UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
Thethe Securities Exchange Act of 1934 (Amendment No. __)
Filed by the Registrant ☒ | |
Filed by a Party other than the Registrant ☐ | |
Check the appropriate box: | |
☐ | Preliminary Proxy Statement |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
☒ | Definitive Proxy Statement |
☐ | Definitive Additional Materials |
☐ | Soliciting Material under §240.14a-12 |
WASHINGTON PRIME GROUP INC. | ||
(Name of Registrant as Specified In Its Charter) | ||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||
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☒ | No fee required. | |
☐ | Fee computed on table below per Exchange Act Rules | |
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(4) | Date Filed: |
WASHINGTON PRIME GROUP INC.
NOTICE OF 2019 ANNUALSPECIAL MEETING OF SHAREHOLDERS
AND
PROXY STATEMENT
WASHINGTON PRIME GROUP INC.
180 East Broad Street
Columbus, Ohio 43215
(614) 621-9000
March 29, 2019October 26, 2020
Dear Shareholder:
You are cordially invited to attend the 2019 Annual Meetinga special meeting of Shareholdersshareholders of Washington Prime Group Inc. (the “Annual“Special Meeting”), which. The Special Meeting will be held at 9:10:00 a.m., local time,Eastern Time, on Thursday, May 16, 2019 at the officesDecember 17, 2020 and will be a webcast meeting of Blank Rome LLP, 1271 Avenueshareholders.
In light of the Americas, 16th Floor, New York, New York 10020.public health and safety concerns related to the coronavirus (COVID-19) global pandemic and the various measures being implemented to reduce its spread, the Special Meeting will be held via live webcast only. Holders of our common shares will be able to access the Special Meeting, vote, and submit any relevant questions during the Special Meeting via live webcast at www.virtualshareholdermeeting.com/WPG2020SM.
We are utilizingTo participate in the Securities and Exchange Commission rulesSpecial Meeting, you must have your sixteen-digit control number that allow usis shown on your proxy card. Access to deliver proxy materials over the InternetSpecial Meeting is limited to expediteour common shareholders of record, or their duly appointed proxies, as of the receiptclose of these materials by our shareholders. You will receive a Notice of Internet Availability of Proxy Materials (the “Notice”). This Notice will include instructionsbusiness on how to access our proxy materials and vote. At your discretion, you may request hard copies and a proxy card for voting by mail by following the instructions on the Notice.
October 20, 2020. It is important that your common shares be represented at the Annualour online Special Meeting. Whether or not you plan to attend, weWe hope that you will participate in the Special Meeting.
Please vote your shares as promptly as possible. Information aboutpossible by signing, dating and returning the Annual Meeting andenclosed proxy card. You may also vote by proxy over the various matters on whichInternet, by mail, or by telephone by following the holders of our common shares of beneficial interest will act is includedinstructions provided in your proxy card, or by participating in the Notice of AnnualSpecial Meeting of Shareholders and Proxy Statement that follow.via live webcast at www.virtualshareholdermeeting.com/WPG2020SM. We encourage you to read the Proxy Statement carefully.carefully before voting.
If you are a preferred shareholder or a holder of the operating partnership units of our limited partnership, Washington Prime Group, L.P., or a holder of certain derivative securities of our common shares, we will be sending you a copy of the enclosed notice of the Special Meeting because the proposal to be considered and acted upon at the Special Meeting is a proposed amendment to our Amended and Restated Articles of Incorporation (the “Charter”) to effectuate a contemplated reverse stock split. As such, under Indiana law and the Charter, you are entitled to receive notice of the Special Meeting and a copy of the proposed amendment to the Charter, but are not entitled to vote on the matter being acted on at the Special Meeting.
Our Board of Directors appreciates your support of our company.company in these challenging times.
Sincerely,
Robert J. Laikin
Chairman of the Board
Louis G. Conforti
Chief Executive Officer and Director
YOUR VOTE IS IMPORTANT.
PLEASE FOLLOW THE INSTRUCTIONS FOR THE VOTING METHOD YOU SELECT.
