director and of the aggregate total number of meetings held by all committees of our boardBoard of directorsDirectors on which he served during the periods in which he served.
Although we do not have a formal policy regarding attendance by members of our boardBoard of directorsDirectors at our Annual Meeting, we encourage all of our directors to attend. FourAll of our directors attended the 20192020 Annual Meeting of Stockholders.Stockholders, which was held virtually.
Director Independence
As required by our charter, a majority of the members of our boardBoard of directorsDirectors must qualify as “independent directors” as affirmatively determined by the boardBoard of directors.Directors. Our boardBoard of directorsDirectors consults with our legal counsel and counsel to the independent directors, as applicable, to ensure that the determinations of our boardBoard of directors’ determinationsDirectors are consistent with our charter and applicable securities and other laws and regulations regarding the definition of “independent director.”
Consistent with these considerations, after review of all relevant transactions or relationships between each director, or any of his or her family members, and the Company, our senior management and our independent registered public accounting firm, the boardBoard of Directors has determined that Messrs. Kuchin, Greene, Pratt and Rayevich and Pratt,Ms. Kirby, who comprise a majority of our board, qualify as independent directors. A copy of our independent director definition, which is contained in our charter and complies with the requirements of the North American Securities Administrators Association’s Statement of Policy Regarding Real Estate Investment Trusts, or the NASAA REIT Guidelines, was attached as an appendix to the proxy statement forcan be located on our 2018 Annual Meetingwebsite at www.silarealtytrust.com by clicking on "Investors," "About Us," and then on "Board of Stockholders, which was filed with the SEC on April 27, 2018.Directors." Although our shares are not listed for trading on any national securities exchange, our independent directors also meet the current independence and qualifications requirements of the New York Stock Exchange.
Committees of our Board of Directors
Audit Committee
The board of directors maintains one standing committee, the audit committee, to assist in fulfilling its responsibilities. The audit committeeAudit Committee is composed of Messrs. Kuchin, Greene Pratt and Rayevich and Ms. Kirby, all four of whom are independent directors. The audit committeeAudit Committee reports regularly to the full board and annually evaluates its performance. The audit committeeAudit Committee meets periodically during the year, usually in conjunction with regular meetings of the board.Board of Directors. The audit committee,Audit Committee, by approval of at least a majority of the members, selects the independent registered public accounting firm to audit our annual financial statements, reviews with the independent registered public accounting firm the plans and results of the audit engagement, approves the audit and non-audit services provided by the independent registered public accounting firm, reviews the independence of the independent registered public accounting firm, considers the range of audit and non-audit fees and reviews the adequacy of our internal accounting controls. Our boardBoard of directorsDirectors has adopted a charter for the audit committeeAudit Committee that sets forth its specific functions and responsibilities. The audit committeeAudit Committee charter can be located on our website at www.cvmissioncriticalreit2.comwww.silarealtytrust.com by clicking on "Investors," "About Us," "Governance Documents," and then on "Audit Committee Charter."
Although our shares are not listed for trading on any national securities exchange, all four members of the audit committeeAudit Committee meet the current independence and qualifications requirements of the New York Stock Exchange, as well as our
charter and applicable rules and regulations of the SEC. While all four members of the audit committeeAudit Committee have significant financial and/or accounting experience, the boardBoard of directorsDirectors has determined that Mr. Kuchin satisfies the SEC’s requirements for an “audit committee“Audit Committee financial expert” and has designated Mr. Kuchin as our audit committeeAudit Committee financial expert. The audit committeeAudit Committee met five times during 2019.2020.
Special Committee
ForAs discussed in more detail in our Current Reports on Forms 8-K filed with the fiscal year ended December 31, 2019,SEC on September 30, 2020 (the “Closing”), we closed on a transaction that provides for the internalization of the external management functions previously performed for us by our boardformer advisor and its affiliates (the “Internalization Transaction”). In connection with the Internalization Transaction, our Board of directors believed that it was appropriate forDirectors formed a Special Committee comprised of Messrs. Kuchin, Greene, Pratt and Rayevich to, among other things, review, evaluate, negotiate and approve the Internalization Transaction. Mr. Kuchin served as the chairperson of the Special Committee. The members of our board not to have a standing compensation committee based uponSpecial Committee met 36 times during 2020. Following the fact that our executive officers, including our principal financial officer, and non-independent directors did not receive compensation directly from us for services rendered to us during the fiscal year ended December 31, 2019. Upon the closingClosing of the Internalization Transaction, we expect to establishthis Special Committee was disbanded.
Compensation Committee
Effective upon the Closing of the Internalization Transaction, the Board of Directors approved and adopted a charter for the establishment of our Compensation Committee. The Compensation Committee has overall responsibility for approving and evaluating all compensation committee withplans, policies, and our programs as they affect the primary functions of setting compensation programs that apply generally to our employees; reviewing compensation with respect to directors; reviewing and making recommendations to our board of directors regarding the compensation structure for all current named executive officers, and other key employees, including salaries, cash incentive awards and participation in equity incentive plans; and reviewing the Company’s goals and objectives relevant to named executive officers'compensation, reviewing and approving base salaries, incentive compensation and evaluating their performance.
Nominatingsupplemental or special benefits, reviewing and approving employment agreements, making recommendations to the Board of Directors - Functionsregarding incentive compensation plans and equity-based plans, administering the Company’s incentive compensation plans and equity-based plans, reviewing disclosures in this proxy statement and compliance with SEC rules and regulations, monitoring and evaluating the Company’s exposure to risk in connection with compensation to NEOs, and performing any other functions deemed appropriate.
We believeWithout limiting the generality of this overall responsibility, the responsibilities of the Compensation Committee include: (a) reviewing and approving (or making recommendations to the Board of Directors regarding approval of) the Company’s corporate goals and objectives relevant to the compensation of the chief executive officer and evaluating the chief executive officer’s performance in light of such goals and objectives; (b) reviewing and approving (or making recommendations to the Board of Directors regarding approval of) base salary, incentive compensation and supplemental or special benefits, with respect to the executive officers other than the chief executive officer; (c) reviewing and approving (or making recommendations to the Board of Directors regarding approval of) executive officers’ employment agreements, severance agreements, and change of control agreements/provisions; (d) with respect to executive officers other than the chief executive officer, reviewing and recommending to the Board of Directors compensation, incentive compensation plans and equity based-plans; (e) administering the Company’s incentive compensation plans and equity-based plans as in effect and as adopted from time to time by the Board of Directors; (f) reviewing and approving new equity compensation plans or any material changes to an existing plan where stockholder approval has not been obtained; (g) reviewing and approving any stock option award or any other type of award as may be required for complying with any tax, securities, or other regulatory requirement; (h) ensuring appropriate overall corporate performance measures and goals are set and determining the extent that established goals have been achieved and any related compensation earned; (i) reviewing and discussing with the Company’s management the compensation-related disclosures required to be included in the Company’s annual proxy statement or annual report on Form 10-K to be filed with the SEC, and producing related reports on executive compensation to the extent required; (j) to the extent applicable, overseeing the Company’s policies regarding tax deductibility of executive compensation, provided that the Compensation Committee retains the flexibility to pay compensation that is not eligible for deduction under Section 162(m) as it deems appropriate; (k) overseeing the Company’s compliance with applicable SEC rules and regulations regarding stockholder approval of certain executive compensation matters, including advisory votes on executive compensation and the frequency of such votes; (l) monitoring and evaluating the Company’s exposure to risk in connection with executive and director compensation; and (m) performing such other functions and having such other powers consistent with the Company’s charter and bylaws and governing law as the Compensation Committee or the Board of Directors may deem appropriate.
Mr. Seton, our boardchief executive officer, may participate in general meetings of directors is qualifiedthe Compensation Committee; however, he does not participate in any discussions determining his own compensation. Mr. Seton may, upon request from the Compensation Committee, provide the Compensation Committee with data pertinent to performhis and the functions typically delegatedother executive officers’ performance, particularly in regards to the individual objectives of each executive.
From time to time, the Compensation Committee may employ or pay a fee to a nominating committee,third party to assist the Compensation Committee in applying the Company’s compensation philosophy toward designing a compensation program for executive officers, analyzing current compensation conditions among the Company’s peers and thatassessing the formationcompetitiveness and appropriateness of a separate committee is not necessary at this time. Therefore, allcompensation levels for executive officers, recommending compensation programs it deems advisable, and making specific recommendations to the Compensation Committee. In 2020, the Compensation Committee engaged FPL Associates, L.P., or FPL. For further discussion regarding the scope of services provided by, and fees paid to, FPL, see below under “Role of the Compensation Consultant.”
The members of our boardCompensation Committee are Messrs. Greene, Pratt and Rayevich, all three of directors developwhom are independent directors. The Compensation Committee met three times during 2020. The Compensation Committee charter can
be located on our website at www.silarealtytrust.com by clicking on "About Us", then on “Governance Documents,” and then on “Compensation Committee Charter.”
Nominating and Corporate Governance Committee
Effective upon the Closing of the Internalization Transaction, the Board of Directors approved the establishment of our NCG Committee. The NCG Committee develops the criteria necessary for prospective members of our boardBoard of directorsDirectors and participateparticipates in the consideration of director nominees. The primary functions of the members of our board of directorsNCG Committee relating to the consideration of director nominees are to conduct searches and interviews for prospective director candidates, if necessary, review background information for all candidates for the boardBoard of directors,Directors, including those recommended by stockholders, and formally propose the slate of director nominees for election by the stockholders at the Annual Meeting.
Uponannual meeting. It is the closingpolicy of the Internalization Transaction, we expectNCG Committee to establish a nominatingconsider any director candidates recommended by stockholders of the Company in the same manner in which it evaluates other potential nominees, so long as the information regarding director candidates recommended by stockholders is submitted to the committee in compliance with the Company’s charter and corporate governance committee that will identify individuals qualified to become directorsbylaws. See under “Certain Information About Our Board of Directors and provide recommendations as to directorExecutive Officers – Board of Directors – Board Membership Criteria and Selection of Directors” for additional discussion regarding the NCG Committee’s processes for identifying and evaluating nominees for director. The NCG Committee charter can be located on our website at www.silarealtytrust.com by clicking on "About Us", then on “Governance Documents,” and appointments to our board of directors, review the composition, organization, functionthen on “Nominating and performanceCorporate Governance Committee Charter.”
The members of our board of directors and its committees and exercise general oversight over our corporate governance policy matters.
SpecialNCG Committee
In addition, in connection with the proposed Internalization Transaction, our board of directors formed a special committee comprised of are Messrs. Kuchin, Greene, Pratt and Rayevich to, among other things, review, evaluate, negotiateSeton and approve the Internalization Transaction. Mr. Kuchin serves as the chairpersonMs. Kirby, three of the special committee.whom are independent directors. The NCG Committee met two times during 2020.
Communication with Directors
We have established procedures for stockholders or other interested parties to communicate directly with our boardBoard of directors.Directors. Such parties can contact the boardBoard of directorsDirectors by mail at: Chairman of Board of Carter Validus Mission Critical REIT II,Sila Realty Trust, Inc. c/o Corporate Secretary, 4890 W. Kennedy Blvd., Suite 650 Tampa, Florida 33609.
The chairman of our boardBoard of directorsDirectors will receive all communications made by these means, and will distribute such communications to such member or members of our boardBoard of directorsDirectors as he deems appropriate, depending on the facts and circumstances outlined in the communication received. For example, if any questions regarding accounting, internal controls and auditing matters are received, they will be forwarded to members of the audit committeeAudit Committee for review.
Board Leadership Structure
The boardOur Board of directorsDirectors believes that independent oversight of management is an important component of an effective boardBoard of directors.Directors. Our boardBoard of directorsDirectors currently operates under a leadership structure with separate roles for our chairman of the boardBoard of directorsDirectors and our Chief Executive Officer. Our Board of Directors believes it is important to select the chairman of our boardBoard of directorsDirectors and our Chief Executive Officer in the manner it considers to be in our best interests and in the best interests of our stockholders at any given point in time. The members of our boardBoard of directorsDirectors possess considerable business experience and in-depth knowledge of the issues we face, and we believe are therefore in the best position to evaluate our needs and how best to organize our leadership structure to meet those needs. The Chairman and the Chief Executive Officer positions may be filled by one individual or by two different individuals.
Our boardBoard of directorsDirectors currently operates under a leadership structure with separate roles for our chairman of the boardBoard of directorsDirectors and our Chief Executive Officer. Mr. Kuchin, an independent director of our boardBoard of directors,Directors, was elected by our boardBoard of directorsDirectors as chairman of the boardBoard of directorsDirectors effective July 28, 2020. As chairman of our boardBoard of directors,Directors, Mr. Kuchin will presidepresides over meetings of our boardBoard of directors,Directors, and Mr. Seton, as our Chief Executive Officer, is responsible for
the general management of our business, financial affairs, day-to-day operations and presides over the annual meeting of stockholders.
The boardOur Board of directorsDirectors also believes, for the reasons set forth below, that our existing corporate governance practices achieve independent oversight and management accountability, which is the goal that many companies seek to achieve by separating the roles of chairman of the board of directors and chief executive officer. Our governance practices provide for strong independent leadership, independent discussion among directors and for independent evaluation of, and communication with, our executive officers and officers and key personnel of our advisor.officers. Some of the relevant processes and other corporate governance practices include:
•A majority of our directors, including the chairman of our boardBoard of directors,Directors, are independent directors. Each director is an equal participant in decisions made by the full boardBoard of directors. In addition, all matters that relate to our sponsor, our advisor or any of their affiliates must be approved by a majority of the independent directors.Directors. The audit committee is comprisedAudit Committee and Compensation Committee are composed entirely of independent directors.
•Each of our directors is elected annually by our stockholders.
Our advisor has a one-year contract, with an annual review by, and renewal subject to the approval, of our board of directors, including a majority
The Role of the independent directors. The fees paid to our advisor must be deemed reasonable, as determined by our independent directors, on an annual basis. On July 28, 2020, we entered into the Purchase Agreement, which is intended to provide for the internalizationBoard of our external management functions, including the services provided to us and our operating partnership by our advisor. The Internalization Transaction is currently expected to close on September 30, 2020, subject to the satisfaction or waiver of certain conditions in the Purchase Agreement.
