OPTION EXERCISES AND STOCK VESTED TABLE
The following table presents information concerning option exercises and stock vested for NEOs that were outstanding as of December 31, 2017.2019.
| | | Stock Awards | | | Stock Awards | | ||||||||||||||||||||
| Name | | Number of Shares Acquired on Vesting | | Value Realized on Vesting(1) | | | Number of Shares Acquired on Vesting | | Value Realized on Vesting(1) | | ||||||||||||||||
| Jeffrey Busch | | | | 44,896(2) | | | | $ | 368,147 | | | | | | 137,016(2) | | | | $ | 1,812,725 | | | ||||
| David Young | | | | 60,000(3) | | | | $ | 492,000 | | | |||||||||||||||
| Robert Kiernan | | | | — | | | | $ | — | | | | | | 17,626(3) | | | | $ | 233,196 | | | ||||
| Donald McClure | | | | 30,430(4) | | | | $ | 249,526 | | | |||||||||||||||
| Alfonzo Leon | | | | 15,258(5) | | | | $ | 125,116 | | | | | | 49,948(4) | | | | $ | 660,811 | | | ||||
| Jamie Barber | | | | — | | | | $ | — | | | | | | 15,857(5) | | | | $ | 209,785 | | | ||||
| Allen Webb | | | | 13,820(6) | | | | $ | 113,324 | | | | | | 41,540(6) | | | | $ | 549,571 | | | ||||
(1)
Based on the closing price of the Company’s common stock on December 29, 2017 of $8.20 per share,31, 2019, which was the last trading day of 2017.2019, of $13.23 per share.
(2)
Consists of: (i) 3,983 LTIP Units issued on August 23, 2017 that had vested as of December 31, 2019, (ii) 2,225 LTIP Units issued pursuant to our 2017 Annual Performance Plan that had vested as of December 31, 2019, (iii) 6,638 LTIP Units issued pursuant to our 2018 Annual Performance Plan that had vested as of December 31, 2019, (iv) 3,156 LTIP Units issued pursuant to our 2018 Long-Term Incentive Plan that had vested as of December 31, 2019 and (v) 1,625 LTIP Units issued as a discretionary grant in 2019 that had vested as of December 31, 2019.
(4)
Consists of : (i) 12,00020,000 LTIP Units issued in connection with the Company’s initial public offering on July 1, 2016 that had vested as of December 31, 2017 and2019, (ii) 3,2589,774 LTIP Units issued on December 21, 2016 that had vested as of December 31, 2017.2019, (iii) 8,182 LTIP Units issued pursuant to our 2017 Annual Performance Plan that had vested as of December 31, 2019, (iv) 6,383 LTIP Units issued pursuant to our 2018 Annual Performance Plan that had vested as of December 31, 2019, (v) 4,047 LTIP Units issued pursuant to our 2018 Long-Term Incentive Plan that had vested as of December 31, 2019 and (vi) 1,563 LTIP Units issued as a discretionary grant in 2019 that had vested as of December 31, 2019.
(5)
Consists of: (i) 3,487 LTIP Units issued on May 8, 2017 that had vested as of December 31, 2019, (ii) 3,886 LTIP Units issued pursuant to our 2017 Annual Performance Plan that had vested as of December 31, 2019, (iii) 4,438 LTIP Units issued pursuant to our 2018 Annual Performance Plan that had vested as of December 31, 2019, (iv) 2,671 LTIP Units issued pursuant to our 2018 Long-Term Incentive Plan that had vested as of December 31, 2019 and (v) 1,375 LTIP Units issued as a discretionary grant in 2019 that had vested as of December 31, 2019.
(6)
Consists of : (i) 12,00020,000 LTIP Units issued in connection with the Company’s initial public offering on July 1, 2016 that had vested as of December 31, 2017 and2019, (ii) 1,8205,430 LTIP Units issued on December 21, 2016 that had vested as of December 31, 2017.2019, (iii) 7,961 LTIP units issued pursuant to our 2017 Annual Performance Plan that had vested as of December 31, 2019, (iv) 4,516 LTIP Units issued pursuant to our 2018 Annual Performance Plan that had vested as of December 31, 2019, (v) 2,399 LTIP Units issued pursuant to our 2018 Long-Term Incentive Plan that had vested as of December 31, 2019 and (vi) 1,235 LTIP Units issued as a discretionary grant in 2019 that had vested as of December 31, 2019.
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POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
Time-Based Awards.LTIP Awards
The LTIP Award agreements related to LTIP Awards issued outside of the 2017our Annual and Long-Term Performance-Based Plans provide that LTIP Units will vest upon the date that the grantee’s employment with the Company and its affiliates ends on account of the grantee’s termination of employment by the Company or its affiliates without Cause (as defined below) or by the grantee for Good Reason (as defined below) or upon a Change-in-Control (as defined below) (each, a “Qualified Termination”“Qualified Termination”):
“Cause” means, with respect to the grantee, a determination by the Compensation Committee in its sole discretion that the grantee has: (i) materially breached a written agreement between the grantee and the Company or one of its affiliates, including the material breach of any written policy or written code of conduct established by the Company or one of its affiliates and applicable to the grantee; (ii) committed an act of gross negligence, willful misconduct, breach of fiduciary duty, fraud, theft or embezzlement; (iii) been convicted of or been indicted for, or pled nolo contendere to, any felony (or state law equivalent) or
any crime or misdemeanor involving moral turpitude; (iv) willfully failed or refused, other than due to disability, to perform the grantee’s duties to the Company or one of its affiliates; or (v) engaged in any other conduct that is materially injurious (whether monetarily or otherwise) to the Company or one of its affiliates.