Forward Looking Statements
This Proxy Statement, together with other statements and information publicly disseminated by Washington Prime Group Inc., contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such statements are based on assumptions and expectations which may not be realized and are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy. Future events and actual results may differ from the events discussed in the forward-looking statements. Risks and other factors that might cause differences, some of which could be material, include, but are not limited to, economic and market conditions, competition, employment litigation, transaction delays, the failure of Washington Prime Group Inc. to qualify as a real estate investment trust, loss of key personnel, the failure to achieve earnings/funds from operations targets or estimates, factors discussed in the section titled “Proposal for Shareholder Consideration During the Special Meeting – Risks Associated with a Reverse Stock Split” below, as well as other risks listed from time to time in our Annual Report on Form 10-K for the year ended December 31, 2019 and other reports and statements filed by Washington Prime Group Inc. with the Securities and Exchange Commission.
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WASHINGTON PRIME GROUP INC.
180 East Broad Street
Columbus, Ohio 43215
(614) 621-9000
NOTICE OF ANNUALSPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 1D6, 2019ECEMBER 17, 2020
The 2019 Annual MeetingNOTICE IS HEREBY GIVEN that a special meeting of Shareholdersthe shareholders (the “Annual“Special Meeting”) of Washington Prime Group Inc., an Indiana corporation and real estate investment trust (“WPG” or the “Company”), will be held on Thursday, May 16, 2019 at 9:10:00 a.m., local time,Eastern Time (“ET”), on Thursday, December 17, 2020. The Special Meeting will be held virtually via webcast and can be accessed via the Internet at www.virtualshareholdermeeting.com/WPG2020SM. There is no physical location for the offices of Blank Rome LLP, 1271 Avenue of the Americas, 16th Floor, New York, New York 10020.Special Meeting. We are holding the AnnualSpecial Meeting for the following purposes:purpose:
1. | To authorize the amendment of the Amended and Restated Articles of Incorporation of the Company to | ||
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The Proxy Statement following this Noticenotice describes these mattersthis matter in detail. We have not received notice of any other proposals to be included in this Proxy Statement and presented at the Annual Meeting. You may vote atin the Annualvirtual Special Meeting and any postponements or adjournments thereof if you were a holder of record of our common shares as of the close of business on Monday, March 18, 2019,October 20, 2020, the record date fixed by our Board of Directors for determining the holders of record of the common shares entitled to receive notice of and to vote atin the Annualvirtual Special Meeting. The Company recommends that you vote “FOR”Company’s Board of Directors urges each shareholder to read carefully the election of each of the nominees for director and “FOR” Proposals2 through 4.accompanying Proxy Statement.
YOUR VOTE IS IMPORTANT AND YOU SHOULD VOTE YOUR SHARES AS PROMPTLY AS POSSIBLE WHETHER OR NOT YOU PLAN TO ATTENDPARTICIPATE IN THE ANNUALSPECIAL MEETING. COMMON SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND ACCESSTHE ANNUALSPECIAL MEETING IN PERSON AT THE LOCATION FOR THE ANNUAL MEETING STATEDINTERNET ADDRESS PROVIDED ABOVE.
If you are a shareholder of record of our common shares then you may change your vote or revoke your proxy at any time before your proxy is exercised atduring the AnnualSpecial Meeting by following the voting instructions inon the Notice Regarding the Internet Availability of Proxy Materials that you received or by filing with us a duly signed revocation or anotherenclosed proxy card bearing a later date than the initial proxy card submitted.card. Alternatively, you may also change your proxy vote by attendingaccessing the Annualvirtual Special Meeting in person and voting in person;voting; however, mere attendance atmerely accessing the Annualwebsite for the Special Meeting will not serve to revoke a proxy unless you specifically request such a revocation. If your common shares are held in a stock brokerage account or by a bank or other nominee, then you must contact the institution or representative that holds your shares and follow its instructions for revoking your proxy. Beneficial owners of common shares held in a brokerage account, by a bank or other nominee are advised that if you do not timely provide instructions to your broker, banker, or nominee, your shares willmay not be voted in connection with the election of directors (Proposal 1), with respectamendment to the advisory resolution regardingCompany’s Amended and Restated Articles of Incorporation to effect a one (1) for nine (9) reverse stock split because brokers, bankers, trustees or other nominees may, but are not required to, vote on the compensation ofproposal if they do not receive instructions from the Company’s named executive officers (Proposal 2), or approval and adoption of the 2019Washington Prime, L.P. Stock Incentive Plan (Proposal 3).beneficial owner as to how to vote.