The Board’s RoleDirectors in Risk Oversight
The boardOur Board of directorsDirectors oversees our stockholders’ interest in the long-term health and the overall success of the Company and its financial strength.
The boardOur Board of directorsDirectors is actively involved in overseeing risk management for the Company. It does so, in part, through its oversight of our property acquisitions and assumptions of debt, as well as its oversight of the Company’s executive officers and our advisor. In particular, the board of directors may determine at any time to terminate our advisor, and must evaluate the performance of our advisor, and re-authorize the advisory agreement, on an annual basis.officers.
In addition, the audit committeeour Audit Committee is responsible for assisting the boardour Board of directorsDirectors in overseeing the Company’s management of risks related to financial reporting. The audit committeeOur Audit Committee has general responsibility for overseeing the accounting and financial processes of the Company, including oversight of the integrity of the Company’s financial statements, the Company’s compliance with legal and regulatory requirements and the adequacy of the Company’s internal control over financial reporting. The audit committeeOur Audit Committee reviews any potential material issues that are raised related to the Company’s financial statements or accounting policies. Additionally, in connection with the annual audit of the Company’s financial statements, the audit committeeour Audit Committee conducts a detailed review with the Company’s independent auditors of the accounting policies used by the Company and its financial statement presentation.
Code of Business Conduct and Ethics
Our boardBoard of directorsDirectors has adopted a Code of Business Conduct and Ethics that is applicable to all members of our boardBoard of directors,Directors, our officers and employees, and the employees of our advisor.employees. The policy may be located on our website at www.cvmissioncriticalreit2.comwww.silarealtytrust.com by clicking on “Investors,” “About Us,” “Governance Documents,” and then on “Code of Conduct.Conduct and Ethics.” If, in the future, we amend, modify or waive a provision in the Code of Business Conduct and Ethics, we may, rather than filing a Current Report on Form 8-K, satisfy the disclosure requirement by posting such information on our website as necessary.
Compensation of Directors
Directors who are also officers or employees of our advisor or their affiliates (Messrs. Seton and Carter) do not receive any special or additional remuneration for service on the board of directors or any of its committees. From January 1, 2019 through November 7, 2019, each non-employee director received compensation for service on the board of directors and any of its committees as provided below:
an annual retainer of $40,000;
an additional annual retainer of $10,000 to the chairman of the audit committee;
$2,000 for each quarterly in-person board meeting;
$2,000 for each committee meeting attended in person ($2,500 for attendance by the chairperson of the audit committee at each meeting of the audit committee);
$5,000 per month for each of the special committee board members beginning December 1, 2019, and ending on the earlier of (i) the consummation of a transaction and (ii) dissolution of the special committee;
$500 per board or committee meeting attended by telephone conference; and
in the event that there is a meeting of the board of directors and one or more committees on a single day, the fees paid to each director will be limited to $2,500 per day ($3,000 per day for the chairman of the audit committee, if there is a meeting of that committee).
All directors received reimbursement of reasonable out-of-pocket expenses incurred in connection with attendance at meetings of the board of directors.
In connection with the proposed Internalization Transaction, our board of directors formed a special committee comprised of Messrs. Kuchin, Green, Pratt and Rayevich to, among other things, review, evaluate, negotiate and approve the Internalization Transaction. Mr. Kuchin serves as the chairperson of the special committee. Each member of the special committee is paid a monthly fee of $5,000, starting December 1, 2019, and ending on the earlier of (i) the consummation of the Internalization Transaction and (ii) dissolution of the special committee, for service on the special committee and shall be reimbursed for all out-of-pocket expenses in connection with the performance of his duties.
Further, as of December 31, 2019, we had authorized and reserved 300,000 shares of our Class A common stock for issuance under the Carter Validus Mission Critical REIT II, Inc. 2014 Restricted Share Plan, or the Incentive Plan, and we granted 3,000 shares of Class A common stock to each of our independent directors at the time we satisfied the minimum offering requirement in our offering in connection with each director's initial election or appointment to the board of directors. The Incentive Plan provided for annual grants of 3,000 shares of Class A common stock to each of our independent directors in connection with such independent director’s subsequent re-election to our board of directors, provided, such independent director is an independent director of our company during such annual period. Restricted stock issued to our independent directors will vest over a four-year period following the first anniversary of the date of grant in increments of 25% per annum. Please see below under "Amended and Restated Incentive Plan" for information on the A&R Incentive Plan, as defined below, and "Independent Director Compensation" for the cash compensation that the independent directors are entitled to receive commencing on November 7, 2019.
Amended and Restated Incentive Plan
On March 6, 2020, our boardBoard of directorsDirectors approved the Amended and Restated 2014 Restricted Share Plan, or the A&R Incentive Plan, pursuant to which we have the authority and power to grant awards of restricted shares of our Class A common stock to our directors, officers and employees, (if we ever have employees), employees of our former advisor and its affiliates, employees of entities that provide services to us, directors of our former advisor or of entities that provide services to us, certain of our consultants and certain consultants to our former advisor and its affiliates or to entities that provide services to us. Our boardBoard of directorsDirectors has authorized a total of 5,000,000 shares of Class A common stock for issuance under the A&R Incentive Plan on a fully diluted basis at any time.
On March 6, 2020, our boardOur Board of directorsDirectors has determined to revise the amounts of restricted Class A common stock theour independent directors are entitled to receive each year as provided below.
On March 10, 2020, we granted each independent director 2,415 shares of restricted Class A common stock, with a per share price of $8.65, and beginning July 1, 2020 and each July 1 thereafter,, we will grantgranted each independent director $60,000 in restricted shares of Class A common stock at the most recently determined estimated net asset value per share. Restricted stock issued to our independent directors will vest in equal installments over a three-year period following the first anniversary of the date of grant in increments of 33.34% per annum.grant.
In connection with the pending Internalization Transaction, in consultation with FPL Associates L.P., or FPL, a compensation consultant engaged in connection with the Internalization Transaction, our special committee determinedSpecial Committee recommended that our Board of Directors approve, and the Board of Directors approved, an annual grant to recommend to our board of directors, the following amounts of restricted Class A common stock the independent directors are entitled to receive each year as follows, which are expected to be approved by our board of directors and effective as of the closing of the Internalization Transaction:
We will annually grant each independent director of $70,000 in restricted shares of Class A common stock at the most recently determined estimated net asset value per share. Restricted stock issued to our independent directors will vest over a one-year period. On October 1, 2020, the Company granted each independent director $7,500in restricted shares of Class A common stock, which will vest over a one-year period. The fair value of each share of restricted common stock was estimated at the date of grant at $8.65 per share.
Additionally, on October 1, 2020, in connection with the Internalization Transaction, Mr. Seton and Ms. Neely received a grant of 231,214 and 115,607 time-based restricted shares of Class A common stock, respectively, at a grant date fair value of $2,000,000 and $1,000,000, respectively, which, subject to the Executive’s continuous employment through the applicable vesting dates, with certain exceptions, will vest on December 31, 2024, or, if earlier, on the 15th month anniversary of the date of a “qualified event” (such as a listing of the Company’s stock on a nationally recognized stock exchange or an underwritten public offering of the Company’s stock). The awards were granted under and subject to the terms of the A&R Incentive Plan and an award agreement.
Further, on October 1, 2020, in connection with the Internalization Transaction, the Company granted one-time awards of approximately 206,936 restricted shares of Class A common stock to certain employees at the date of grant fair value per share of $8.65. The granted shares will vest on December 31, 2024, or, if earlier, on the 15th month anniversary of the date of a
“qualified event” defined above. The awards were granted under and subject to the terms of the A&R Incentive Plan and an award agreement.
Director Compensation
Our director compensation policy, which became effective at the Closing of the Internalization Transaction and is described further below, applies to all directors who are not employees of the Company. Mr. Seton, as an employee of the Company, does not receive any compensation for his service on the Board of Directors. All other directors receive cash compensation and equity compensation which is in the form of restricted shares of Class A common stock of the Company. The Company does not have a minimum stock ownership requirement for directors.
Revised Independent Director Cash Compensation
On March 6, 2020, our boardBoard of directorsDirectors approved the following annual compensation amounts for our independent directors, effective as of November 7, 2019: (i) a cash retainer of $90,000 per year (the chairperson of the audit committee will receiveAudit Committee receives an additional $15,000 per year) plus (ii) $2,500 for each regularly scheduled quarterly audit committeeAudit Committee and boardBoard of directorsDirectors meeting the director attends in person.
On March 19, 2020, due to the current coronavirus (COVID-19) pandemic, our boardBoard of directorsDirectors revised the meeting fees to be paid to each independent director to include regularly scheduled quarterly meetings that are required to be held telephonically. Therefore, each independent director will receive $2,500 for each regularly scheduled quarterly audit committeeAudit Committee and boardBoard of directorsDirectors meeting the director attends (whether the meeting is in person or telephonic).
In connection with the pending Internalization Transaction, in consultation with FPL, our special committee determined to recommendSpecial Committee recommended to our boardBoard of directorsDirectors that it approve the following annual compensation amounts for our independent directors, effective as of the closingClosing of the Internalization Transaction, which are expected to bewere approved by our boardBoard of directors andDirectors effective as of the closingClosing of the Internalization Transaction:
•Each of our independent directors will receivereceives an annual base retainer of $90,000;
•The chairman of the audit committee will receiveAudit Committee receives an additional annual cash amount of $15,000;
•The chairman of our boardBoard of directors will receiveDirectors receives an additional annual cash amount of $50,000;
•The chairman of the compensation committee, which is not yet formed, will receiveCompensation Committee receives an additional annual cash amount of $10,000; and
•The chairman of the nominatingNominating and corporate governance committee, which is not yet formed, will receiveCorporate Governance Committee receives an additional annual cash amount of $10,000.
Further, we expect thatEffective as of the Closing of the Internalization Transaction, our boardBoard of directors will approveDirectors approved the following meeting fees, to be effective as of the closing of the Internalization Transaction:fees:
•Each of the members of the audit committee will receiveAudit Committee receives $2,500 for each regularly scheduled audit committeeAudit Committee meeting (whether in-person or telephonic);
•Each of the members of the nominatingNominating and corporate governance committee, which is not yet formed, will receiveCorporate Governance Committee receives $1,500 for each regularly scheduled meeting (whether in person or telephonic); and
•Each of the members of the compensation committee, which is not yet formed, will receiveCompensation Committee receives $1,500 for each regularly scheduled meeting (whether in person or telephonic).
Director ResignationEquity Awards
On April 24, 2020, Robert M. Winslow resigned fromEach of our boardindependent directors receives an annual grant of directors, effective immediately. Mr. Winslow’s resignation was not a result$70,000 in restricted shares of any disagreement with our board of directors on any matter relating to our operations, policies or practices. As a result of Mr. Winslow’s resignation, our board of directors reduced its size so that it now has six members, four of whom are independent directors.
On July 28, 2020, Mr. Carter agreed,Class A common stock at the most recently determined estimated net asset value per share, issued as awards pursuant to the Purchase AgreementCompany’s A&R Incentive Plan. The restricted stock issued to our independent directors vest over a one-year period.
Reimbursements and as a closing condition therein, to resign as a director ofOther Fees
We reimburse our board of directors effectivefor reasonable out-of-pocket expenses incurred in connection with attendance at and upon the closingmeetings of the Internalization Transaction, which is currently expected to be September 30, 2020, subject to satisfaction or waiverBoard of certain conditionsDirectors and its committees in the Purchase Agreement. Our board of directors currently intends to reduce its size from six to five members immediately upon the effectiveness of Mr. Carter’s resignation.accordance with our expense reimbursement policies.
In addition, on July 28, 2020, pursuant to the Purchase Agreement, Mr. Carter resigned as the Chairman of our board of directors, effective immediately. On July 28, 2020, our board of directors designated Mr. Kuchin as Chairman of our board of directors, effective immediately.
Director Compensation Table
The following table sets forth certain information with respect to our director compensation during the year ended December 31, 2019:2020: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Fees Earned or Paid in Cash | | Stock Awards | | Option Awards | | Non-Equity Incentive Plan Compensation | | Change in Pension Value and Nonqualified Deferred Compensations Earnings | | All Other Compensation | | Total |
Jonathan Kuchin (1) | | $ | 82,222 |
| | $ | 27,750 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 20,648 |
| (3) | $ | 130,620 |
|
Randall Greene (1) | | $ | 70,028 |
| | $ | 27,750 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 13,181 |
| (4) | $ | 110,959 |
|
Roger Pratt (1) | | $ | 100,028 |
| | $ | 27,750 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 5,155 |
| (5) | $ | 132,933 |
|
Ronald Rayevich (1) | | $ | 100,028 |
| | $ | 27,750 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 11,923 |
| (6) | $ | 139,701 |
|
| Michael A. Seton | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| John E. Carter | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Robert M. Winslow (2) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Fees
Earned
or Paid in
Cash | | Stock
Awards | | Option
Awards | | Non-Equity
Incentive Plan
Compensation | | Change in
Pension Value
and
Nonqualified
Deferred
Compensations
Earnings | | All Other
Compensation | | Total |
Jonathan Kuchin (1) | | $ | 136,244 | | | $ | 88,390 | | | $ | — | | | $ | — | | | $ | — | | | $ | 23,691 | | (2) | $ | 248,325 | |
Randall Greene (1) | | $ | 112,744 | | | $ | 88,390 | | | $ | — | | | $ | — | | | $ | — | | | $ | 21,374 | | (3) | $ | 222,508 | |
Roger Pratt (1) | | $ | 97,769 | | | $ | 88,390 | | | $ | — | | | $ | — | | | $ | — | | | $ | 6,893 | | (4) | $ | 193,052 | |
Ronald Rayevich (1) | | $ | 110,244 | | | $ | 88,390 | | | $ | — | | | $ | — | | | $ | — | | | $ | 18,263 | | (5) | $ | 216,897 | |
Michael A. Seton (6) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
John E. Carter (7) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| |
(1) | On September 25, 2019, the independent director was awarded 3,000 restricted shares of Class A common stock in connection with his re-election to the board of directors. The grant date fair value of the stock was $9.25 per share for an aggregate amount of $27,750.(1)On March 10, 2020, July 1, 2020 and October 1, 2020, the independent director was awarded 2,415, 6,936 and 867 restricted shares of Class A common stock, respectively, in connection with his re-election to the Board of Directors. The grant date fair value of the stock was $8.65 per share for an aggregate amount of $88,390. As of December 31, 2019, all of the 3,000 shares of Class A common stock remain unvested. |
| |
(2) | Robert M. Winslow resigned from the board of directors effective April 24, 2020. Mr. Winslow's resignation was not a result of any disagreement with the board of directors or us relating to our operations, policies or practices. Mr. Winslow was not an independent director. |
| |
(3) | Of this amount, $13,689 reflects the dollar value of distributions paid in connection with the stock awards granted to our independent directors and $6,959 represents reimbursement of travel and other expenses incurred by directors to attend various director meetings. |
| |
(4) | Of this amount, $13,181 reflects the dollar value of distributions paid in connection with the stock awards granted to our independent directors.
|
| |
(5) | Of this amount, $2,430 reflects the dollar value of distributions paid in connection with the stock awards granted to our independent directors and $2,725 represents reimbursement of travel and other expenses incurred by directors to attend various director meetings. |
| |
(6) | Of this amount, $11,239 reflects the dollar value of distributions paid in connection with the stock awards granted to our independent directors and $684 represents reimbursement of travel and other expenses incurred by directors to attend various director meetings. |
Compensation Committee Interlocks and Insider Participation
As noted above, for the fiscal year ended December 31, 2019, we did not have a standing2020, all of the 10,218 shares of Class A common stock remain unvested.