“Good Reason” means: (i) a material diminution in the grantee’s base salary; (ii) a material diminution or adverse change in the grantee’s title, duties or authority; (iii) a material breach by the Company or the Operating Partnership of any of its covenants or obligations under the relevant LTIP Award Agreement; or (iv) the relocation of the geographic location of the grantee’s principal place of employment by more than 50 miles from the location of the grantee’s principal place of employment; provided that, in the case of the grantee’s allegation of Good Reason, (A) the condition described in the foregoing clauses must have arisen without the grantee’s consent; (B) the grantee must provide written notice to Operating Partnership of such condition in accordance with the Agreement within 45 days of the initial existence of the condition; (C) the condition specified in such notice must remain uncorrected for 30 days after receipt of such notice by Operating Partnership; and (D) the grantee’s date of termination must occur within 60 days after such notice is received by Operating Partnership.
“Change-in-Control” means and includes each of the following:
(a) The acquisition, either directly or indirectly, by any individual, entity or group (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act), of more than 50% of either (i) the then outstanding shares of the Company’s common stock (the “Common Stock”“Common Stock”), taking into account as outstanding for this purpose such shares of Common Stock issuable upon the exercise of options or warrants, the conversion of convertible shares or debt, and the exercise of any similar right to acquire such Common Stock (the “Outstanding“Outstanding Company Common Stock”Stock”) or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding“Outstanding Company Voting Securities”Securities”); provided,, however, that the following acquisitions shall not constitute a Change in Control (i) any acquisition by the Company or any of its subsidiaries, (ii) any acquisition by a trustee or other fiduciary holding the Company’s securities under an employee benefit plan sponsored or maintained by the Company or any of its affiliates, (iii) any acquisition by an underwriter, initial purchaser or placement agent temporarily holding the Company’s securities pursuant to an offering of such securities or (iv) any acquisition by an entity owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the then Outstanding Company Common Stock.
(b) Individuals who constitute incumbent Directors at the beginning of any two-consecutive-year period, together with any new incumbent Directors who become members of the Board during such two-year period, cease to be a majority of the Board at the end of such two-year period.
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(c) The consummation of a reorganization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company that requires the approval of the Company’s stockholders, whether for such transaction or the issuance of securities in the transaction (a “Business Combination”“Business Combination”), in each case, unless following such Business Combination:
(i) the individuals and entities who were the beneficial owners of the Outstanding Company Voting Securities immediately prior to such Business Combination, beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of members of the boardBoard of directorsDirectors (or the analogous governing body) of the entity resulting from such Business Combination (the “Successor Entity”“Successor Entity”) (or, if applicable, the ultimate parent entity that directly or indirectly has beneficial ownership of sufficient voting securities to elect a majority of the members of the boardBoard of directorsDirectors (or the analogous governing body) of the Successor Entity (the “Parent Company”“Parent Company”));
(ii) no Person beneficially owns (within the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of members of the boardBoard of directorsDirectors (or the analogous governing body) of the Parent Company (or, if there is no Parent Company, the Successor Entity); and
(iii) at least a majority of the members of the boardBoard of directorsDirectors (or the analogous governing body) of the Parent Company (or, if there is no Parent Company, the Successor Entity) following the consummation of the Business Combination were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination.
(d) The direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its subsidiaries, taken as a whole, to any Person that is not a subsidiary of the Company.
Qualified Termination — The LTIP Award agreements related to LTIP Awards issued pursuant to 2017our Annual and Long-Term Performance-Based Awards provide that all earned LTIP Units will vest upon the date of a Qualified Termination; provided, however that with respect toTermination. Forfeiture restrictions are removed in the event of a termination due to deathof the executive’s position without “Cause” or disability, any earned LTIP Units will vestfor “Good Reason” or as ifa result of the executive’s retirement, although transfer and redemption restrictions remain until such dates as such executive’s awards would have vested absent such termination had not occurred.or retirement.
The LTIP Award agreements related to LTIP Awards issued pursuant to 2017 Annual and Long-Term Performance-Based Awards provide that, with respect to any unearned LTIP Units as of the date of a Qualified Termination, the relevant performance metrics will be evaluated on the original valuation date for each plan as if such termination had not occurred and then, with respect to LTIP Units then earned, a partial service factor will be applied to determine that actual number of LTIP Units to issue to the grantee.
Change-in-Control — Upon a Change-in-Control, with respect to the 2017 Annual Performance-Based Awards, (i) if a Change-in-Control had occurred prior to the first anniversary of the effective date of the plan, the performance goals related to such plan would have been pro-rated based on the effective date of the Change-in-Control and the number of resulting earned LTIP Awards would have been pro-rated based on the effective date of the Change-in-Control and (ii) if a Change-in-Control occurs after the first anniversary of the effective date of the plan, the performance goals will be measured as if such Change-in-ControlChange-in- Control had not occurred and the amount of earned LTIP Units will be determined accordingly.