By Order of the Board of Directors,
Robert P. Demchak
Executive Vice President, GeneralCounsel and Corporate Secretary
March 29, 2019October 26, 2020
Important Notice Regarding the Availability of Proxy Materials for the Copies of our Proxy Materials, consisting of the Notice of Special Meeting of Shareholders and |
PROXY STATEMENT FOR THE 2019 ANNUALSPECIAL MEETING OF SHAREHOLDERS
WASHINGTON PRIME GROUP INC.
180 East Broad Street
Columbus, Ohio 43215
(614) 621-9000
PROXY STATEMENT
AnnualSpecial Meeting of Shareholders to be h–eld onThursday May 16, 2019December 17 at , 2020–109::00a.m., local time.ET
www.virtualshareholdermeeting.com/WPG2020SM
QUESTIONS AND ANSWERS ABOUT THE ANNUALSPECIAL MEETING AND VOTING
Who is Soliciting My Vote?
The Board of Directors (the “Board”) of Washington Prime Group Inc., an Indiana corporation and real estate investment trust or REIT, is soliciting proxies from the holders of Washington Prime Group Inc.’s issued and outstanding common shares of beneficial interest, $0.0001 par value per share (the “Common Shares” or “Common Stock”) to be voted atduring a special meeting (the “Special Meeting”) of the 2019 Annual Meetingshareholders of Shareholders (the “Annual Meeting”),Washington Prime Group Inc. and any adjournments or postponements of such meeting for the purposespurpose set forth in the accompanying Notice of AnnualSpecial Meeting of Shareholders (the “Meeting Notice”). Proxy materials for the Special Meeting are first being sent to shareholders on or about October 26, 2020. From time to time throughout this Proxy Statement, Washington Prime Group Inc. will be referred to as the “Company,” “WPG,” “we,” “us,” “our,” or “our company.”
Your Vote is Very Important
Our Annual Meeting this year is being held atBecause of concerns relating to the offices of Blank Rome LLP, 1271 Avenueglobal pandemic of the Americas, 16th Floor, New York, New York 10020, which you are invited to attend. Under rules adopted by the Securitiesnovel coronavirus (COVID-19) and Exchange Commission (“SEC”), we have elected to provide access to the Special Meeting for our proxy materialsshareholders in light of such concerns, the Special Meeting is being conducted in a virtual-only webcast format that is accessible via the Internet at www.virtualshareholdermeeting.com/WPG2020SM. There is no physical location for the Annual Meeting over the Internet. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials (the “Notice”) beginning on or about March 29, 2019 to our shareholders of record. If you received the Notice by mail, you will not receive a printed copy of the proxy materials unless you request it in the manner described in the Notice. The Notice includes instructions on how to access the proxy materials over the Internet or to request a printed copy of the proxy materials. Whether or not you plan to attend our Annual Meeting, please take the time to vote.Special Meeting.
Voting by Shareholders of Record.If you are a common shareholder of record you may vote in person at the Annual Meeting. We will give you a ballot when you arrive. If you do notand wish to access the Special Meeting to vote in person or ifyour shares, then you will not be attendingneed your sixteen-digit control number that was provided to you on your proxy card. You will need this control number to vote your shares, submit any questions for consideration during the AnnualSpecial Meeting, youor to change your previously submitted proxy vote. You may vote by proxy. You mayalso vote by proxy over the Internet, by mail, or by telephone following the instructions provided in your proxy card or Notice.card.
Voting by Beneficial Owners.If your Common Shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of Common Shares held in “street name.” If you are a beneficial owner and you wish to vote in person ataccess the AnnualSpecial Meeting, then you must obtain a valid proxyfollow the directions for accessing the Special Meeting that you receive from the organization that holds your Common Shares. If you do not wish to vote in person or you will not be attending the Annual Meeting, you may provide voting instructions to your broker. If you hold your Common Shares in “street name,” please check the materials provided by your broker or contact your broker, nominee, fiduciary or other custodian(s) to determine if you will be able to vote over the Internet or by telephone.
What Am I Voting on?On?
There are four (4) proposalsis one (1) proposal (the “Proposal”) to be considered and voted on by holders of Common Shares (the “Common Shareholders” or a “Common Shareholder”) atduring the AnnualSpecial Meeting:
| Proposal 1: | To authorize the amendment of the Amended and Restated Articles of Incorporation of the Company to | ||
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What areis the Board’s Voting Recommendations?Recommendation?