(2)Of this amount, $21,902 reflects the dollar value of distributions paid in connection with the stock awards granted to our independent director and $1,789 represents reimbursement of travel expenses incurred by directors to attend various director meetings.
(3)Of this amount, $21,374 reflects the dollar value of distributions paid in connection with the stock awards granted to our independent director.
(4)Of this amount, $6,128 reflects the dollar value of distributions paid in connection with the stock awards granted to our independent director and $765 represents reimbursement of travel expenses incurred by directors to attend various director meetings.
(5)Of this amount, $18,133 reflects the dollar value of distributions paid in connection with the stock awards granted to our independent director and $130 represents reimbursement of travel expenses incurred by directors to attend various director meetings.
(6)For compensation committeeinformation regarding Michael A. Seton, see "Compensation and did not separately compensate our executive officers. Therefore, none of our executive officers participatedOther Information Concerning Executive Officers - Summary Compensation Table".
(7)On July 28, 2020, in any deliberations regarding executive compensation. There are no interlocks or insider participation as to compensation decisions required to be disclosed pursuant to SEC regulations.
Duringconnection with the fiscal year ended December 31, 2019, Robert M. Winslow,Internalization Transaction, John E. Carter Michael A. Seton and Kay C. Neely also servedresigned as officers, directors and/or key personnelthe chairman of our advisor, our property manager, and/or other affiliated entities. As such, they did not receive any separate compensation from us for services as our directors and/or executive officers. For information regarding transactions with such related parties, see the section entitled “Transactions with Related Persons, Promoters and Certain Control Persons.”
Delinquent Section 16(a) Reports
Section 16(a)Board of Directors, effective immediately. On September 30, 2020, pursuant to a closing condition of the Exchange Act requires each director, officer and individual beneficially owning more than 10% ofInternalization Transaction, John E. Carter resigned as a registered security of the Company to file with the SEC, within specified time frames, initial statements of beneficial ownership (Form 3) and statements of changes in beneficial ownership (Forms 4 and 5) of common stock of the Company. Based solely on a review of the copies of such forms furnished to us during and with respect to the fiscal year ended December 31, 2019, or written representations that no additional forms were required, to the bestmember of our knowledge, allBoard of the filings by the Company’s directors and executive officers were made on a timely basis, except that a Form 4 was inadvertently filed late by Ms. Neely and each of Messrs. Seton, Kuchin, Carter, Greene, Rayevich and Winslow.Directors.
Executive Officers of the Company
The following individuals currently serve as our executive officers:
| | | | | | | | | | | | | | |
| Name | | Age | | Positions |
| Michael A. Seton | | 48 | | Chief Executive Officer and President |
| Kay C. Neely | | 45 | | Chief Financial Officer and Treasurer and Secretary |
| Jon C. Sajeski | | 39 | | Chief Investment Officer, Healthcare |
| Jason C. Reed | | 51 | | Chief Investment Officer, Data Centers |
| Jamie A. Yoakum | | 49 | | Chief Accounting Officer |
For biographical information regarding Michael A. Seton, see “Certain Information About Management-Board of Directors-Director Nominees”.
Kay C. Neely has served as Chief Financial Officer and Treasurer of Carter Validus Mission Critical REIT II,Sila Realty Trust, Inc. and Carter Validus Advisors II, LLC since September 2018, as Secretary of Carter Validus Mission Critical REIT II,Sila Realty Trust, Inc. and Carter Validus Advisors II, LLC since June 2019, and as a member of the InvestmentManagement Committee of Sila Realty Trust, Inc. since September 2020. Ms. Neely has approximately 20 years of real estate accounting and operations experience. Since 2016, she has served in various roles with the Company and entities affiliated with the Company: (1) Chief Financial Officer and Treasurer of Carter Validus Advisors II, LLC since April 2020. Ms. Neely has also served as Chief Financial Officer, Treasurer(September 2018 – September 2020) and Secretary of Carter Validus Mission Critical REIT, Inc. and Chief Financial Officer and Secretary of Carter/Validus Advisors, LLC from June(June 2019 until its sale in October 2019. Ms. Neely has also served as the– September 2020); (2) Chief Financial Officer, Treasurer and Secretary of Carter Validus REIT Management Company II, LLC since June(June 2019 and Carter/Validus REIT Investment Management Company, LLC from June 2019 until its sale in October 2019. In addition, Ms. Neely has served as the– September 2020); (3) Executive Vice President of Finance and Accounting of CV Data Center Growth & Income REIT Advisors, LLC from November(November 2018 to– December 2019, and has served as2019); (4) President of CV Data Center Growth & Income Fund Manager, LLC and(June 2019 – December 2019); (5) Chief Executive Officer of CV Data Center Real Estate Management Services, LLC from(June 2019 – December 2019); (6) Senior Vice President of Accounting of Carter/Validus Advisors, LLC (January 2016 – June 2019); (7) Chief Financial Officer, Treasurer and Secretary of Carter Validus Mission Critical REIT, Inc. (June 2019 to December 2019. Ms. Neely served as the– October 2019); (8) Chief Financial Officer and Secretary of Carter/Validus Advisors, LLC (June 2019 – October 2019); (9) Chief Financial Officer, Treasurer and Secretary of Carter/Validus REIT Investment Management Company, LLC (June 2019 – October 2019); and (10) Senior Vice President of Accounting of Carter Validus Advisors II, LLC from January(January 2016 through– September 2018, and as the Senior Vice President of Accounting of Carter/Validus Advisors, LLC from January 2016 through June 2019, where she was responsible for the oversight of the accounting and financial reporting functions, as well as managing all accounting department personnel.2018). Ms. Neely brings approximately 19 years of real estate accounting and operations experience. Ms. Neely began her career withserved in various capacities at KPMG LLP in 1999(1999 – 2016), most recently as a staff accountant in the audit practice and became a manager in June 2003, serving in such capacity until June 2005. From June 2005 to January 2008, Ms. Neely was an audit senior manager with KPMG LLP, where she planned, organized, staffed and administered audit engagements for public and private entities primarily in the real estate sector, including real estate investment trusts and investment funds. From March 2010 to January 2016, Ms. Neely was Associate Director of Audit Resource Management, at KPMG LLP, where she managed the daily operations and financial planning for audit practices in 10 offices located in the Southeast and Puerto Rico, which consisted of over 400 audit partners, managers and staff. Earlier Ms. Neely held various positions, including in her capacity as an audit senior manager, handling the planning, organization, staffing and administration of audit engagements for public and private entities primarily in the real estate sector, including real estate investment trusts and investment funds. Ms. Neely graduated in the top 10% of her class at Emory University, Goizueta Business School in Atlanta, Georgia in 1998 with a Bachelorbachelor of Science in business administration with concentrations in accounting and finance. She holdsfinance and is a current Certified Public Accountant license in the state of Georgia.
Key Personnel of our Advisor
Our advisor is Carter Validus Advisors II, LLC. Our officers and one other director also are officers, key personnel and/or members of our advisor. Our advisor has contractual responsibility to us and our stockholders pursuant to the advisory agreement. On July 28, 2020, we entered into the Purchase Agreement, which is intended to provide for the internalization of our external management functions. The Internalization Transaction is currently expected to close on September 30, 2020, subject to the satisfaction or waiver of certain conditions in the Purchase Agreement.
The following individuals are key personnel of our advisor:
For biographical information regarding Michael A. Seton, see “Certain Information About Management - Board of Directors - Director Nominees”, and for more information regarding Kay C. Neely, see “ - Executive Officers of the Company” above.
Jamie Yoakum has served as Chief Accounting Officer of Carter Validus Advisors II, LLC since September 2018 and as a member of the Investment Committee of Carter Validus Advisors II, LLC since April 2020. Prior to being appointed Chief Accounting Officer of Carter Validus Advisors II, LLC, Mr. Yoakum served as Senior Vice President of Accounting of Carter Validus Advisors II, LLC from August 2015 to September 2018, where he was responsible for the oversight of the accounting and financial reporting functions, as well as managing all accounting department personnel. Mr. Yoakum also has served as Senior Vice President of Accounting of Carter/Validus Advisors, LLC from August 2015 until its sale in October 2019, and, from September 2011 to August 2015, served as Vice President Corporate Controller of Carter/Validus Advisors, LLC. In addition, Mr. Yoakum has served as Chief Financial Officer of CV Data Center Growth & Income Fund Manager, LLC and CV Data Center Growth & Income REIT, LLC, from April 2018 to December 2019. Mr. Yoakum has more than 20 years of real estate accounting experience. From October 2007 through June 2011, Mr. Yoakum was the Controller and Chief Financial Officer for RMC Property Group where he was responsible for overseeing the Company’s accounting and financial operations. Mr. Yoakum served as Vice President of Finance/Administration and Controller with Euro American Advisors, Inc., or Euro American, at its US headquarters in Tampa. In these roles, Mr. Yoakum had overall responsibility of all accounting functions, financial analysis and fiscal reporting of Euro American and its real estate investments. Mr. Yoakum worked at Euro American from April 2006 through September 2007. From February 2005 through April 2006, he worked for Fifth Third Bank where he underwrote corporate lines of credit and mortgages for diverse real estate properties. From May 2001 through February 2005, he worked at CASTO as Assistant Corporate Controller/Financial Analyst where he was responsible for corporate financial reporting. Mr. Yoakum's career commenced with the international accounting firm of Deloitte & Touche (now Deloitte) as a staff accountant in the Real Estate Tax Department from January 1999 through May 2001. While at Deloitte, Mr. Yoakum's primary clients werelicensed certified public and privately-held real estate companies. Mr. Yoakum graduated summa cum laude from Franklin University in Columbus, Ohio, in 1999 and 2000 with Bachelor's degrees in Finance and Accounting, respectively, and holds a current Certified Public Accountant license in the state of Ohio.accountant.
Jon C. Sajeski has served as the Chief Investment Officer, Healthcare of Carter Validus Advisors II, LLC since June 2019 and as a member of the InvestmentManagement Committee of Carter Validus Advisors II, LLCSila Realty Trust, Inc. since AprilSeptember 2020. He is responsible for the management ofmanaging the Company’s healthcare portfolioplatform, while continuing to enhance its national footprint. Mr. Sajeski previously served as Chief Acquisitions Officer and Senior Vice President, Healthcare Investment Management of Carter Validus Advisors II, LLC from September 2018 through June 2019 and as Vice President, Healthcare Acquisitions of Carter Validus Advisors II, LLC from February 2016 through September 2018. Mr. Sajeski has over 16almost 20 years of experience in numerous facets of healthcare real estate including acquisitions, asset management, development, financing, leasing and property management. Mr. Sajeski has served in various roles with the Company and entities affiliated with the Company: (1) Chief Investment Officer, Healthcare of Carter Validus Advisors II, LLC (June 2019 – September 2020), member of the Investment Committee (April 2020 – September 2020), Chief Acquisition Officer and Senior Vice President, Healthcare Investment Management (September 2018 – June 2019), and Vice President, Healthcare Acquisitions (February 2016 – September 2018); and (2) Chief Acquisitions Officer and Senior Vice President, Healthcare Investment Management of Carter/Validus Advisors, LLC (September 2018 – June 2019) and Vice President, Healthcare Acquisitions (February 2016 – September 2018). He began his career at Rendina Healthcare Real Estate in February 2004, where he worked in numerous departments and gained extensive knowledge and experience in healthcare and healthcare-related real estate. Mr. Sajeski served as Vice President of Acquisitions and Leasing of Rendina Healthcare Real Estate from March(March 2015 through– February 2016,2016), as Vice President of Business Development and Leasing from April(April 2014 through– March 2015,2015), and as Vice President of the affiliated property management company from March(March 2013 through– April 2014.2014). Mr. Sajeski received a Bachelorbachelor of Sciencescience in real estate and finance from Florida State University in 2003.