With respect to the 2017 Long-Term Performance-Based Awards, (i) if a Change-in-Control occurs prior to the third anniversary of the effective date of the plan, the performance goals related to such plan would have been pro-rated based on the effective date of the Change-in-Control and the number of resulting earned LTIP Awards would have been pro-rated based on the effective date of the Change-in-Control and (ii) if a Change-in-Control occurs after the third anniversary of the effective date of the plan, the performance goals will be measured as if such Change-in-Control had not occurred and the amount of earned LTIP Units will be determined accordingly.
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Any earned LTIP Units issued upon a Change-in-Control as described above will be subject to the same vesting schedule as if the Change-in-Control had not occurred except that, if a Qualified Termination occurs prior to the one-year anniversary of such Change-in-Control, all earned LTIP Units shall immediately vest upon such termination.
The following tables represent the payments due to our NEOs in the event termination or change in control payments would have been triggered under the 2016 Plan, the 2017 Annual Performance-Based Awards and the 2017 Long-Term Performance-Based Incentive PlanPlans as of December 31, 2017.2019.
Payments Due Upon a Qualified Termination or a Change-in-Control.
| Name | | Stock Awards | | Total(1) | | | Stock Awards | | Total(1) | | ||||||||||||||||
| Jeffrey Busch | | | | 76,309(2) | | | | $ | 625,734 | | | | | | 29,318(2) | | | | $ | 387,873 | | | ||||
David Young(3) | | | | — | | | | $ | — | | | |||||||||||||||
| Robert Kiernan | | | | 8,199(4) | | | | $ | 67,232 | | | | | | 42,650(3) | | | | $ | 564,253 | | | ||||
Donald McClure(5) | | | | 2,845 | | | | $ | 23,329 | | | |||||||||||||||
| Alfonzo Leon | | | | 22,698(6) | | | | $ | 186,124 | | | | | | 24,380(4) | | | | $ | 322,552 | | | ||||
| Jamie Barber | | | | 9,116(7) | | | | $ | 74,751 | | | | | | 35,151(5) | | | | $ | 465,043 | | | ||||
| Allen Webb | | | | 19,581(8) | | | | $ | 160,564 | | | | | | 15,712(6) | | | | $ | 207,868 | | | ||||
(1)
Based on the closing price of the Company’s common stock on December 29, 2017 of $8.20 per share,31, 2019, which was the last trading day of 2017.2019, of $13.23 per share.
(2)
Consists of 66,579(i) 2,250 LTIP Units issued outside of the 2017Annual and Long-Term Incentive Plans, (ii) 9,191 LTIPs issued pursuant to the 2018 Annual Plan that had not vested as of December 31, 2019, (iii) 9,136 LTIP Units issued pursuant to the time-based vesting portion of the 2019 Long-Term Incentive Plan that had not vested as of December 31, 2019 and 9,730(iv) 8,741 LTIP Units issued pursuant to the time-based vesting portion of the 2018 Long-Term Incentive Plan that had not vested as of December 31, 2019. Pursuant to the Company’s Annual and Long-Term Incentive Plans, no performance-based LTIP Units are issued upon the date of a Qualified Termination. Instead, LTIP Units are issued at the end of the performance period and a partial service factor is applied based on the date of the Qualified Termination. Therefore, we are unable to determine the amount of LTIP Units that would be awarded based on a Qualified Termination date of December 31, 2019.
(3)
Consists of (i) 23,343 LTIP Units issued outside of the Annual and Long-Term Incentive Plans, (ii) 6,638 LTIPs issued pursuant to the 2018 Annual Plan that had not vested as of December 31, 2019, (iii) 6,356 LTIP Units issued pursuant to the time-based vesting portion of the 2019 Long-Term Incentive Plan that had not vested as of December 31, 2019 and (iv) 6,313 LTIP Units issued pursuant to the time-based vesting portion of the 2018 Long-Term Incentive Plan that had not vested as of December 31, 2019. Pursuant to the Company’s Annual and Long-Term Incentive Plans, no performance-based LTIP Units are issued upon the date of a Qualified Termination. Instead, LTIP Units are issued at the end of the performance period and a partial service factor is applied based on the date of the Qualified Termination. Therefore, we are unable to determine the amount of LTIP Units that would be awarded based on a Qualified Termination date of December 31, 2019.
(4)
Consists of (i) 1,563 LTIP Units issued outside of the Annual and Long-Term Incentive Plans, (ii) 6,383 LTIPs issued pursuant to the 2018 Annual Plan that had not vested as of December 31, 2019, (iii) 8,342 LTIP Units issued pursuant to the time-based vesting portion of the 2019 Long-Term Incentive Plan that had not vested as of December 31, 2019 and (iv) 8,093 LTIP Units issued pursuant to the time-based vesting portion of the 2018 Long-Term Incentive Plan that had not vested as of December 31, 2019. Pursuant to the Company’s Annual and Long-Term Incentive Plans, no performance-based LTIP Units are issued upon the date of a Qualified Termination. Instead, LTIP Units are issued at the end of the performance period and a partial service factor is applied based on the date of the Qualified Termination. Therefore, we are unable to determine the amount of LTIP Units that would be awarded based on a Qualified Termination date of December 31, 2019.