The Board unanimously recommends that Common Shareholders vote FOReach the Proposal.
Will Additional Matters be PresentedDuringthe Special Meeting?
Under Indiana law, only matters described in the Meeting Notice may be conducted at the Special Meeting. Therefore, only the Proposal will be considered during the Special Meeting.
How Do I Access the Special Meeting?
The Special Meeting will begin at 10:00 a.m., ET, on Thursday, December 17, 2020. In order to access and participate in the Special Meeting, if you are a registered Common Shareholder then use your sixteen-digit control number to access the website www.virtualshareholdermeeting.com/WPG2020SM that is hosting the Special Meeting. Be sure to have computer speakers (and headphones, if necessary) as the audio will only stream through computer speakers. There is no telephone conference line. Common Shareholders that hold their shares in “street name” should follow the instructions for accessing the website hosting our Special Meeting in the voter instruction form provided by the brokerage, bank, trust or other custodian that holds your Common Shares.
Common Shareholders are encouraged to log into the webcast at least 15 minutes prior to the start of the Board’s nomineesmeeting to provide time to register and download, if needed, any required software and test the Internet connectivity of their computer or other technical equipment used to access the Special Meeting. The webcast replay of the Special Meeting proceedings will be available at www.virtualshareholdermeeting.com/WPG2020SM 24 hours after the Special Meeting concludes. The replay will be available for election as directorsa period of one (1) year following the Special Meeting date. Common Shareholders who access the Special Meeting and FOR Proposals 2 through 4.do not enter their sixteen-digit control number will only be able to listen to the proceedings and will not be able to vote or otherwise participate.
How Do I Submita Question for Consideration Duringthe Special Meeting?
If you would like to submit a relevant question before the Special Meeting convenes then visit www.proxyvote.com and submit a question for consideration. Once the Special Meeting begins and the webcast commences then you may submit a relevant question for consideration, once you have logged into the webcast at www.virtualshareholdermeeting.com/WPG2020SM and entered your sixteen-digit control number, by simply typing in your question in the “Ask a Question” box and clicking “Submit.” All appropriate and relevant questions will be eligible for selection by the Special Meeting chairperson to be asked during the Special Meeting proceedings and considered.
What Happens If Additional Matters are Presented atIEncounter TechnicalProblems in Accessing orParticipatingin the AnnualSpecial Meeting?
We know of no other matters other thanhave provided a toll-free technical support “help line” that can be accessed by any Common Shareholder who is experiencing technical challenges or problems logging into or participating in our virtual Special Meeting. If you encounter any difficulties accessing the items of business described in this Proxy Statement andSpecial Meeting during the Meeting Noticeregistration or meeting time, then please call the technical support telephone number that will be considered atposted to the Annual Meeting. If other matters properly comeVirtual Shareholder Meeting log-in page. Technical support is only available fifteen (15) minutes before the AnnualSpecial Meeting start time and during the persons named as proxies will haveSpecial Meeting. The technical support number for assistance is only available the discretion to vote on those matters for you.
How Do I Attend the Annual Meeting?
The Annual Meeting will be held at 9:00 a.m., local time, on Thursday, May 16, 2019 at the offices of Blank Rome LLP, 1271 Avenueday of the Americas, 16th Floor, New York, New York 10020. For directions to the Annual Meeting so you can attend and vote in person, you can find them here: https://www.mapquest.com/us/ny/new-york/10020-1300/1271-avenue-of-the-americas-40.760305,-73.980137 or you may contact our Investor Relations department, via mail at Washington Prime Group Inc., Attn: Investor Relations, 180 East Broad Street, Columbus, Ohio 43215 or by phone at (614) 621-9000.Special Meeting.
Who is Entitled to Vote?
You are entitled to vote on all matters presented to the Common Shareholders atProposal during the Annualvirtual Special Meeting if you owned Common Shares at the close of business onMonday, March 18, 2019 Tuesday, October 20, 2020 (the “Record Date”), the date fixed by the Board for determining the holders of record of the Common Shares entitled to receive notice of and to vote atduring the AnnualSpecial Meeting.
How Many Common Shares May Vote at Duringthe AnnualSpecial Meeting?