Jason C. Reed has served as the Chief Investment Officer, Data Centers and a member of the Management Committee of Sila Realty Trust, Inc. since September 2020. In these roles, Mr. Reed is responsible for the management of the Company’s nationwide data center portfolio. Mr. Reed has more than 20 years of real estate experience in complex global real estate transactions, law and management. Since February 2018, Mr. Reed has served in various roles with the Company and entities affiliated with the Company: (1) Chief Investment Officer, Data Centers of Carter Validus Advisors II, LLC since June(June 2019 and as– September 2020), member of the Investment Committee of Carter Validus Advisors II, LLC since April 2020. As(April 2020 – September 2020), Senior Vice President, Data Center Investment Management (November 2018 – June 2019), and Chief InvestmentAcquisition Officer Data Centers, Mr. Reed is responsible for the management of the Company’s data center portfolio and provides the strategic vision to turn business goals into actionable plans with appropriate risk management. Mr. Reed previously served as Chief Acquisitions Officer and(February 2018 – November 2018); (2) Senior Vice President, Data Center Investment Management of Carter Carter/Validus Advisors, II, LLC (November 2018 – October 2019), and Chief Acquisition Officer (February 2018 – November 2018); and (3) Chief Investment Officer of CV Data Center Growth & Income REIT Advisors, LLC (November 2018 – December 2019) and Chief Acquisition Officer (April 2018 – November 2018). Previously, from NovemberJune 2017 to February 2018, through June 2019. Mr. Reed also has served as a principal of Longview Real Estate Advisors, LLC, a full-service advisory firm to the data center and telecommunications industry, since June 2017 where he was responsible for the firm’sfirm's acquisitions, leasing and management strategy. From January 2016 to September 2017, Mr. Reed served as the Senior Vice President, Global Real Estate at Equinix, Inc. from January 2016 through September 2017,, where he was accountable directly to the Chief Development Officer and Real Estate Committee of the Board of Directorsresponsible for the investmentoverseeing investments across 22 countries and 44 metropolitan areas. From March 2003 to January 2016, Mr. Reed also served in various roles at Level 3 Communications (currently known as Lumen Technologies), most recently as Vice President, Global Real Estate and Facilities, from May 2008 through January 2016 where he was responsible for the strategic planning, investment and management of globalthe firm’s real estate consisting of over 10,000 properties across North America, EMEA, and Latin America. Mr. Reed received a Bachelorbachelor of Sciencescience in Business Administrationbusiness administration in June 1992 and Juris Doctora juris doctor and Mastermaster of Lawslaws in Taxation in 1996 and 1997, respectively, attaxation from the University of Denver.Denver in May 1996.
Jamie A. Yoakum has served as Chief Accounting Officer and a member of the Management Committee of Sila Realty Trust, Inc. since September 2020. Mr. Yoakum has more than 20 years of real estate accounting experience. He has served in various roles with the Company and entities affiliated with the Company since 2011: (1) Chief Accounting Officer of Carter Validus Advisors II, LLC (September 2018 – September 2020) and a member of the Investment Committee (April 2020 – September 2020); (2) Senior Vice President of Accounting of Carter Validus Advisors II, LLC (August 2015 – September 2018); (3) Senior Vice President of Accounting of Carter/Validus Advisors, LLC (August 2015 – October 2019) and Vice President and Corporate Controller (September 2011 – August 2015); (4) Chief Financial Officer of CV Data Center Growth & Income Fund Manager, LLC (April 2018 – December 2019); and (5) Chief Financial Officer of CV Data Center Growth & Income REIT, LLC (April 2018 – December 2019). Previously, Mr. Yoakum was the Chief Financial Officer and Controller at RMC Property Group from October 2007 through June 2011, where he was responsible for overseeing accounting and financial operations. Mr. Yoakum served as Vice President of Finance/Administration and Controller at Euro American Advisors, Inc. from April 2006 through September 2007, where he was responsible for all accounting functions, financial analysis, fiscal reporting and its real estate investments. Prior to that, Mr. Yoakum held various controller, financial analyst and accounting roles with Fifth Third Bank, CASTO, and Deloitte & Touche (now Deloitte). Mr. Yoakum graduated summa cum laude from Franklin University in Columbus, Ohio, in 1999 with a bachelor of science in finance and in 2000 with a bachelor of science in accounting and is licensed as a certified public accountant.
COMPENSATION AND OTHER INFORMATION CONCERNING EXECUTIVE OFFICERS
Compensation Discussion and Analysis
This Compensation Discussion and Analysis outlines the principles underlying our executive compensation policies and decisions as it relates to the Company’s named executive officers (“NEOs”). Our NEOs for 2020 were:
•Michael A. Seton — Chief Executive Officer and President
•Kay C. Neely — Chief Financial Officer and Treasurer and Secretary
•Jon C. Sajeski — Chief Investment Officer, Healthcare
•Jason C. Reed — Chief Investment Officer, Data Centers
•Jamie A. Yoakum — Chief Accounting Officer
On July 28, 2020, the Company entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with Sila Realty Operating Partnership, LP, Carter Validus Advisors II, LLC (the “Former Advisor”), various affiliates of Executive Officersthe Former Advisor and Sila Realty Management Company, LLC, to effectively provide for the internalization of the Company’s external management functions (the “Internalization Transaction”). Upon completion of the Internalization Transaction on September 30, 2020 (the “Closing”), 76 individuals became employees of the Company, including the NEOs. Until September 30, 2020, our executive officers were officers of an affiliate of the Former Advisor and were compensated by such entities for its services to us and our Compensation Committee did not make any decisions regarding their compensation prior to this date; therefore, this Compensation Discussion and Analysis and the accompanying tables do not include any discussion of compensation prior to September 30, 2020.
ForOur Executive Compensation Philosophy and Objectives
Our executive compensation program includes three primary components: base salary, annual cash bonus, and long-term incentive awards, including time based stock awards and performance based stock awards. The Company’s executive compensation philosophy focuses on attracting, motivating and retaining a superior management team that can maximize stockholder value. The compensation arrangements are designed to reward our NEOs for performance, measured by financial and other metrics that the fiscal year ended December 31, 2019,Company believes will enhance stockholder value, and to pay our NEOs at levels that the Compensation Committee believes to be competitive with other enterprise’s of similar sizes and in similar industries. The compensation arrangements consist of both base salary and incentive compensation, payable partly in cash and partly in equity, subject to time-based and performance-based vesting conditions. This program is intended to incentivize our NEOs to manage the Company in a prudent manner without encouraging unnecessary risk-taking, as well as to align executive compensation with the interests of the Company’s stockholders over multi-year performance and vesting periods that encourage the retention of key talent. The Compensation Committee believes the best way to maintain the alliance of management and stockholder objectives is to have a significant component of executive compensation tied to achievement of goals based on key performance metrics. The performance goals are set at competitive levels which are intended to be challenging but are believed to be achievable. The Compensation Committee reviews the components of our executive compensation program annually to ensure that they continue to meet the evolving needs of the Company.
Roles and Responsibilities
Role of the Board of Directors and Compensation Committee
The Board of Directors established the Compensation Committee in September 2020 in connection with the Closing of the Internalization Transaction and our concurrent transition to self-management. At that time, certain employees of our Former Advisor, who had been involved in the management of our day-to-day operations, including all of our NEOs, became employees of the Company and the advisory agreement with the Former Advisor was terminated. Prior to that time, we had no employees and depended on the Former Advisor and its affiliates to manage our executive officersaffairs on a day-to-day basis and perform essential services, and we did not receivedetermine the compensation directly from us for services renderedpayable to us.our NEOs by the Former Advisor or its affiliates. As a result, we did not have, and our boardthe Board of directors hasDirectors had not considered, a compensation policy or program for our NEOs. Prior to the Closing, a Special Committee composed of independent directors approved the Employment Agreements and was thereafter effectively replaced and superseded in all respects by the Compensation Committee upon its establishment effective as of the Closing.
Our Compensation Committee is comprised of three independent directors: Messrs. Greene (Chairman), Pratt and Rayevich. In general, the Compensation Committee’s overall responsibilities include: (a) assisting the Board of Directors in discharging its responsibilities relating to compensation of the Company’s directors, chief executive officer and other executive officers; and (b) producing an annual report on executive compensation for inclusion in the Company’s proxy statement, in accordance with applicable rules and regulations. The Compensation Committee has overall responsibility for approving and evaluating all compensation plans, policies, and programs of the Company as they affect the executive officers and shall undertake those specific duties and responsibilities provided in the Compensation Committee charter and such other duties as the Board of Directors may from time to time prescribe. These and other responsibilities of the Compensation Committee are set forth in its charter. See “Certain information about our Board of Directors and Executive Officers — Compensation Committee.”
Under the terms of the employment agreements with each of Michael A. Seton and Kay C. Neely (the “Employment Agreements”, as further described below under “—Employment Agreements”) and the offers of employment provided to each of Jon C. Sajeski, Jason C. Reed, and Jamie A. Yoakum (together with Employment Agreements, the “Employment Arrangements”), determinations regarding annual compensation (i.e. review of annual base salary, establishment of performance goals and determination of achievement of performance goals) may be made by either the Board of Directors or the Compensation Committee. Since the Closing of the Internalization Transaction and during the term of the Employment Arrangements, the Compensation Committee has generally made all such determinations, and the Company expects the Compensation Committee will continue to play this role with respect to future determinations. Therefore, references to decisions to be made regarding annual compensation that may be made by the Compensation Committee or the Board of Directors under the Employment Arrangements are generally attributed to the Compensation Committee alone in this “—Compensation Discussion and Analysis” section.
Role of the Chief Executive Officer
Mr. Seton, in his capacity as our chief executive officer, is consulted by the Compensation Committee with respect to the performance goals utilized in determining the annual cash bonus and the annual long term incentive awards for the executive officers other than himself. The Compensation Committee retains the authority to set all of such performance goals. Mr. Seton, who is also a member of the Board of Directors, may also participate in compensation-related decisions in that capacity. To the extent that any discussions are held regarding Mr. Seton’s own compensation, Mr. Seton generally will recuse himself from any such discussion and not participate in any resulting decisions. Our executive officers, including Mr. Seton, have historically developed proposals and provided information and analysis to the Compensation Committee as part of the process whereby the Compensation Committee establishes and makes decisions with respect to achievement of the performance goals utilized in determining the annual cash bonuses and the long-term incentive awards.
Role of Compensation Consultant
FPL Associates, L.P., or FPL, is our compensation consultant and was initially engaged by the Special Committee as a compensation consultant to provide analysis and make recommendations to our independent directors and assist and advise them in connection with (a) structuring and negotiating the Employment Agreements that became effective in connection with the Internalization Transaction, and the analysis and recommendations provided served as the basis for the terms of the Employment Arrangements that became effective following the Closing, and (b) reviewing its independent director compensation program.
Subsequent to the Closing, the Compensation Committee has continued to engage FPL as a compensation consultant. FPL has continued to assist and advise the Compensation Committee in connection with executive compensation-related matters, including the Compensation Committee’s establishment of the performance goals utilized in determining the annual cash bonuses and the annual long term incentive awards, the Compensation Committee’s establishment of goals related to the
granting, earning and vesting of time based awards, and the Compensation Committee’s decisions with respect to achievement of performance goals under performance based awards. In addition, FPL has continued to assist and advise the Compensation Committee in connection with director compensation-related matters, including annual retainer fees and additional leadership and committee fees.
In 2020, the Compensation Committee directed FPL to, among other things: (a) assist the Compensation Committee in applying our compensation philosophy toward designing a compensation program for our executive officers, including the determination of the portion of total compensation awarded in the form of salary, annual cash incentive and equity-based compensation, as well as selecting the appropriate performance metrics and levels of performance (e.g., threshold, target, maximum); (b) analyze current compensation conditions among the Company’s peers, and assess the competitiveness and appropriateness of compensation levels for our executive officers and directors; (c) recommend to the Compensation Committee advisable compensation programs for our executive officers and directors; and (d) make specific recommendations to the Compensation Committee for base salary, annual cash bonus and incentive awards for our executive officers and annual retainer fees and additional leadership and committee fees for our directors.
A representative from FPL attends certain meetings of the Compensation Committee and communicates directly with the Compensation Committee chair or its members outside of meetings. We paid FPL approximately $105,000 in 2020 for their services as a compensation consultant.
In addition, in 2020, the Company engaged Ferguson Partners, an executive search firm and an affiliate of FPL, to assist in the search for a new director. Ferguson Partners was paid approximately $72,300 in 2020 for its services. The decision to engage Ferguson Partners for director search services was made by the NCG Committee. While the Compensation Committee does not pre-approve these non-executive compensation services, it does consider all factors relevant to FPL’s independence from management. The Compensation Committee believes that the services provided by Ferguson Partners did not impact the advice and services that FPL provided to the Compensation Committee on executive compensation matters and has determined that FPL has no conflict of interest and is independent.
Peer Group
During 2020, both the Special Committee and the Compensation Committee relied on peer group analysis prepared by FPL to evaluate executive officer pay, including base salary, and incentive award practices, including with respect to annual cash bonuses and long term incentive and equity-based awards.
The peer group recommended by FPL and approved by the Special Committee and Compensation Committee was comprised of the following companies in comparable industries (including non-traded REITs and publicly-traded REITs) and with an enterprise value similar to the Company:
• Broadstone Net Lease, Inc.
• Essential Properties Realty Trust, Inc.
• InvenTrust Properties Corp.
• CareTrust REIT, Inc.
• Four Corners Property Trust, Inc.
• LTC Properties, Inc.
• Community Healthcare Trust Incorporated
• Griffin Capital Essential Asset REIT
• Phillips Edison & Company, Inc.
• Easterly Government Properties, Inc.
• Healthcare Realty Trust Incorporated
• Physicians Realty Trust
• Seritage Growth Properties
Based on this analysis, FPL recommended and the Compensation Committee determined that, as a general practice, 50% of the annual long term inventive award should vest based on time only and that vesting should be over a four-year period and 50% should vest based on performance over time compared to goals established by the Compensation Committee, subject to threshold, target and a maximum levels of achievement, and that vesting should be at the end of a three period.
Advisory Vote on Executive Compensation and Frequency of the Stockholder Vote on Executive Compensation
Because we did not have employees prior to the closing of the Internalization Transaction, this is the first year in which we will hold a non-binding stockholder advisory vote on compensation of our NEOs and a non-binding stockholder advisory vote on the frequency of such votes.
Elements of Named Executive Officer Compensation
The three primary components of our NEO compensation program are: base salary, annual cash bonus, and long-term incentive awards, including time based stock and performance based stock.