(5)
Consists of (i) 19,810 LTIP Units issued outside of the Annual and Long-Term Incentive Plans, (ii) 4,438 LTIPs issued pursuant to the 2018 Annual Plan that had not vested as of December 31, 2019,
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(iii) 5,561 LTIP Units issued pursuant to the time-based vesting portion of the 2019 Long-Term Incentive Plan that had not vested as of December 31, 2019 and (iv) 5,341 LTIP Units issued pursuant to the time-based vesting portion of the 2018 Long-Term Incentive Plan that had not vested as of December 31, 2019. Pursuant to the Company’s Annual and Long-Term Incentive Plans, no performance-based LTIP Units are issued upon the date of a Qualified Termination. Instead, LTIP Units are issued at the end of the performance period and a partial service factor is applied based on the date of the Qualified Termination. Therefore, we are unable to determine the amount of LTIP Units that would be awarded based on a Qualified Termination date of December 31, 2019.
(6)
Consists of (i) 1,235 LTIP Units issued outside of the Annual and Long-Term Incentive Plans, (ii) 4,516 LTIPs issued pursuant to the 2018 Annual Plan that had not vested as of December 31, 2019, (iii) 5,164 LTIP Units issued pursuant to the time-based vesting portion of the 2019 Long-Term Incentive Plan that had not vested as of December 31, 2019 and (iv) 4,797 LTIP Units issued pursuant to the time-based vesting portion of the 2018 Long-Term Incentive Plan that had not vested as of December 31, 2019. Pursuant to the Company’s Annual and Long-Term Incentive Plans, no performance-based LTIP Units are issued upon the date of a Qualified Termination. Instead, LTIP Units are issued at the end of the performance period and a partial service factor is applied based on the date of the Qualified Termination. Therefore, we are unable to determine the amount of LTIP Units that would be awarded based on a Qualified Termination date of December 31, 2019.
Payments Due Upon a Change of Control
| Name | | | Stock Awards | | | Total(1) | | ||||||
| Jeffrey Busch | | | | | 125,383(2) | | | | | $ | 1,658,819 | | |
| Robert Kiernan | | | | | 94,700(3) | | | | | $ | 1,252,878 | | |
| Alfonzo Leon | | | | | 90,892(4) | | | | | $ | 1,202,497 | | |
| Jamie Barber | | | | | 77,243(5) | | | | | $ | 1,021,926 | | |
| Allen Webb | | | | | 62,192(6) | | | | | $ | 822,796 | | |
(1)
Assumes a change-of-control price of $13.23, which was the closing price of the Company’s common stock on December 31, 2019, which was the last trading day of 2019.
(2)
Consists of (i) 2,250 LTIP Units issued outside of the Annual and Long-Term Incentive Plans, (ii) 49,151 LTIP Units issued pursuant to the 2017 Annual Plan. As of December 31, 2017, noLong-Term Incentive Plan, (iii) 9,191 LTIP Units would have beenissued pursuant to the 2018 Annual Plan, (iv) 8,741 LTIP Units issued pursuant to the time-based vesting portion of the 2018 Long-Term Incentive Plan, (v) 24,135 LTIP Units issued pursuant to the performance-based portion of the 2018 Long- Term Incentive Plan, (vi) 15,167 LTIP Units issue pursuant to the 2019 Annual Plan (assuming target amount earned underwith respect to the 2017discretionary component of the 2019 Annual Plan), (vii) 9,136 LTIP Units issued pursuant to the time-based vesting portion of the 2019 Long-Term Performance-BasedIncentive Plan and (viii) 7,613 LTIP Units issued pursuant to the performance-based portion of the 2019 Long-Term Incentive Plan.
(3)
Consists of 5,974(i) 23,343 LTIP Units issued outside of the 2017Annual and Long-Term Incentive Plans, and 2,225(ii) 16,683 LTIP Units issued pursuant to the 2017 Annual Plan. As of December 31, 2017, noLong-Term Incentive Plan, (iii) 6,638 LTIP Units would have beenissued pursuant to the 2018 Annual Plan, (iv) 6,313 LTIP Units issued pursuant to the time-based vesting portion of the 2018 Long-Term Incentive Plan, (v) 17,432 LTIP Units issued pursuant to the performance-based portion of the 2018 Long- Term Incentive Plan, (vi) 12,639 LTIP Units issue pursuant to the 2019 Annual Plan (assuming target amount earned underwith respect to the 2017discretionary component of the 2019 Annual Plan), (vii) 6,356 LTIP Units issued pursuant to the time-based vesting portion of the 2019 Long-Term Performance-BasedIncentive Plan and (viii) 5,296 LTIP Units issued pursuant to the performance-based portion of the 2019 Long-Term Incentive Plan.
Consists of 14,516(i) 1,563 LTIP Units issued outside of the 2017Annual and Long-Term Incentive Plans, and 8,182(ii) 24,574 LTIP Units issued pursuant to the 2017 Annual Plan. As of December 31, 2017, noLong-Term Incentive Plan, (iii) 6,383 LTIP Units would have beenissued pursuant to the 2018 Annual Plan, (iv) 8,093 LTIP Units issued pursuant to the time-based vesting portion of the 2018 Long-Term Incentive Plan, (v) 22,345 LTIP Units issued pursuant to the
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performance-based portion of the 2018 Long- Term Incentive Plan, (vi) 12,639 LTIP Units issue pursuant to the 2019 Annual Plan (assuming target amount earned underwith respect to the 2017discretionary component of the 2019 Annual Plan), (vii) 8,342 LTIP Units issued pursuant to the time-based vesting portion of the 2019 Long-Term Performance-BasedIncentive Plan and (viii) 6,952 LTIP Units issued pursuant to the performance-based portion of the 2019 Long-Term Incentive Plan.