On the Record Date, a total of 186,453,891187,434,835 Common Shares were outstanding and entitled to vote on all matters presented to Common Shareholders at the AnnualProposal during the virtual Special Meeting. Holders of our preferred shares and certain other derivative securities of the Common Shareholders are entitled to receive notice of the AnnualSpecial Meeting but are not entitled to vote on any matters being acted on at the Annual MeetingProposal or attendparticipate in the AnnualSpecial Meeting.
What If I Receive More Than One Set of Proxy Materials or More Than One Control Number?
If you receive more than one proxy card or voter instruction form or more than one set of our proxy materials because you hold Common Shares in different ways (e.g., joint tenancy, trusts, custodial accounts, etc.) or in multiple accounts and you have received more than one sixteen-digit control number, then you will need to enter each respective control number when accessing the Special Meeting, or otherwise, to vote the Common Shares associated with that particular control number and relating to the respective account(s) in which those Common Shares are held.
How Many Common Shares Must bePresentinOrder for the Special Meeting to Hold the Annual Meeting?Proceed?
The presencerepresentation at the AnnualSpecial Meeting, in personeither virtually or by proxy, of holders of Common Shares representing a majority of all the votes entitled to be cast atduring the AnnualSpecial Meeting as of the Record Date, or at least 93,226,94693,717,418 Common Shares, will constitute a quorum for the transaction of business.business during the Special Meeting.
What is a Proxy?
A proxy is a person or entity authorized to act for another. In the context of our Special Meeting, by executing our proxy card, you will appoint the individuals designated on it to vote your shares represented by the proxy card as specifically instructed on the proxy card.
What is the Difference Between a “Shareholder of Record” and a “Street Name” Holder?
These terms describe how your Common Shares are held. If your Common Shares are registered directly in your name with Computershare, Inc., our transfer agent (“Computershare”), then you are a “shareholder of record.” If your Common Shares are held in the name of a brokerage, bank, trust or other nominee as a custodian, then you are a “street name” holder.
How Do I Vote My Common Shares?
If you are a “shareholder of record,” you have several choices. You can vote your Common Shares by attendingin one of the Annual Meeting or by proxy as follows:following ways:
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► | by completing, signing and returning your proxy card by mail; or |
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If you participate in the Computershare Investment Plan (the “CIP”) and hold your Common Shares directly in your name, then you will receive a Noticenotice or instruction card with respect to how to vote the Common Shares held directly in your name and for the Common Shares that you have acquired and hold through the CIP. If you participate in the CIP and own your Common Shares in “street name” through a brokerage account, then you will receive a voter instruction form or proxy card covering the Common Shares held in the CIP from your bank, broker, trustee or other nominee.
In the event that you hold Common Shares in “street name,” your broker, bank, trustee or nominee will provide you with materials and instructions for accessing the Special Meeting and voting your Common Shares as theShares. The rules of the New York Stock Exchange (“NYSE”) require your broker, banker, trustee or other nominee to first obtain your voting instructions with respect to those Common Shares before voting on non-routine matters such asmatters. As the election of our directors presented in Proposal 1, the vote concerning our named executive officer compensation presented in Proposal 2 and the vote concerning Proposal 3. Theis considered a routine matter, NYSE rules however, permit, but do not require, your broker, banker, trustee or other nominee to vote your common shares on routine matters, such as ratifying the appointment of our independent registered public accounting firm presented in Proposal 4, without receiving your voting instructions. If you do not instruct your broker, banker, trustee or other nominee how to vote with respect to the matters presented in Proposals 1, 2 and
What Are Broker Non-Votes?
A broker non-vote occurs when a nominee, such as a broker, holding Common Shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary authority to vote for that particular proposal and has not received instructions from the beneficial owner as to how to vote its Common Shares. You may vote via the Internet or by telephone if your bank or broker offers these options. Please see the voting instructions provided by your bank or broker for use in instructing your banker or broker how to vote your Common Shares held in “street name.” Proposals 1, 2 and 3 are the type of proposals where a broker non-vote could occur. If you do not provide your broker with voting instructions, none of your Common Shares held by the broker will be voted on any of these proposals. Brokers,Because brokers, bankers, trustees or other nominees may, but are not required to, vote on the Proposal 4 without receiving instructions from the beneficial owner as to how to vote its Common Shares.Shares, there will be no broker non-votes on the Proposal.