The objective of the base salary component of our NEO compensation program is to pay fixed cash compensation set at a level reflective of each NEO’s performance, market conditions, and competitive rates. The objective of the annual cash bonus component of the NEO compensation program is to pay performance-based cash incentives that reward achievement of annual performance goals. The objective of the annual long term incentive award is to award equity incentives that align NEO compensation with the interests of the Company’s stockholders over multi-year performance and vesting periods that encourage the retention of key talent, and to reward achievement of performance goals. The performance goals that relate to the vesting and earning of the Performance-Based DSUs, however, relate to a multi-year performance period commencing at the beginning of the year following the year to which the applicable annual long term incentive award relates, and thus relate not only to past performance but also to future performance.
Base Salary
Each NEO is entitled to receive a base salary (“Base Salary”) pursuant to the Employment Arrangements, subject to annual review by the Compensation Committee.
Following are the annual base salaries for the NEOs: Michael A. Seton - $800,000, Kay C. Neely - $450,000, Jon C. Sajeski - $325,000, Jason C. Reed - $325,000 and Jamie A. Yoakum - $285,000.
Annual Bonus
Each NEO is eligible to receive an annual bonus (the “Annual Bonus”). Pursuant to the Employment Arrangements, bonuses are payable in cash, and will typically be pursuant to the criteria and goals reasonably established and administered by the Board of Directors or the Compensation Committee, with (a) a target Annual Bonus opportunity as a percentage of Base Salary for Michael A. Seton and Kay C. Neely, and (b) a fixed target Annual Bonus opportunity for Jon C. Sajeski, Jason C. Reed and Jamie A. Yoakum (each, a “Target Annual Bonus”). The Annual Bonus payable to each NEO will be determined based on the Compensation Committee’s determination of achievement of annual performance goals for a year and payable as soon as practicable after year-end for such year (but no later than March 15th). To be entitled to receive any Annual Bonus, except as otherwise provided in the Employment Arrangements, NEOs must remain employed through the last day of the calendar year to which the Annual Bonus relates.
Following are the Target Annual Bonus opportunities as a percentage of a NEO’s Base Salary going forward: Michael A. Seton – 135% and Kay C. Neely – 100%. Following are the fixed Target Annual Bonus opportunities for the other NEOs going forward: Jon C. Sajeski - $300,000, Jason C. Reed - $300,000 and Jamie A. Yoakum - $175,000.
Notwithstanding the above, due to the Closing of the Internalization Transaction near the end of the fiscal year, each NEO received an Annual Bonus for 2020 that was a fixed amount (rather than an amount based on criteria and goals established and administered by the Board of Directors or Compensation Committee) and was prorated to reflect the period of employment from the Closing through December 31, 2020. These amounts were as follows: Michael A. Seton – $270,000, Kay C. Neely – $112,500, Jon C. Sajeski - $75,000, Jason C. Reed - $75,000 and Jamie A. Yoakum - $43,750. Further, Jon C. Sajeski, Jason C. Reed and Jamie A. Yoakum received additional bonus payments related to the period they were employed by the Former Advisor, which were partially reimbursed by the Former Advisor at the closing of the Internalization Transaction. These amounts were as follows: Jon C. Sajeski - $152,500, Jason C. Reed - $35,700 and Jamie A. Yoakum - $25,106.
Long Term Incentive Awards
Each NEO will also be eligible to receive long term incentive awards in the form of equity under any applicable plan or program adopted by the Company during the term of his or her employment. Each NEO’s entitlement to long term incentive awards will be at the discretion of the Board of Directors or the Compensation Committee. Long term incentive awards may consist of restricted stock awards of Class A common stock of the Company that vest on a fixed date or ratably over time, subject to continued employment through the vesting date (“Time-Based RCS”) and/or deferred stock awards of common stock that may be earned and vest based on Company performance over a period of time to be determined by the Board of Directors or the Compensation Committee, subject to continued employment through the applicable vesting date (“Performance-Based
DSUs”). Time-Based RCS and Performance-Based DSUs are granted under, and will be subject to, the terms of the Company’s Amended and Restated 2014 Restricted Share Plan (the “A&R Incentive Plan”), and an award agreement.
Performance-Based DSUs awarded to our NEOs represent a contingent right to receive shares of common stock at a future settlement date, subject to satisfaction of applicable vesting conditions, attainment of specified performance metrics, and/or other restrictions, as set forth in the A&R Incentive Plan. The Board of Directors or the Compensation Committee will approve the performance goals applicable to earning and vesting of the Performance-Based DSUs from time to time. The number of Performance-Based DSUs that may ultimately become earned and vested will be tied to the performance goals, performance period and weightings (i.e., threshold, target and maximum) determined by the Board of Directors or the Compensation Committee. The Board or the Compensation Committee will, in its sole discretion, make determinations necessary to calculate the achievement level of these performance goals and the number of Performance-Based DSUs that will actually be earned and vest at the end of the determined performance periods.
Due to the Internalization Transaction, for the year ended December 31, 2020, the NEOs received a one-time award of Time-Based RCS (the “Internalization Award”) after the Closing pursuant to each of their Employment Arrangements. Subject to each NEO’s continuous employment through the vesting date, the Internalization Award will vest on December 31, 2024.
In the first quarter of 2021, the NEOs received, subject to each NEO’s continued employment through the vesting dates, long term incentive awards (the “2021 Awards”). 50% of the 2021 Awards consist of Time-Based RCS that vest ratably over a four year period ending on December 31, 2024, subject to continued employment through the vesting date, and the remaining 50% of the 2021 Awards consist of Performance-Based DSUs that may be earned and become vested based on Company performance over a three-year performance period ending on December 31, 2023, and subject to continued employment through the applicable vesting date. The combined value of the Common Stock underlying the 2021 Awards on the grant date is a fixed value provided in the Employment Arrangements, with the value being split between the Time-Based RCS and the Performance-Based DSUs.
Following are the fixed grant date fair values of the 2021 Awards for the NEOs: Michael A. Seton - $1,800,000, Kay C. Neely - $700,000, Jon C. Sajeski - $225,000, Jason C. Reed - $225,000 and Jamie A. Yoakum - $150,000.
Employment Agreements
As described more fully under “– Employment Agreements” below, on July 28, 2020, in connection with the execution of the Purchase Agreement relating to the Internalization Transaction, Mr. Seton and Ms. Neely entered into the Employment Agreements with Sila Realty Management Company, LLC, a subsidiary indirectly owned by the Company, setting forth the terms upon which they will serve as Chief Executive Officer and Chief Financial Officer, respectively. The Employment Agreements became effective as of the closing of the Internalization Transaction and will continue in effect through December 31, 2025, unless terminated sooner pursuant to the Employment Agreements.
The Employment Agreements set forth the framework and certain parameters of Mr. Seton’s and Ms. Neely’s regular and incentive compensation from the Company. The terms of the applicable base salary, annual cash bonus amounts and long term incentive awards were intended to promote retention and be competitive with our peers. We believe the customary protections in the Employment Agreements, such as certain payments upon termination (as described more fully below), promote our ability to attract and retain management and provide our NEOs with day-to-day employment stability and enable them to properly focus their attention on their duties and responsibilities with the Company, thereby promoting productivity.
Seton Employment Agreement
Pursuant to the terms of Mr. Seton’s Employment Agreement, Mr. Seton is entitled to certain payments and benefits if: (a) his employment is terminated by (i) the Company without “cause” or (ii) with “good reason”; and (b) he executes a release of claims. If such termination occurs within twelve months after a change in control, Mr. Seton is entitled to, among other things, a lump sum cash payment equal to a multiple of two and one half of the sum of his then-current base salary and target annual bonus.
Neely Employment Agreement
Pursuant to the terms of Ms. Neely’s Employment Agreement, Ms. Neely is entitled to certain payments and benefits if: (a) her employment is terminated by (i) the Company without “cause” or (ii) with “good reason”; and (b) she executes a release of claims. If such termination occurs within twelve months after a change in control, Ms. Neely is entitled to, among other things, a lump sum cash payment equal to a multiple of two of the sum of her then-current base salary and target annual bonus.
Severance Plan
The Company has a severance plan, or the Severance Plan, to provide Jon C. Sajeski, Jason C. Reed and Jamie A. Yoakum with the opportunity to receive severance protections in connection with a termination of employment. The Severance Plan is primarily intended to help retain these NEOs, to provide appropriate protection that facilitates acting in the interest of the Company’s stockholders in the event of a possible or actual change in control of the Company, to align the Company’s severance arrangements with current market practice and to provide economic security to our NEOs in the event of certain terminations of employment. If a participant’s employment with the Company terminates for any reason, the Company shall provide (or cause to be provided to) the participant his accrued benefits, which consist of any of the following: (a) accrued but unpaid base salary and/or accrued but unused vacation and/or paid time off; (b) vested employee benefits to which the participant is entitled as of the termination; and (c) any reimbursement for necessary, customary or usual business expenses and fees incurred by the participant in accordance with the applicable expense reimbursement policy. If a participant incurs a qualifying termination, the Company shall provide (or cause to be provided to) the participant any earned but unpaid annual bonus relating to the calendar year prior to the year of such termination (provided that, except as otherwise provided in the Employment Arrangements, such participant must remain employed through the last day of the calendar year to which the Annual Bonus relates), a lump sum payment calculated in accordance with the Severance Plan and full and immediate vesting of equity-based incentive awards.
Retirement Savings Opportunities
All full-time employees, including our NEOs, are able to participate in our 401(k) retirement savings plan, or the 401(k) Plan. We provide the 401(k) Plan to allow our employees to save a portion of their cash compensation for retirement in a tax-efficient manner. Under the 401(k) Plan, employees are eligible to defer a portion of their base salary, and we currently make a matching contribution of up to 6% of each participant’s annual base salary, determined by the individual’s contribution and as restricted by the statutory limit.
Health and Welfare Benefits
We provide to all full-time employees, including our NEOs, a competitive benefits package, which includes medical, dental, short- and long-term disability insurance, and life insurance plans.
Other Benefits
In 2020, we also reimbursed Michael A. Seton and Kay C. Neely for certain health insurance premiums (such reimbursement will not occur in 2021 and is not expected to occur in future years).
Tax Considerations
Section 162(m) of the Internal Revenue Code of 1986, or the Code, generally prohibits any publicly held corporation from taking a federal income tax deduction for compensation in excess of $1 million in any taxable year paid to any “covered employee”. As originally enacted, IRC Section 162(m) defined a "covered employee" as the chief executive officer and the next four highest compensated officers whose compensation was required to be reported to stockholders under the Exchange Act. In December 2020, the IRS issued final regulations that expanded the definition of "covered employee" to include anyone serving as the chief executive officer or chief financial officer and the three highest compensated executive officers on the SEC compensation disclosure table, beyond the individuals serving in those roles at the end of the year. Once an individual is identified as a covered employee, the individual is forever going forward as a covered employee, even in years when the individual would not otherwise meet the definition, and even after termination or death. The Tax Cuts and Jobs Act of 2017 eliminated the exception for performance-based compensation, therefore, performance-based bonuses or equity awards must be considered as “compensation” for purposes of determining any deduction disallowance under IRC Section 162(m). In addition, amounts paid for services to covered employees outside of their capacity as executive officers, including services in a non-employee capacity such as fees for post-employment service on the corporation’s Board of Directors, would be included in the limitation computation.
We do not anticipate that these changes to Section 162(m) will have a material impact on the Company, although we anticipate our taxable income will increase on an annual basis as a result of the application of Section 162(m). To maintain our status as a real estate investment trust, we are required to distribute at least 90% of our taxable income to our stockholders in the form of dividends. The increase in taxable income resulting from the change in Section 162(m) has been, and will continue to be, taken into account as our Board of Directors determines the amount of dividends to be paid to our stockholders in tax years that are affected by the change. Although the Compensation Committee intends to consider the impact of Section 162(m) in structuring compensation programs, it expects its primary focus to continue to be on creating programs that address the needs
and objectives of the Company regardless of the impact of Section 162(m). As a result, the Compensation Committee may make awards and structure programs that are non-deductible under Section 162(m).
Summary Compensation Table
The table below summarizes the compensation of our NEOs for the fiscal year ended December 31, 2019. In addition,2020.
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| | | Year | | Salary | | Bonus ($)(1) | | Stock Awards ($) (2) | | Non-Equity Incentive Plan Compensation | | All Other Compensation ($)(3) | | Total Compensation ($)(4) |
Michael A. Seton Chief Executive Officer | | 2020 | | $ | 200,000 | | | $ | 270,000 | | | $ | 2,000,000 | | | $ | — | | | $ | 47,209 | | (5) | $ | 2,517,209 | |
Kay C. Neely Chief Financial Officer | | 2020 | | $ | 112,500 | | | $ | 112,500 | | | $ | 1,000,000 | | | $ | — | | | $ | 32,837 | | (6) | $ | 1,257,837 | |
Jon C. Sajeski Chief Investment Officer, Healthcare | | 2020 | | $ | 81,250 | | | $ | 227,500 | | (7) | $ | 500,000 | | | $ | — | | | $ | 24,286 | | (8) | $ | 833,036 | |
Jason C. Reed Chief Investment Officer, Data Centers | | 2020 | | $ | 81,250 | | | $ | 110,700 | | (9) | $ | 500,000 | | | $ | — | | | $ | 24,286 | | (10) | $ | 716,236 | |
Jamie A. Yoakum Chief Accounting Officer | | 2020 | | $ | 71,250 | | | $ | 68,856 | | (11) | $ | 300,000 | | | $ | — | | | $ | 20,511 | | (12) | $ | 460,617 | |
(1)Represents Annual Bonus with respect to the applicable year. See “Elements of Named Executive Officer Compensation – Annual Bonus” for further discussion.
(2)Represents long term incentive awards in the form of Time-Based RCS. The amounts in this column represent the aggregate grant date fair value in accordance with FASB ASC 718. The assumptions used in determining the grant date fair value are set forth in Note 18 to the Consolidated Financial Statements in our boardForm 10-K for the year ended December 31, 2020.
(3)Includes dividends on unvested restricted stock, Company 401(k) matching contributions, as well as reimbursement of directors believed that ithealthcare insurance premiums for Mr. Seton and Ms. Neely.