Consists of 5,230(i) 19,810 LTIP Units issued outside of the 2017Annual and Long-Term Incentive Plans, and 3,886(ii) 12,598 LTIP Units issued pursuant to the 2017 Annual Plan. As of December 31, 2017, noLong-Term Incentive Plan, (iii) 4,438 LTIP Units would have beenissued pursuant to the 2018 Annual Plan, (iv) 5,341 LTIP Units issued pursuant to the time-based vesting portion of the 2018 Long-Term Incentive Plan, (v) 14,748 LTIP Units issued pursuant to the performance-based portion of the 2018 Long- Term Incentive Plan, (vi) 10,111 LTIP Units issue pursuant to the 2019 Annual Plan (assuming target amount earned underwith respect to the 2017discretionary component of the 2019 Annual Plan), (vii) 5,561 LTIP Units issued pursuant to the time-based vesting portion of the 2019 Long-Term Performance-BasedIncentive Plan and (viii) 4,635 LTIP Units issued pursuant to the performance-based portion of the 2019 Long-Term Incentive Plan.
Consists of 11,620(i) 1,235 LTIP Units issued outside of the 2017Annual and Long-Term Incentive Plans, and 7,961(ii) 19,660 LTIP Units issued pursuant to the 2017 Annual Plan. As of December 31, 2017, noLong-Term Incentive Plan, (iii) 4,516 LTIP Units would have beenissued pursuant to the 2018 Annual Plan, (iv) 4,797 LTIP Units issued pursuant to the time-based vesting portion of the 2018 Long-Term Incentive Plan, (v) 13,247 LTIP Units issued pursuant to the performance-based portion of the 2018 Long- Term Incentive Plan, (vi) 9,269 LTIP Units issue pursuant to the 2019 Annual Plan (assuming target amount earned underwith respect to the 2017discretionary component of the 2019 Annual Plan), (vii) 5,164 LTIP Units issued pursuant to the time-based vesting portion of the 2019 Long-Term Performance-BasedIncentive Plan and (viii) 4,304 LTIP Units issued pursuant to the performance-based portion of the 2019 Long-Term Incentive Plan.
Prior to our Internalization, our Former Advisor was responsible for Issuance Under Equitymanaging the Company’s affairs pursuant to the Prior Management Agreement and, as of December 31, 2019, directly employed all of the individuals who provide services to the Company. The Company did not provide any salary or cash bonus compensation to the CEO or any other individual who provided services to the Company (other than a reimbursement of a portion of Mr. Barber’s salary, which ended in May 2018). As a result, the CEO to median employee pay ratio required to be disclosed under Item 402(u) of Regulation S-K is not applicable.
This information is being provided for compliance purposes. Neither the Compensation PlansCommittee nor our Former Advisor used the pay ratio measure in making any compensation decisions.
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SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table sets forth information as of December 31, 20172019 with respect to compensation plans under which our equity securities are authorized for issuance. We have no such plans that were not approved by security holders.
| Plan Category | | | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | | | Weighted-average exercise price of our outstanding options, warrants and rights (b) | | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a) (c)) | | |||||||||
| Equity compensation plans approved by security holders | | | | | | | | | | N/A | | | | | | | | ||
(1)
Represents outstanding earned and unearned LTIP Units, which are a separate non-voting class of limited liability companypartnership interests structured as profits interests. The LTIP Units, subject to certain forfeiture provisions, may be converted,redeemed into either, at the election of the holder, intoCompany, (i) shares of our common stock on a one-for-one basis.basis or (ii) cash.
(2)
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COMPENSATION OF DIRECTORS
The following table summarizes the compensation we paid to our non-management directors in 2017.2019.
Director Compensation for 20172019
| Name | | | Fees Earned or Paid in Cash(1) | | | Stock Awards(2) | | | All Other Compensation(3) | | | Total | | ||||||||||||
Henry Cole(4) | | | | $ | 57,352 | | | | | $ | 30,384 | | | | | $ | 1,278 | | | | | $ | 89,014 | | |
Matthew L. Cypher(5) | | | | $ | 41,460 | | | | | $ | 30,384 | | | | | $ | 1,278 | | | | | $ | 73,122 | | |
Kurt Harrington(5) | | | | $ | 43,013 | | | | | $ | 30,384 | | | | | $ | 1,278 | | | | | $ | 74,675 | | |
Ronald Marston(4) | | | | $ | 55,841 | | | | | $ | 30,384 | | | | | $ | 1,278 | | | | | $ | 87,503 | | |
Dr. Roscoe Moore(4) | | | | $ | 51,486 | | | | | $ | 30,384 | | | | | $ | 1,278 | | | | | $ | 83,148 | | |
| Zhang Jinguo | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
| Zhang Huiqi | | | | $ | — | | | | | $ | — | | | | | $ | 24,000 | | | | | $ | 24,000 | | |
| Name | | | Fees Earned or Paid in Cash(1) | | | Stock Awards(2) | | | All Other Compensation(3) | | | Total | | ||||||||||||
Henry Cole(4) | | | | $ | 65,810 | | | | | $ | 40,000 | | | | | $ | 9,022 | | | | | $ | 114,832 | | |
Matthew L. Cypher Ph.D(5) | | | | $ | 55,839 | | | | | $ | 40,000 | | | | | $ | 9,022 | | | | | $ | 104,861 | | |
Ronald Marston(6) | | | | $ | 56,526 | | | | | $ | 40,000 | | | | | $ | 9,022 | | | | | $ | 105,548 | | |
Dr. Roscoe Moore(7) | | | | $ | 46,473 | | | | | $ | 40,000 | | | | | $ | 5,455 | | | | | $ | 91,928 | | |
| Zhang Jingguo | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
Zhang Huiqi(8) | | | | $ | — | | | | | $ | — | | | | | $ | 24,000 | | | | | $ | 24,000 | | |
Lori Wittman(9) | | | | $ | 59,664 | | | | | $ | 40,000 | | | | | $ | 4,266 | | | | | $ | 103,930 | | |
Paula Crowley(10) | | | | $ | 52,542 | | | | | $ | 40,000 | | | | | $ | 4,220 | | | | | $ | 96,762 | | |
(1)
Represents the annual retainer fees.