Can I Vote My Common Shares at Duringthe AnnualSpecial Meeting?
If you are a “shareholder of record,” you may vote your Common Shares in person atduring the AnnualSpecial Meeting. If you hold your Common Shares in “street name,” you must obtain a legal proxy from your broker, bank, trustee or nominee, giving you the right to vote theyour Common Shares atduring the AnnualSpecial Meeting.
How Will Abstentions and Broker Non-Votes be Treated?
Abstentions will have no effect on the outcome of any of the proposals. There will be no broker non-votes regarding the ratification of the appointment of the Company’s independent registered accounting firm. Broker non-votes will not be counted as votes “FOR” or “AGAINST” the election of directors or in the case of Proposals 2 and 3 and, therefore, will have no effect on the outcome of such proposals. However, abstentions and broker non-votesProposal but will be considered present for the purposes of determining a quorum. There will be no broker non-votes regarding the Proposal.
What Vote Is Required to Approve Eachthe Proposal?
All Common Shares are entitled to one vote per share. To approve each of the proposals,Proposal, the following votes are required from the holders of Common Shares:
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| Proposal 1: The number of votes cast “FOR” |
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You May Receive More Than One Notice.
You will receive multiple Notices or voter instruction forms if you hold your Common Shares in different ways (e.g., joint tenancy, trusts, custodial accounts, etc.) or in multiple accounts.
Can I Change My Vote After I Have Submitted My Proxy?
If you are a Common Shareholder of record, you may revoke your proxy in any one of the following ways:
| by sending a written notice of revocation to our Corporate Secretary at 180 East Broad Street, Columbus, Ohio 43215 that is received prior to the | ||
| by signing a later-dated proxy card and submitting it so that it is received prior to the | ||
| by granting a subsequent proxy by telephone or through the Internet; or | ||
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If your Common Shares are held in “street name,” you should follow the instructions provided by your broker, bank, trustee or nominee.
How Will My Common Shares be Voted If I Do Not Specify How They Should be Voted?
If you sign and return a proxy card without indicating how you want your Common Shares to be voted, the persons named as proxies will vote your Common Shares “FOR” eachthe Proposal. As a holder of our Common Shares in “street name” through a broker, banker, trustee or other nominee, if you fail to provide voting instructions with respect to the Board’s nominees for election as director and “FOR” Proposals 2matters presented in the Proposal then your broker, banker or other nominee may or may not vote with respect to 4.the Proposal.
Who Will Count the Votes?
Broadridge Financial Solutions, Inc. will count the votes and will serve as the inspector of election atfor the AnnualSpecial Meeting.
Who Pays the Cost of This Proxy Solicitation?
We will pay the cost of preparing, filing, assembling and mailing the proxy materials. We willmay also request banks, brokers and other holders of record to send the proxy materials to, and obtain proxies from, beneficial owners and will reimburse them for their reasonable expenses in doing so. Additionally, we have hiredretained Georgeson LLC to assist in the solicitation of proxies, for which itproxies. Georgeson LLC will receive customary feesa fee of $9,000 and the reimbursement of reasonable expenses. You are encouraged to contact Georgeson LLC with any questions that you may have at the following toll-free number: 866-482-5026.
Is this Proxy Statement the Only Way That Proxies are Being Solicited?
Certain directors, executive officers, employees or other representatives of the Company may also solicit proxies by telephone, facsimile, e-mail or personal contact. They will not be specifically compensated for doing so.
What Do I Need To Do to AttendAccess the Annual Meeting in Person?Special Meeting?
Only Common Shareholders as of the close of business on the Record Date are entitled to attendreceive a sixteen-digit control number to access and participate in the AnnualSpecial Meeting. All other persons or entities who access the Special Meeting as a guest will only be able to listen to the proceedings and will not be permitted to vote, ask a question or otherwise participate. If your Common Shares are registeredheld in your name and you owned them“street name” as of the close of business on the Record Date you only need to provide some form of government-issued photo identification for admission.