(4)The dollar value in this column for each named executive officer represents the sum of all compensation reflected in the previous columns.
(5)Represents $17,100 in Company 401(k) match, $1,365 in health insurance and $28,744 in dividends on unvested restricted Class A common stock.
(6)Represents $17,100 in Company 401(k) match, $1,365 in health insurance and $14,372 in dividends on unvested restricted Class A common stock.
(7)Includes both an Annual Bonus of $75,000 to Mr. Sajeski with respect to 2020 and additional bonuses of $152,500, which were partially reimbursed by our Former Advisor.
(8)Represents $17,100 in Company 401(k) match and $7,186 in dividends on unvested restricted Class A common stock.
(9)Includes both an Annual Bonus of $75,000 to Mr. Reed with respect to 2020 and an additional bonus of $35,700, which was appropriatepartially reimbursed by our Former Advisor.
(10)Represents $17,100 in Company 401(k) match and $7,186 in dividends on unvested restricted Class A common stock.
(11)Includes both an Annual Bonus of $43,750 to Mr. Yoakum with respect to 2020 and an additional bonus of $25,106, which was partially reimbursed by our Former Advisor.
(12)Represents $16,199 in Company 401(k) match and $4,312 in dividends on unvested restricted Class A common stock.
Grants of Plan-Based Awards
The table below sets forth information with respect to plan-based awards in 2020 to our NEOs:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Grant Date | | Estimated Future Payments Under Non-Equity Incentive Plan Awards | | Estimated Future Payments
Under Equity Incentive Plan
Awards | | All Other Stock Awards:(1) | | All Other
Option
Awards: | | Exercise
or Base
Price of
Option
Awards
($/Share) | | Grant Date Fair Value of Awards(2) ($) |
| | Threshold
($) | | Target
($) | | Maximum
($) | | Threshold
($) | | Target
($) | | Maximum
($) | | Number
of Shares
of Stock
(#) | | Number of
Securities
Underlying
Options
(#) | | |
| Michael A. Seton | | October 1, 2020 | | — | | — | | — | | — | | — | | — | | 231,214 | | — | | — | | $ | 2,000,000 | |
| Kay C. Neely | | October 1, 2020 | | — | | — | | — | | — | | — | | — | | 115,607 | | — | | — | | $ | 1,000,000 | |
| Jon C. Sajeski | | October 1, 2020 | | — | | — | | — | | — | | — | | — | | 57,803 | | — | | — | | $ | 500,000 | |
| Jason C. Reed | | October 1, 2020 | | — | | — | | — | | — | | — | | — | | 57,803 | | — | | — | | $ | 500,000 | |
| Jamie A. Yoakum | | October 1, 2020 | | — | | — | | — | | — | | — | | — | | 34,682 | | — | | — | | $ | 300,000 | |
(1)Consists of time-based restricted common stock, which, subject to the NEOs continuous employment through the applicable vesting dates, with certain exceptions, will vest on December 31, 2024 (or, if earlier, on the 15th month anniversary of the date of a “qualified event” (such as a listing of the Company’s stock on a nationally recognized stock exchange or an underwritten public offering of the Company’s stock). The awards were granted under and subject to the terms of the A&R Incentive Plan and an award agreement.
(2)The amounts shown in this column represent the grant date fair value for time-based restricted common stock awards granted to our NEOs during the covered year calculated in accordance with ASC 718. The fair market value is determined based on the closing stock price of the Company’s Class A common stock at the date of grant. The assumptions used in determining the grant date fair value are set forth in Note 18 to the Consolidated Financial Statements in our Form 10-K for the year ended December 31, 2020.
Outstanding Equity Awards at Fiscal Year-End
The table below sets forth information with respect to outstanding equity awards held by our NEOs as of December 31, 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Stock Awards |
| Name | | Number of Shares or Units of Stock That Have Not Vested (#)(1) | | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | | Equity Incentive Plan
Awards: Number of
Unearned Shares,
Units or Other Rights
That Have Not Vested | | Equity Incentive Plan
Awards: Market or
Payout Value of
Unearned Shares,
Units or Other Rights
That Have Not Vested |
Michael A. Seton (3) | | 231,214 | | $ | 2,009,250 | | | — | | | $ | — | |
Kay C. Neely (4) | | 115,607 | | $ | 1,004,625 | | | — | | | $ | — | |
Jon C. Sajeski (5) | | 57,803 | | $ | 502,308 | | | — | | | $ | — | |
Jason C. Reed (6) | | 57,803 | | $ | 502,308 | | | — | | | $ | — | |
Jamie A. Yoakum (7) | | 34,682 | | $ | 301,387 | | | — | | | $ | — | |
(1)Awards granted in the form of Time-Based RCS vesting on December 31, 2024.
(2)There is no public market for our boardshares. The market value of directorsshares of stock that have not yet vested as reported in the table above is calculated as the net asset value of $8.69 per share of our common stock at the end of the last completed fiscal year (calculated as of December 31, 2020) multiplied by the number of shares of stock.
(3)Consists of 231,214 Time-Based RCS of Class A common stock, issued on October 1, 2020 that had not vested as of December 31, 2020, with a grant date fair value of $2,000,000, which, subject to the NEOs continuous employment through the applicable vesting dates, with certain exceptions, will vest on December 31, 2024, or, if earlier, on the 15th month anniversary of the date of a “qualified event” (such as a listing of the Company’s stock on a nationally recognized stock exchange or an underwritten public offering of the Company’s stock). The award was granted under and subject to the terms of the A&R Incentive Plan and an award agreement.
(4)Consists of 115,607 Time-Based RCS of Class A common stock, issued on October 1, 2020 that had not vested as of December 31, 2020, with a grant date fair value of $1,000,000, which, subject to the NEOs continuous employment through the applicable vesting dates, with certain exceptions, will vest on December 31, 2024, or, if earlier, on the 15th month anniversary of the date of a “qualified event” (such as a listing of the Company’s stock on a nationally recognized stock exchange or an underwritten public offering of the Company’s stock). The award was granted under and subject to the terms of the A&R Incentive Plan and an award agreement.
(5)Consists of 57,803 Time-Based RCS of Class A common stock, issued on October 1, 2020 that had not vested as of December 31, 2020, with a grant date fair value of $500,000, which, subject to the NEOs continuous employment through the applicable vesting dates, with certain exceptions, will vest on December 31, 2024 or, if earlier, on the 15th month anniversary of the date of a “qualified event” (such as a listing of the Company’s stock on a nationally recognized stock exchange or an underwritten public offering of the Company’s stock). The award was granted under and subject to the terms of the A&R Incentive Plan and an award agreement.
(6)Consists of 57,803 Time-Based RCS of Class A common stock, issued on October 1, 2020 that had not vested as of December 31, 2020, with a grant date fair value of $500,000, which, subject to the NEOs continuous employment through the applicable vesting dates, with certain exceptions, will vest on December 31, 2024 or, if earlier, on the 15th month anniversary of the date of a “qualified event” (such as a listing of the Company’s stock on a nationally recognized stock exchange or an underwritten public offering of the Company’s stock). The award was granted under and subject to the terms of the A&R Incentive Plan and an award agreement.
(7)Consists of 34,682 Time-Based RCS of Class A common stock, issued on October 1, 2020 that had not vested as of December 31, 2020, with a grant date fair value of $300,000, which, subject to the NEOs continuous employment through the applicable vesting dates, with certain exceptions, will vest on December 31, 2024 or, if earlier, on the 15th month anniversary of the date of a “qualified event” (such as a listing of the Company’s stock on a nationally recognized stock exchange or an underwritten public offering of the Company’s stock). The award was granted under and subject to the terms of the A&R Incentive Plan and an award agreement.
Potential Payments Upon Termination or Change in Control
The table below reflects the amount of compensation that our NEOs would be entitled to receive under the Employment Arrangements and/or Severance Plan, assuming that such termination was effective as of December 31, 2020. The following amounts are only estimates of the amounts that would be paid out to such NEOs upon termination of their employment. The actual amounts to be paid out can only be determined at the time of such executive’s separation from the Company. The event of a termination by the Company for Cause, or by the executive without Good Reason (each as defined in the Employment Agreements and discussed below), including in connection with a change in control, such executive would not be entitled to any of the amounts reflected in the table and would only be entitled to the standard termination benefits provided under their Employment Agreement or Severance Plan, as applicable. See “—Employment Agreements” and “—Severance Plan” for further details.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Termination Without
Cause, Voluntary
Termination for Good
Reason or Termination
Following Non-Renewal by the Company
(No Change in Control) | | Termination Without
Cause, Voluntary
Termination for Good
Reason or Termination
Following Non-Renewal by the Company
(Change in Control) | | Death | | Disability |
| Michael A. Seton | | | | | | | | |
| Cash Severance Payment | | $ | 4,840,000 | | $ | 5,780,000 | | $ | 1,080,000 | | $ | 1,480,000 |
| Medical/Welfare Benefits | | $ | 12,265 | | $ | 12,265 | | $ | 12,265 | | $ | 12,265 |
Equity-Award Acceleration(1) | | $ | 2,009,250 | | $ | 2,009,250 | | $ | 2,009,250 | | $ | 2,009,250 |
| Total | | $ | 6,861,515 | | $ | 7,801,515 | | $ | 3,101,515 | | $ | 3,501,515 |
| Kay C. Neely | | | | | | | | |
| Cash Severance Payment | | $ | 1,800,000 | | $ | 2,250,000 | | $ | 450,000 | | $ | 675,000 |
| Medical/Welfare Benefits | | $ | 13,842 | | $ | 13,842 | | $ | 13,842 | | $ | 13,842 |
Equity-Award Acceleration(1) | | $ | 1,004,625 | | $ | 1,004,625 | | $ | 1,004,625 | | $ | 1,004,625 |
| Total | | $ | 2,818,467 | | $ | 3,268,467 | | $ | 1,468,467 | | $ | 1,693,467 |
| Jon C. Sajeski | | | | | | | | |
| Cash Severance Payment | | $ | 1,237,500 | | $ | 1,550,000 | | $ | 300,000 | | $ | 462,500 |
| Medical/Welfare Benefits | | $ | 20,503 | | $ | 20,503 | | $ | 20,503 | | $ | 20,503 |
Equity-Award Acceleration(1) | | $ | 502,308 | | $ | 502,308 | | $ | 502,308 | | $ | 502,308 |
| Total | | $ | 1,760,311 | | $ | 2,072,811 | | $ | 822,811 | | $ | 985,311 |
| Jason C. Reed | | | | | | | | |
| Cash Severance Payment | | $ | 1,237,500 | | $ | 1,550,000 | | $ | 300,000 | | $ | 462,500 |
| Medical/Welfare Benefits | | $ | 13,842 | | $ | 13,842 | | $ | 13,842 | | $ | 13,842 |
Equity-Award Acceleration(1) | | $ | 502,308 | | $ | 502,308 | | $ | 502,308 | | $ | 502,308 |
| Total | | $ | 1,753,650 | | $ | 2,066,150 | | $ | 816,150 | | $ | 978,650 |
| Jamie A. Yoakum | | | | | | | | |
| Cash Severance Payment | | $ | 865,000 | | $ | 1,095,000 | | $ | 175,000 | | $ | 317,500 |
| Medical/Welfare Benefits | | $ | — | | $ | — | | $ | — | | $ | — |
Equity-Award Acceleration(1) | | $ | 301,387 | | $ | 301,387 | | $ | 301,387 | | $ | 301,387 |
| Total | | $ | 1,166,387 | | $ | 1,396,387 | | $ | 476,387 | | $ | 618,887 |
(1)Represents all unvested, time-based restricted shares of Class A common stock outstanding as of December 31, 2020.
Employment Agreements
On July 28, 2020, in connection with the execution of the purchase agreement relating to the Internalization Transaction, Mr. Seton and Ms. Neely entered into the Employment Agreements setting forth the terms upon which they will serve as Chief Executive Officer and Chief Financial Officer, respectively. The Employment Agreements became effective on September 30, 2020 and will continue in effect through December 31, 2025, unless terminated sooner pursuant to the Employment Agreements.
Seton Employment Agreement
Pursuant to the terms of Mr. Seton’s Employment Agreement, Mr. Seton is entitled to, among other things:
•an annual base salary of not less than $800,000;
•an annual cash bonus with a target amount of at least 135% of his annual base salary, based on criteria and goals established by our Board of Directors or one of its committees, or the Seton Target Annual Bonus; provided, however, that Mr. Seton’s annual bonus for calendar year 2020 was a fixed amount equal to the Seton Target Annual Bonus (rather than being based on criteria and goals established and administered by our Board of Directors or a committee thereof) and was prorated to reflect the period of employment from the Closing of the Internalization Transaction through December 31, 2020;
•in the first quarter of calendar year 2021, an award of time-based restricted stock, or the Seton Time-Based 2021 Award, and an award of performance-based restricted stock units, or the Seton Performance-Based 2021 Award, was granted under the A&R Incentive Plan and award agreements, which are collectively referred to as the Seton 2021 Awards. The combined value of our shares of common stock underlying the Seton 2021 Awards on the grant date are $1,800,000, with 50% of the grant date value of the Seton 2021 Awards consisting of the Seton Performance-Based 2021 Award and 50% consisting of the Seton Time-Based 2021 Award. The performance objectives and other terms and conditions of the Seton Performance-Based 2021 Award were determined by our Board of Directors, and the Seton Time-Based 2021 Award vest ratably over four years following the grant date, subject to Mr. Seton’s continued employment during the applicable vesting dates, with certain exceptions;
•as soon as practicable (but in no event more than 10 days) after the Closing of the Internalization Transaction, a grant of time-based restricted stock with a grant date fair value of $2,000,000, which, subject to the Mr. Seton’s continuous employment through the applicable vesting dates, with certain exceptions, will vest on December 31, 2024, or, if earlier, on the 15th month anniversary of the date of a “Qualified Event” (such as a listing of the Company’s stock on a nationally recognized stock exchange or an underwritten public offering of the Company’s stock). Such award was granted under and subject to the terms of the A&R Incentive Plan and an award agreement;
•participate in all employee benefit programs made available to our employees generally from time to time and to receive certain other perquisites; and
•payments and benefits upon termination of employment without “cause” or by Mr. Seton with “good reason” and with an execution of a release of claims as follows: (1) a lump sum cash payment equal to a multiple of two (if the termination does not occur within 12 months after a change in control) or two and one half (if the termination occurs within 12 months after a change in control) of the sum of his then-current base salary and the Seton Target Annual Bonus; (2) a pro-rated annual bonus for the year of termination; (3) vesting of all outstanding equity-based awards that are subject solely to time-based vesting conditions; and (4) if Mr. Seton elects continuation of coverage under our group health plan, continuation of subsidized health care coverage on the same terms as in effect at the time of termination for 18 months or, if earlier, until Mr. Seton becomes eligible for health care coverage from another employer or eligibility for continuation of coverage under any group health plan ends.