(2)
The number of LTIP Units comprising each LTIP award was based on a price of $9.51$10.80 per unit, which was the closing10-day volume weighted average price forof the Company’s common stock onas of May 18, 2017,29, 2019, the date of grant. The stock award values disclosed in this director compensation table are based on market values of the Company’s common stock at the time of grant, which differ from the values calculated in accordance with GAAP as reported in the Company’s audited historical financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017.2019. See Note 7 — 2016 Equity Incentive Plan in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.2019.
(3)
Represents distributions declared or paid on vested and unvested LTIP Units.
(4)
(5)
(6)
As of his appointment through the closing dateDecember 31, 2019, Mr. Marston had 3,705 unvested LTIP Units.
(7)
As of the Company’s initial public offering.December 31, 2019, Mr. Moore had 3,705 unvested LTIP Units.
(8)
As of December 31, 2019, Ms. Zhang did not have any unvested LTIP Units.
(9)
As of December 31, 2019, Ms. Wittman had 3,705 unvested LTIP Units.
(10)
As of December 31, 2019, Ms. Crowley had 3,821 unvested LTIP Units.
In March 2018,2020, our Board approved the following compensation for our independent directors for 20182020 that will be effective as of May 30, 2018September 2, 2020 (the date of the Annual Meeting):
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an annual payment of $30,000,$40,000, payable on the date of the Annual Meeting in LTIP Units;
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an annual cash retainer of $30,000,$40,000, payable in equal amounts each quarter;
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an additional annual cash retainer of $12,000,$15,000, $10,000, $7,000 and $11,000$15,000 for the chairperson of our audit committee, compensation committee, nominating and corporate governance committee and investment committee, respectively;
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an additional annual cash retainer of $6,000,$7,500, $5,000, $3,500 and $5,500$7,500 for each other member of our audit committee, compensation committee, nominating and corporate governance committee and investment committee, respectively; and
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an additional $15,000 cash retainer to our lead independent director.
Our Board of Directors may revise our directors’ compensation in its discretion. Aside from certain one-time payments made to Messrs. Cole, Cypher, Harrington, Marston and Moore relating to their service as directors from their appointment date to our IPO date, the terms of our directors’ 2017 compensation are the same as the terms of their 2018 compensation described above.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
General
Each of our directors, director nominees and executive officers is required to complete an annual disclosure questionnaire and report all transactions with us in which they and their immediate family members had or will have a direct or indirect material interest with respect to us. The Nominating and Corporate Governance Committee generally reviews any past or proposed transactions between our Company and related persons (as such term is defined in Item 404 of Regulation S-K). If we believe a transaction is significant to us and raises particular conflict of interest issues, the Audit Committee will discuss the matter with legal or other appropriate counsel to evaluate and approve the transaction.
Management AgreementInternalization Transaction
On July 9, 2020, we completed the Internalization by acquiring all the outstanding shares of capital stock of IAGH, the parent company of our Former Advisor. Prior to the Internalization, we were externally managed by our Former Advisor pursuant to the Prior Management Agreement and our Former Advisor, through IAGH, was jointly owned by Zensun Enterprises Limited (formerly ZH International Holdings, Ltd. is the 85% owner ofLtd) (85% ownership interest) and Mr. Jeffrey Busch, our Advisor and the owner of ZH USA, LLC. Mr. Zhang is the Chairman, Chief Executive Officer and Executive DirectorPresident (the remaining 15% ownership interest). A special committee of ZH International Holdings, Ltd. Our Chief Executive Officerthe Board of Directors, consisting solely of independent and Chairman,disinterested directors (the “Special Committee”), negotiated the terms of the Internalization on behalf of the Company. The Stock Purchase Agreement (defined below) and the Internalization were unanimously approved by the Special Committee, and, upon recommendation by the Special Committee, by the Company’s independent and disinterested directors, on July 9, 2020.
Pursuant to a stock purchase agreement, dated as of July 9, 2020 (the “Stock Purchase Agreement”), by and among the Company, Zensun Enterprises Limited and Mr. Jeffrey Busch owns(collectively, the remaining 15%“Sellers”), the Sellers sold all the outstanding shares of capital stock of IAGH to us in exchange for an aggregate of approximately $17.6 million in cash paid at the closing, which reflected an aggregate purchase price of $18.1 million less a net working capital adjustment. Additionally, Zensun and Mr. Busch pledged an aggregate of $1.8 million of shares of our Advisor. Certaincommon stock and LTIP Units to satisfy future potential indemnification obligations (the “Holdback Amount”).
The Stock Purchase Agreement contains customary representations and warranties for the Sellers, including regarding organization and good standing, power and authority, capitalization and ownership, financial statements and liabilities, litigation, compliance with laws, absence of changes, taxes, material contracts, employee matters, real properties, intellectual property, affiliate transactions and brokerage arrangements. The representations and warranties of the parties in the Stock Purchase Agreement survive the closing of the Internalization for a period of eighteen (18) months, except that (i) Seller fundamental representations shall survive for 10 years and (ii) tax-related representations and warranties survive for sixty (60) days after the expiration of the applicable statute of limitations.
In connection with the Internalization, we entered into employment agreements with each of Messrs. Busch, Kiernan and Leon and established a severance plan in which certain of our employees will be allowed to participate. As an internally managed company, we will no longer pay our Former Advisor any fees or expense reimbursements arising from the Prior Management Agreement.
Prior Management Agreement
In connection with the Internalization, the Company and the Former Advisor amended and restated the Prior Management Agreement to reflect the fact that the agreement is now an inter-company agreement within the Company. Prior to the Internalization, we were subject to the Prior Management Agreement, the material terms of the Management Agreementwhich are summarizeddescribed below:
Term and Termination
The initial term of the Prior Management Agreement willwas set to expire on the third anniversary of the closing date of the IPO and will automatically renew for an unlimited number of successiveJuly 1, 2021 with automatic one-year renewal periods thereafter unless(subject to termination or nonrenewal by our Board of Directors). Although the agreement isInternalization did not renewed or is terminated in accordance with its terms. Ifterminate the Company’s board of directors decides to terminate or not renew thePrior Management Agreement, the Company will generally be requiredit was amended and restated to pay thebecome an inter-company agreement between our Former Advisor a termination fee equal to three times the sum of the average annual base management fee(now our subsidiary) and the average annual incentive fee with respect to the previous eight fiscal quarters ending on the last day of the fiscal quarter prior to termination. Subsequent to the initial term, the Company may terminate the Management Agreement only under certain circumstances.our operating partnership.
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Base Management Fee
For purposes of calculating the base management fee, the Company’s stockholders’ equity means:meant: (a) the sum of (1) the Company stockholders’ equity as of March 31, 2016, (2) the aggregate amount of the conversion price (including interest) for the conversion of the Company’s outstanding convertible debentures into common stock and OP units upon completion of the IPO, and (3) the net proceeds from (or equity value assigned to) all issuances of equity and equity equivalent securities (including common stock, common stock equivalents, preferred stock, LTIP Units and OP units issued by the Company or the Operating Partnership) in the IPO, or in any subsequent offering (allocated on a pro rata daily basis for such issuances during the fiscal quarter of any such issuance), less (b) any amount that the Company pays to repurchase shares of its common stock or equity securities of the operating partnership. Stockholders’ equity also excludes (1) any unrealized gains and losses and other non-cash items (including depreciation and amortization) that have impacted stockholders’ equity as reported in the Company’s financial statements prepared in accordance with GAAP, and (2) one-time events pursuant to changes in GAAP, and certain non-cash items not otherwise described above, in each case after discussions between the Former Advisor and its independent directors and approval by a majority of the Company’s independent directors. As a result, the Company’s stockholders’ equity, for purposes of calculating the base management fee, could behave been greater or less than the amount of stockholders’ equity shown on its financial statements.
The base management fee of theour Former Advisor shall bewas calculated within 30 days after the end of each quarter and such calculation shall bewas promptly delivered to the Company. The Company iswas obligated to pay the quarterly installment of the base management fee calculated for that quarter in cash within five business days after delivery to the Company of the written statement of the Former Advisor setting forth the computation of the base management fee for such quarter.
Incentive Fee
AFFO iswas to be calculated by adjusting the Company’s funds from operations, or FFO, by adding back acquisition and disposition costs, stock-based compensation expenses, amortization of deferred financing costs and any other non-recurring or non-cash expenses, which are costs that do not relate to the operating performance of the Company’s properties, and subtracting loss on extinguishment of debt, straight-line rent adjustment, recurring tenant improvements, recurring leasing commissions and recurring capital expenditures.
Rights to Designate Board Nominees
Prior to the Internalization, our Former Advisor had the right to nominate three members on our Board to be duly elected by our stockholders at each annual meeting of stockholders.
Management Fee Expense Incurred and Accrued Management Fees
For years ended December 31, 20172019 and 2016,2018, management fees of approximately $3,123,000$6,266,000 and $1,434,000,$4,422,000, respectively were incurred and expensed by the Company and during those years the Company
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paid management fees to the Advisor in the amount of $2,680,000approximately $5,682,000 and $1,443,585,$4,343,000, respectively. As of December 31, 20172019 and December 31, 2016,2018, accrued management fees of $1,064,000approximately $1,727,000 and $621,000,$1,143,000, respectively, were due to theour Former Advisor.
Zensun Enterprises Limited’s interest in our management fees incurred during 2019 and 2018 equaled $5,326,100 and $3,758,700, respectively. Mr. Busch’s interest in our management fees incurred during 2019 and 2018 equaled $939,900 and $663,300, respectively.