Mr. Seton’s Employment Agreement provides that for the 24-month period following a termination of employment for any reason, Mr. Seton will not solicit our employees or exclusive consultants or independent contractors and will not solicit our customers or, in the case of a termination of employment where severance is provided pursuant to the terms of the Employment Agreement, compete with us. The Employment Agreement also contains covenants relating to the treatment of confidential information and intellectual property matters and restrictions on the ability of Mr. Seton on the one hand and the Company on the other hand to disparage the other.
Neely Employment Agreement
Pursuant to the terms of Ms. Neely’s Employment Agreement, Ms. Neely is entitled to, among other things:
•an annual base salary of not less than $450,000;
•an annual cash bonus with a target amount of at least 100% of her annual base salary, based on criteria and goals established by our Board of Directors or one of its committees, or the Neely Target Annual Bonus; provided, however,
that Ms. Neely’s annual bonus for calendar year 2020 was a fixed amount equal to the Neely Target Annual Bonus (rather than being based on criteria and goals established and administered by our Board of Directors or one if its committees) and was prorated to reflect the period of employment from the Closing of the Internalization Transaction through December 31, 2020;
•in the first quarter of calendar year 2021, an award of time-based restricted stock, or the Neely Time-Based 2021 Award, and an award of performance-based restricted stock units, or the Neely Performance-Based 2021 Award was granted under the A&R Incentive Plan and award agreements, which are collectively referred to as the Neely 2021 Awards. The combined value of our shares of common stock underlying the Neely 2021 Awards on the grant date was $700,000, with 50% of the grant date value of the Neely 2021 Awards consisting of the Neely Performance-Based 2021 Award and 50% consisting of the Neely Time-Based 2021 Award. The performance objectives and other terms and conditions of the Neely Performance-Based 2021 Award were determined by our Board of Directors, and the Neely Time-Based 2021 Award vest ratably over four years following the grant date, subject to Ms. Neely’s continued employment during the applicable vesting dates, with certain exceptions.
•as soon as practicable (but in no event more than 10 days) after the Closing of the Internalization Transaction, a grant of time-based restricted stock with a grant date fair value of $1,000,000, which, subject to the Ms. Neely’s continuous employment through the applicable vesting dates, with certain exceptions, will vest on December 31, 2024, or, if earlier, on the 15th month anniversary of the date of a “Qualified Event” (such as a listing of the Company’s stock on a nationally recognized stock exchange or an underwritten public offering of the Company’s stock). Such award was granted under and subject to the terms of the A&R Incentive Plan and an award agreement;
•participate in all employee benefit programs made available to our employees generally from time to time and to receive certain other perquisites;
•payments and benefits upon termination of employment without “cause” or by Ms. Neely with “good reason” and with an execution of a release of claims as follows: (1) a lump sum cash payment equal to a multiple of one and one half (if the termination does not occur within 12 months after a change in control) or two (if the termination occurs within 12 months after a change in control) of the sum of her then-current base salary and the Neely Target Annual Bonus; (2) a pro-rated annual bonus for the year of termination; (3) vesting of all outstanding equity-based awards that are subject solely to time-based vesting conditions; and (4) if Ms. Neely elects continuation of coverage under our group health plan, continuation of subsidized health care coverage on the same terms as in effect at the time of termination for 18 months or, if earlier, until Ms. Neely becomes eligible for health care coverage from another employer or eligibility for continuation of coverage under any group health plan ends.
Ms. Neely’s Employment Agreement provides that for the 12-month period following a termination of employment for any reason, Ms. Neely will not solicit our employees or exclusive consultants or independent contractors and will not solicit our customers or, in the case of a termination of employment where severance is provided pursuant to the terms of the Employment Agreement, compete with us. The Employment Agreement also contains covenants relating to the treatment of confidential information and intellectual property matters and restrictions on the ability of Ms. Neely on the one hand and the Company on the other hand to disparage the other.
Offers of Employment
In connection with the execution of the purchase agreement relating to the Internalization Transaction, each of Mr. Sajeski, Mr. Reed and Mr. Yoakum were offered at-will employment with the Company, effective on September 30, 2020. The offers included the terms and conditions governing their employment, including base salary, annual cash bonus amounts and long term incentive awards, all of which are intended to promote retention and be competitive with our peers, as well as benefits applicable to all employees of the Company.
Risk Considerations in our Compensation Program
The Compensation Committee has assessed our compensation program for the purpose of reviewing and considering any risks presented by our compensation policies and practices that are likely to have a standing compensation committee based uponmaterial adverse effect on us. Following the factassessment, the Compensation Committee determined that our compensation policies and practices did not create risks that were reasonably likely to have a material adverse effect on the Company.
Compensation Committee Interlocks and Insider Participation
No executive officer of the Company has served as a director or member of the Compensation Committee (or other committee serving an equivalent function, or in the absence of any such committee, the entire Board of Directors) of any other entity that has one of its executive officers includingserving or having served as a member of our principal financial officer,Board of Directors or Compensation Committee.
Compensation Committee Report
The Compensation Committee of Sila Realty Trust, Inc. has reviewed and non-independent directors did not receive compensation directly from us for services rendereddiscussed with management the Compensation Discussion and Analysis included in this Proxy Statement. Based on its review and discussions, the Compensation Committee recommended to usthe Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into the Company Annual Report on Form 10-K for the fiscal year ended December 31, 2019. Accordingly, we have not included a2020.
By the Compensation Committee Report or a Compensation Discussion and Analysis in this proxy statement.
Our executive officers are also officers of our advisor, and its affiliates, including Carter Validus Real Estate Management Services II, LLC, our property manager, and are compensated by these entities, in part, for their services to us. We pay fees to such entities under our advisory agreement and our property management and leasing agreement. We also reimburse our advisor for its provision of administrative services, including related personnel costs, subject to certain limitations. A description of the fees that we pay to our advisor and property manager or any affiliate thereof is found in the “Transactions with Related Persons, Promoters and Certain Control Persons” section below. On July 28, 2020, we entered into the Purchase Agreement, which is intended to provide for the internalizationBoard of our external management functions, including thoseDirectors of our advisor and property manager. The Internalization Transaction is currently expected to close on September 30, 2020, subject to the satisfaction or waiver of certain conditions in the Purchase Agreement.Sila Realty Trust, Inc.
| | | | | | | | |
| | Randall Greene |
| | Roger Pratt |
| | Ronald Rayevich |
EQUITY COMPENSATION PLAN INFORMATION
Securities Authorized for Issuance Under Equity Compensation Plans and Unregistered Sales of Equity Securities
We adopted the Incentive Plan, pursuant to which our boardBoard of directorsDirectors has the authority to grant restricted or deferred stock awards to persons eligible under the plan. As of December 31, 2019,2020, the maximum number of shares of our Class A common stock that may be issued pursuant to the Incentive Plan was 300,000, subject to adjustment under specified circumstances. On March 6, 2020, our boardBoard of directorsDirectors approved the A&R Incentive Plan, pursuant to which we have the authority and power to grant awards of restricted shares of our Class A common stock to our directors, officers and employees, employees of our former advisor and its affiliates, employees of entities that provide services to us, directors of our former advisor or of entities that provide services to us, certain of our consultants and certain consultants to our former advisor and its affiliates or to entities that provide services to us. Our boardBoard of directorsDirectors has authorized a total of 5,000,000 shares of Class A common stock for issuance under the A&R Incentive Plan on a fully diluted basis at any time.
The following table provides information regarding the A&R Incentive Plan as of December 31, 2019:
2020: |
| | | | | | | | | | | | | | | | | | | |
| Plan Category | | Number of Securities to Be Issued upon Outstanding Options, Warrants and Rights | | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights | | Number of Securities Remaining Available for Future Issuance |
Equity compensation plans approved by security holders(1) | | — |
| | — |
| | 240,0004,344,323 |
|
| Equity compensation plans not approved by security holders | | — |
| | — |
| | — |
|
| Total | | — |
| | — |
| | 240,0004,344,323 |
|
| |
(1) | On September 25, 2019, we granted an aggregate of 12,000 restricted shares of Class A common stock to our independent directors, which were awarded in connection with each independent director’s re-election to our board of directors. The fair value of each share of our restricted common stock was estimated at the date of grant at $9.25 per share. As of December 31, 2019, we had issued an aggregate of 60,000 shares of restricted stock to our independent directors in connection with their appointment or re-election to our board of directors. Restricted stock issued to our independent directors vests over a four-year period following the first anniversary of the date of grant in increments of 25% per annum. |
The shares described above were not registered under the Securities Act and were issued in reliance on Section 4(a)(2) of the Securities Act.
Anticipated Security Ownership of Management Post-Internalization TransactionOn July 28, 2020, in connection with the pending Internalization Transaction, CV Manager, LLC, a newly formed Delaware limited liability company, in its post-closing capacity as our indirect subsidiary, we and our operating partnership entered into an employment agreement, or the Employment Agreements, with each of Michael A. Seton and Kay C. Neely, or the Executives, which set forth the terms and conditions of Mr. Seton’s and Ms. Neely’s service as our Chief Executive Officer and Chief Financial Officer, respectively.
Pursuant to the Employment Agreements, Mr. Seton and Ms. Neely will be eligible to receive equity and/or other long-term incentive awards, in the discretion of our board of directors or a committee thereof.
Subject to each Executive’s continued employment through the grant date, in the first quarter of calendar year 2021, each Executive will receive an award of time-based restricted stock, or a Time-Based 2021 Award, and an award of performance-based restricted stock units, or the Performance-Based 2021 Award, and together with the Time-Based 2021 Award, the 2021 Awards, each to be granted under and subject to the terms of A&R Incentive Plan and award agreements. In the case of Mr. Seton, the combined value of the shares of our common stock underlying the 2021 Awards on the grant date will be $1,800,000, with 50% of the grant date value of the 2021 Awards consisting of the Performance-Based 2021 Award and 50% consisting of the Time-Based 2021 Award. In the case of Ms. Neely, the combined value of the shares of our common stock underlying the 2021 Awards will be $700,000, with 50% of the grant date value of the 2021 Awards consisting of the Performance-Based 2021 Award and 50% consisting of the Time-Based 2021 Award. The performance objectives and other terms and conditions of the Performance-Based 2021 Award will be determined by our board of directors or a committee thereof. The Time-Based 2021 Award will vest ratably over four years following the grant date, subject to the Executive’s continued employment through the applicable vesting dates, with certain exceptions.
Further, as soon as practicable (but in no event more than 10 days) after the closing of the Internalization Transaction, Mr. Seton and Ms. Neely will receive a grant of time-based restricted stock with a grant date fair value of $2,000,000 and $1,000,000, respectively, which, subject to the Executive’s continuous employment through the applicable vesting dates, with certain exceptions, will vest on December 31, 2024, or, if earlier, on the 15th month anniversary of the date of a “Qualified Event” (such as a listing of our common stock on a nationally recognized stock exchange or an underwritten public offering of our common stock). The awards will be granted under and subject to the terms of the A&R Incentive Plan and an award agreement.
BENEFICIAL OWNERSHIP OF EQUITY SECURITIES
The following table sets forth information as of August 19, 2020,April 22, 2021, regarding the beneficial ownership of our common stock by each person known by us to own 5.0% or more of the outstanding shares of any class of our common stock, each of our directors, and each named executive officer,NEO, and our directors and executive officers as a group. The percentage of beneficial ownership is calculated based on 166,055,460166,996,024 shares of Class A common stock outstanding, as of August 19, 2020.April 22, 2021. As of the date of this proxy statement, there were no executive officers, directors, or other beneficial owners holding any shares of Class I common stock, Class T common stock, and Class T2 common stock. |
| | | | | | | | | | | | | |
Name of Beneficial Owner (1) | | Number of Class A Shares of Common Stock Beneficially Owned (2) | | Percentage of All Class A Common Stock |
Carter Validus REIT Management Company II, LLCDirectors | | 29,362 |
| | * |
DirectorsMichael A. Seton (3) | | 334,781 | | | * |
Jonathan Kuchin (3) (4) | | 47,69849,850 |
| | * |
Randall Greene (4)(5) | | 46,47247,339 |
| | * |
Adrienne Kirby (6) | | — | | | * |
Roger Pratt (5)(7) | | 16,01417,530 |
| | * |
Ronald Rayevich (6)(8) | | 39,99040,857 |
| | * |
Michael A. Seton | | (7
| )
| | * |
John E. Carter | | (8
| )
| | * |
| Executive Officers | | | | |
Kay C. Neely | | (9(9)
| | 155,883 | | | * |
)Jon C. Sajeski (10)
| | 70,749 | | | * |
Jason C. Reed (11) | | 70,749 | | | * |
Jamie A. Yoakum (12) | | 43,313 | | | * |
All officers and directors as a group (7(10 persons) | | 179,536831,051 |
| | * |
| |
* | Represents less than 1% of the outstanding Class A common stock. |
| |
(1) | The address of each beneficial owner listed is c/o Carter Validus Mission Critical REIT II, Inc., 4890 W. Kennedy Blvd., Suite 650, Tampa, Florida 33609. |
| |
(2) | Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities and shares issuable pursuant to options, warrants and similar rights held by the respective person or group which may be exercised within 60 days following August 19, 2020. Except as otherwise indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. |
| |
(3) | Represents 32,336 restricted shares of our Class A common stock issued to the beneficial owner in connection with his initial election, his subsequent re-elections to the board of directors and restricted shares of our Class A common stock granted under the A&R Incentive Plan; and 15,362 non-restricted shares of Class A common stock received as merger consideration in connection with our merger with Carter Validus Mission Critical REIT, Inc., or the REIT Merger. |
| |
(4) | Represents 29,665 restricted shares of our Class A common stock issued to the beneficial owner in connection with his initial election, his subsequent re-elections to the board of directors and restricted shares of our Class A common stock granted under the A&R Incentive Plan; and 16,807 non-restricted shares of Class A common stock received as merger consideration in the REIT Merger. |
| |
(5) | Represents restricted shares of our Class A common stock issued to the beneficial owner in connection with his initial election, his subsequent re-election to the board of directors and restricted shares of our Class A common stock granted under the A&R Incentive Plan. |
| |
(6) | Represents 27,351 restricted shares of our Class A common stock issued to the beneficial owner in connection with his initial election, his subsequent re-elections to the board of directors and restricted shares of our Class A common stock granted under the A&R Incentive Plan; and 12,639 non-restricted shares of Class A common stock received as merger consideration in the REIT Merger. |
| |
(7) | Mr. Seton is the Chief Executive Officer of Carter Validus REIT Management Company II, LLC, which directly owns 29,362 shares of Class A common stock in our company. Mr. Seton disclaims beneficial ownership of the shares held by Carter Validus REIT Management Company II, LLC, except to the extent of his pecuniary interest. |
| |
(8) | Mr. Carter is Executive Chairman of Carter Validus REIT Management Company II, LLC, which directly owns 29,362 shares of Class A common stock in our company. Mr. Carter disclaims beneficial ownership of the shares held by Carter Validus REIT Management Company II, LLC, except to the extent of his pecuniary interest. |
* Represents less than 1% of the outstanding Class A common stock.