Allocated General and Administrative Expenses
Agreement Regarding Reimbursement of Certain Expenses
On May 8, 2017, the Company and its Former Advisor entered into an agreement pursuant to which the Company agreed, for a period of one year, to reimburse the Former Advisor for $125,000 of the annual salary of the Company’s General Counsel and Secretary. The term of the agreement expired on May 8, 2018 and the agreement was not renewed.
Approval of Transactions with Related Persons
The Board of Directors has adopted a related persons transactions policy, to be followed in connection with all related person transactions involving the Company. Prior to entering into a related party transaction, the Audit Committee reviews the material facts of the transaction and either approves or disapproves of the entry into the transaction, subject to certain exceptions described in the policy. If advance Audit Committee approval is not feasible, then the transaction is considered and ratified (if the Audit Committee determines it to be appropriate) at the Audit Committee’s next regularly scheduled meeting. In determining whether to approve or ratify a transaction, the Audit Committee will take into account, among other factors it deems appropriate, (1) whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances, (2) the extent of the related person’s interest in the transaction and (3) whether the transaction is material to the Company.
Additionally, under our Code of Business Conduct and Ethics, related party transactions are subject to appropriate review and oversight by the Board’s Audit Committee.
Under our Nominating and Corporate Governance Committee charter, the Nominating and Corporate Governance Committee is responsible for reviewing and approving in advance any related party transactions, other than related party transactions which have been preapproved pursuant to preapproval guidelines or rules established by the Nominating and Corporate Governance Committee or the Board.
PROPOSAL 43 — RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
REGISTERED PUBLIC ACCOUNTING FIRM
We are asking our stockholders to ratify the appointment of MaloneBaileyDeloitte as our independent registered public accounting firm for 2018.2020. Although the ratification is not required by our bylaws or other governing documents, the Board is submitting the selection of MaloneBaileyDeloitte to our stockholders for ratification as a matter of good corporate practice. Even if the stockholders do ratify the appointment, our Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it believes that such a change would be in the best interest of us and our stockholders.
We expect that a representative of MaloneBaileyDeloitte will be present virtually at the Annual Meeting, will be given the opportunity to make a statement if he or she so desires and will be available to respond to appropriate questions.
The Board of Directors recommends a vote FOR the ratification of the appointment of MaloneBaileyDeloitte as our independent registered public accounting firm for 2018.2020.
Fees Paid to Our Independent Registered Public Accounting Firm
Our former independent registered public accounting firm that was engaged for the fiscal year ended December 31, 2018 and through the date of filing of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 was MaloneBailey, LLP (“MaloneBailey”). The following is a summary of the fees incurred by the Company with MaloneBailey the Company’s independent registered public accounting firm for professional services rendered for the years ended December 31, 20172019 and 2016.2018.
| | | Year Ended December 31, 2017 | | Year Ended December 31, 2016 | | | Year Ended December 31, 2019 | | Year Ended December 31, 2018 | | ||||||||||||||||
| MaloneBailey: | | | | | | | | | | | | |||||||||||||||
Audit Fees | | | $ | 506,400 | | | | $ | 346,900 | | | | | $ | 86,378 | | | | $ | 514,253 | | | ||||
| Audit-Related Fees | | | | 35,500 | | | | | 42,600 | | | | | | — | | | | | 17,500 | | | ||||
| Tax Fees | | | | — | | | | | — | | | | | | — | | | | | — | | | ||||
| All Other Fees | | | | — | | | | | — | | | | | | — | | | | | — | | | ||||
| Total | | | $ | 541,900 | | | | $ | 389,500 | | | | | $ | 86,378 | | | | $ | 531,753 | | | ||||
| | ||||||||||||||||||||||||||
Our current independent registered public accounting firm commencing with our second fiscal quarter ended June 30, 2019 was Deloitte. We incurred no fees for professional services rendered to us by Deloitte for the year ended December 31, 2018. The following is a summary of the fees incurred by the Company with Deloitte for professional services rendered for the year ended December 31, 2019.
| | | | Year Ended December 31, 2019 | | |||
| Deloitte: | | | | | | | |
| Audit Fees | | | | $ | 483,341 | | |
| Audit-Related Fees | | | | | 50,000 | | |
| Tax Fees | | | | | — | | |
| All Other Fees | | | | | — | | |
| Total | | | | $ | 533,341 | | |
Audit Fees
“Audit Fees” consist of fees and expenses billed for professional services rendered for the audit of the consolidated financial statements, review of the interim consolidated financial statements, review of registration statements and the preparation of comfort letters and services that are normally provided by accountants in connection with statutory and regulatory filings or engagements. For the year ended December 31, 2017,2019, these fees also include an audit of management’s assessment of internal controls.
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Audit-Related Fees
“Audit-Related Fees” consist of fees and expenses for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements that are not “Audit Fees.”
Tax Fees
“Tax Fees” consist of fees and related expenses billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal and state tax compliance, tax planning and structuring and research and assistance.
All Other Fees
“All Other Fees” consist of fees and expenses for products and services that are not “Audit Fees,” “Audit-Related Fees” or “Tax Fees.”
Pre-Approval Policy
All audit, tax and other services provided to us are reviewed and pre-approved by the Audit Committee. All fees paid to Deloitte in 2019 and MaloneBailey in 20172019 and 20162018 described above were approved by the Boards, as constituted priorAudit Committee.
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OTHER MATTERS
We do not know of any other matters to and following completioncome before the Annual Meeting. If, however, any other matters do come before the Annual Meeting, it is the intention of the IPO,persons designated as applicable.
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