(1)The address of each beneficial owner listed is Sila Realty Trust, Inc., 4890 W. Kennedy Blvd., Suite 650, Tampa, Florida 33609.
(2)Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities and shares issuable pursuant to options, warrants and similar rights held by the respective person or group which may be exercised within 60 days following April 22, 2021. Except as otherwise indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them.
(3)Represents 231,214 time-based restricted shares of Class A common stock issued on October 1, 2020 and the Time-Based 2021 Award, consisting of 103,567 restricted shares of Class A common stock, issued on January 8, 2021.
(4)Represents 34,488 restricted shares of our Class A common stock issued to the beneficial owner in connection with his initial election, his subsequent re-elections to the Board of Directors and restricted shares of our Class A common stock granted under the A&R Incentive Plan; and 15,362 non-restricted shares of Class A common stock received as merger consideration in connection with our merger with Carter Validus Mission Critical REIT, Inc., or the REIT Merger.
(5)Represents 30,532 restricted shares of our Class A common stock issued to the beneficial owner in connection with his initial election, his subsequent re-elections to the Board of Directors and restricted shares of our Class A common stock granted under the A&R Incentive Plan; and 16,807 non-restricted shares of Class A common stock received as merger consideration in the REIT Merger.
(6)On April 15, 2021, the Board of Directors appointed Ms. Kirby as director, effective immediately. On April 23, 2021, we granted Ms. Kirby 1,677 restricted shares of our Class A common stock under the A&R Incentive Plan.
(7)Represents restricted shares of our Class A common stock issued to the beneficial owner in connection with his initial election, his subsequent re-election to the Board of Directors and restricted shares of our Class A common stock granted under the A&R Incentive Plan.
| |
(9) | Ms. Neely is the Chief Financial Officer of Carter Validus REIT Management Company II, LLC, which directly owns 29,362 shares of Class A common stock in our company. Ms. Neely disclaims beneficial ownership of the shares held by Carter Validus REIT Management Company II, LLC, except to the extent of her pecuniary interest. |
(8)Represents 28,218 restricted shares of our Class A common stock issued to the beneficial owner in connection with his initial election, his subsequent re-elections to the Board of Directors and restricted shares of our Class A common stock granted under the A&R Incentive Plan; and 12,639 non-restricted shares of Class A common stock received as merger consideration in the REIT Merger.
(9)Represents 115,607 time-based restricted shares of Class A common stock issued on October 1, 2020 and the Time-Based 2021 Award, consisting of 40,276 restricted shares of Class A common stock, issued on January 8, 2021.
(10)Represents 57,803 time-based restricted shares of Class A common stock issued on October 1, 2020 and the Time-Based 2021 Award, consisting of 12,946 restricted shares of Class A common stock, issued on January 8, 2021.
(11)Represents 57,803 time-based restricted shares of Class A common stock issued on October 1, 2020 and the Time-Based 2021 Award, consisting of 12,946 restricted shares of Class A common stock, issued on January 8, 2021.
(12)Represents 34,682 time-based restricted shares of Class A common stock issued on October 1, 2020 and the Time-Based 2021 Award, consisting of 8,631 restricted shares of Class A common stock, issued on January 8, 2021.
AUDIT COMMITTEE REPORT
Independent Auditors
KPMG LLP (“KPMG”) is the independent registered public accounting firm selected by our audit committeeAudit Committee for the fiscal year ended December 31, 2020. KPMG has served as our independent registered public accounting firm since 2014. The audit committeeAudit Committee reserves the right, however, to select new auditors at any time in the future in its discretion if it deems such decision to be in the best interests of the Company and its stockholders.Company. Any such decision would be disclosed to the stockholders in accordance with applicable securities laws. KPMG representatives will be present at the Annual Meeting and will have the opportunity to make a statement if they desire to do so. In addition, KPMG representatives will be available to respond to appropriate questions posed by any stockholders.
During the year ended December 31, 20182019 through the most recent fiscal year ended December 31, 2019 and through the subsequent interim period,2020, neither the Company nor anyone on its behalf consulted with KPMG regardingregarding: (1) the application of accounting principles to a specified transaction, either completed or proposed; (2) the type of audit opinion that might be rendered on the Company’s financial statements; or (3) any matter that was either the subject of a disagreement or event identified in response to Item 304(a)(1) of Regulation S-K (there being none).
The audit committeeAudit Committee reviewed the audit and non-audit services performed by KPMG, as well as the fees charged by KPMG for such services. In its review of the non-audit services and fees, the audit committeeAudit Committee considered whether the provision of such services is compatible with maintaining the independence of KPMG. The aggregate fees billed to us for professional accounting services by KPMG for the years ended December 31, 20192020 and December 31, 2018,2019, are respectively set forth in the table below.
| | | | Year Ended December 31, 2019 | | Year Ended
December 31, 2018 | | Year Ended
December 31, 2020 | | Year Ended
December 31, 2019 |
| Audit fees | $ | 906,500 |
| | $ | 514,000 |
| Audit fees | $ | 820,000 | | | $ | 906,500 | |
| Audit-related fees | — |
| | — |
| Audit-related fees | — | | | — | |
| Tax fees | — |
| | — |
| Tax fees | 164,110 | | | — | |
| All other fees | 10,000 |
| | 10,890 |
| All other fees | 10,000 | | | 10,000 | |
| Total | $ | 916,500 |
| | $ | 524,890 |
| Total | $ | 994,110 | | | $ | 916,500 | |
For purpose of the preceding table, the professional fees are classified as follows:
All requests for services to be provided by the independent auditor that do not require specific pre-approval by the audit committeeAudit Committee will be submitted to management and must include a detailed description of the services to be rendered. Management will determine whether such services are included within the list of services that have received the general pre-approval of the audit committee.Audit Committee. The audit committeeAudit Committee will be informed on a timely basis of any such services rendered by the independent auditors.
Our independent directors have reviewed the material transactions between our affiliates and us during the year ended December 31, 2019 and the six months ended June 30, 2020. Set forth below is a description of the transactions with affiliates. We believe that we have executed all of the transactions set forth below on terms that are fair and reasonable to the Company and on terms no less favorable to us than those available from unaffiliated third parties.
We will cease paying the distribution and servicing fee with respect to Class T shares at the earliest to occur of the following: (i) a listing of the Class T shares on a national securities exchange, (ii) following the completion of the Offering, total underwriting compensation in the Offering equaling 10.0% of the gross proceeds from the Offering less the total amount of distribution and servicing fees waived by participating broker-dealers in the Offering, (iii) such Class T shares no longer being outstanding, (iv) December 31, 2021, which is the fourth anniversary of the last day of the fiscal quarter in which our primary offering of our initial public offering terminated and (v) the date on which the holder of such Class T share or its agent notifies us or our agent that he or she is represented by a new participating broker-dealer; provided that we will continue paying the Class T distribution and servicing fee, which shall be re-allowed to the new participating broker-dealer, if the new participating broker-dealer enters into a participating broker-dealer agreement with our dealer manager or otherwise agrees to provide the services set forth in the dealer manager agreement.
We will cease paying the distribution and servicing fee with respect to a Class T2 share at the earliest to occur of the following: (i) a listing of the Class T2 shares on a national securities exchange; (ii) following the completion of the Offering, total underwriting compensation in the Offering equaling 10% of the gross proceeds from the Offering; (iii) there are no longer any Class T2 shares outstanding; (iv) the end of the month in which our transfer agent, on our behalf, determines that total underwriting compensation, including selling commissions, dealer manager fees, the Class T2 distribution and servicing fee and other elements of underwriting compensation with respect to such Class T2 share, would be in excess of 8.5% of the total gross investment amount at the time of purchase of such Class T2 share; (v) the end of the month in which our transfer agent, on our behalf, determines that the Class T2 distribution and servicing fee with respect to such Class T2 share would be in excess of
3.0% of the total gross investment amount at the time of purchase of such Class T2 share; (vi) the date on which such Class T2 share is repurchased by us; and (vii) the date on which the holder of such Class T2 share or its agent notifies us or our agent that he or she is represented by a new participating broker-dealer; provided that we will continue paying the Class T2 distribution and servicing fee, which shall be re-allowed to the new participating broker-dealer, if the new participating broker-dealer enters into a participating broker-dealer agreement with our dealer manager or otherwise agrees to provide the services set forth in the dealer manager agreement. At the time we cease paying the distribution and servicing fee with respect to a Class T2 share pursuant to the provisions above, such Class T2 share (including associated Class T2 DRIP shares) will convert into a number of Class I shares (including any fractional shares) with an equivalent of NAV as such share. Stockholders will receive a confirmation notice when their Class T2 shares have been converted into Class I shares. We currently expect that any such
conversion will be on a one-for-one basis, as we expect the NAV per share of each Class T2 share and Class I share to be the same.
During the Offerings, all selling commissions were expected to be re-allowed to participating broker-dealers. The dealer manager fee could be partially re-allowed to participating broker-dealers. No selling commissions, dealer manager fees and distribution and servicing fees are paid in connection with purchases of shares of any class issued pursuant to the DRIP.
In connection with the rental, leasing, operation and management of our properties, prior to the Closing of the Internalization Transaction, we pay ourpaid the former property manager, and its affiliates, aggregate fees equal to 3.0% of gross revenues from the properties managed, or property management fees. We reimburse ourreimbursed the former property manager and its affiliates for property-level expenses that any of them paypaid or incurincurred on our behalf, including certain salaries, bonuses and benefits of persons employed by ourthe former property manager and its affiliates, except for the salaries, bonuses and benefits of persons who also serveserved as one of its executive officers. OurFor certain properties the former property manager and its affiliates may subcontractsubcontracted the performance of their duties to third parties and paypaid all or a portion of the property management fee to the third parties with whom they contractcontracted for thesethose services. IfWhen we contractcontracted directly with third parties for such services, we will paypaid such third parties customary market fees and may pay ourpaid the former property manager an oversight fee equal to 1.0% of the gross revenues of the properties managed. In no event willdid we pay ourthe former property manager or any affiliate both a property management fee and an oversight fee with respect to any particular property.
exceed the fee customarily charged in arm’s-length transactions by others rendering similar services in the same geographic area for similar properties as determined by a survey of brokers and agents in such area and which is typically less than $1,000.area.
fair, competitive and commercially reasonable, and no less favorable to us than comparable loans between unaffiliated parties.
PROPOSAL NO. 2 -— NON-BINDING ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION
The Audit Committee selected and appointed the firm of KPMG to act as our independent registered public accounting firm for the year ending December 31, 2020.2021. Ratification of the appointment of KPMG requires the affirmative vote of a majority of the votes cast in person (virtually) or by proxy at a meeting at which a quorum is present. Any shares not voted, whether by abstention, broker non-vote or otherwise, have no impact on the vote.
Although stockholder ratification of the appointment of our independent auditor is not required by our bylaws or otherwise, we are submitting the selection of KPMG to our stockholders for ratification as a matter of good corporate governance practice. Even if the selection is ratified, our audit committee,Audit Committee, in its discretion, may select a different independent registered public accounting firm at any time if it determines that such a change would be in the best interests of the Company. If our stockholders do not ratify the Audit Committee’s selection, the Audit Committee will take that fact into consideration, together with such other factors it deems relevant, in determining its next selection of our independent registered public accounting firm.
Representatives of KPMG are expected to be available during the Annual Meeting, will have an opportunity to make a statement if they so desire, and will be available to respond to questions from our stockholders. Please see the section entitled “Audit Committee Report - Independent Auditors” in this proxy statement for the aggregate fees billed to us for professional accounting services by KPMG for the years ended December 31, 20192020 and December 31, 2018.2019.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF KPMG AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2020.2021.
ANY STOCKHOLDER WHO DID NOT RECEIVE A COPY OF OUR MOST RECENT ANNUAL REPORT ON FORM 10-K OR WOULD LIKE ADDITIONAL COPIES, INCLUDING THE FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENT SCHEDULES, AS FILED WITH THE SEC, SHALL BE FURNISHED A COPY WITHOUT CHARGE UPON WRITTEN REQUEST TO: CARTER VALIDUS MISSION CRITICAL REIT II,SILA REALTY TRUST, INC., 4890 W. KENNEDY BLVD., SUITE 650, TAMPA, FLORIDA 33609, ATTENTION: SECRETARY.