If you hold your Common Shares in a bank or brokerage account, you can attend the Annual Meeting if you bring a recent bank or brokerage statement showing that you own Common Shares on the Record Date, and provide some form of government-issued photo identification. If your Common Shares are held in a bank or brokerage account, contact your bank or broker to obtain a written legal proxy in order to vote your Common Shares at the Annual Meeting. Persons acting as proxies must bring a valid proxy from a shareholder of record as of the Record Date. If you do not obtain a legal proxy from your bank or broker then you will not beare entitled to voteaccess the Special Meeting using the instructions provided by your broker, bank, trustee or nominee holding your Common Shares. Your late arrivalUnauthorized access to the Special Meeting or failurethe use of deceptive actions, artifice, or tactics to gain access to the Special Meeting is prohibited. Accessing the Special Meeting after the proceedings have commenced or failing to comply with thesethe rules for the Special Meeting as well as the procedures discussed herein or described in the materials you received regarding the Special Meeting could adversely affect your ability to participate in the AnnualSpecial Meeting. No cameras, recording equipment, photography devices, electronic devices, or excessively large bags or packages will be permitted in the room or space in which the Annual Meeting will be convened and held. You could be required to show a valid form of identification to access the area or floor where we will hold the Annual Meeting and may also be subject to a physical security search by building security.
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PROPOSALSPROPOSAL FOR SHAREHOLDER CONSIDERATION AT DURINGTHE ANNUALSPECIAL MEETING
The following proposalsProposal will be presented atduring the AnnualSpecial Meeting to be voted on by Common Shareholders as the close of business on the Record Date and represented, virtually or by proxy, at the Annual Meeting in person or by proxy.
PROPOSAL 1: ELECTION OF DIRECTORS
Our Board currently consists of seven memberswith no vacancies. All of the nominees for election to the Board are incumbent directors whose current terms conclude at the Annual Meeting. All directors are elected for one year terms. Upon the recommendation of the Governance and Nominating Committee, our Board has nominated all of the individuals currently serving as a director to stand for re-election at the AnnualSpecial Meeting.
Each director elected at the Annual Meeting will hold office until the next succeeding annual meeting of shareholders and until his or her successor is duly elected and qualified, or until his or her earlier death, resignation or removal. Each nominee listed below has consented to be named in this Proxy Statement and has agreed to serve as a director if elected, and we expect each nominee to be able to serve if elected. If any nominee is not able to stand for election or serve, the persons named as proxies will have authority, according to their judgment, to vote or refrain from voting for such alternate nominee as may be designated by the Board.PROPOSAL 1: TO AUTHORIZE THE AMENDMENT OF THE AMENDED AND RESTATED ARTICLES OF INCORPORATION OF THE COMPANY TO EFFECT A ONE (1) FOR NINE (9) REVERSE STOCK SPLIT OF THE COMPANY’S COMMON STOCK
PursuantThe Board has proposed to amend the Company’s Amended and Restated Articles of Incorporation to effect a one (1) for nine (9) reverse stock split (the “Reverse Stock Split”) primarily to facilitate the continued listing of the Company’s Common Stock on the NYSE. One criteria for continued listing on the NYSE is that the average closing price of a listed company’s common stock be at least $1.00 per share over a consecutive 30 trading-day period. The per share price of the Common Stock does not currently meet the average closing price requirement of the NYSE. The Company received a deficiency notice from the NYSE that the Company had failed to maintain an average closing price of its Common Stock of not less than $1.00 over a consecutive 30 trading-day period. As a result, the Company has until January 1, 2021 to regain compliance.
After careful consideration, on August 6, 2020, the Board determined that it would be in our best interests and the best interests of our shareholders to seek shareholder approval to authorize the Board to amend Article FOURTH of our Amended and Restated Articles of Incorporation and Amended and Restated Bylawsto effect the Reverse Stock Split of our outstanding Common Shares using a one-for-nine conversion ratio (the “Bylaws”“Reverse Stock Split Authorization”), director nominees in a non-contested election are elected by a vote.
Reasons for THE Reverse Stock Split
One of the majorityprimary objectives in effecting the Reverse Stock Split is to raise the per share trading price of votes cast byour Common Shareholders entitledStock in order to vote atmaintain the Annual Meeting with respecteligibility of the Common Stock for listing on the NYSE and avoid delisting. The Board believes that the Reverse Stock Split will result in the market price of the Common Stock rising to that director, which means thatthe level necessary to satisfy the $1.00 minimum average closing price continued listing requirement. However, even if the per share trading price of the Common Stock equals or exceeds $1.00, such price may not remain equal to or in excess of $1.00 for a substantial period of time. The market price of the Common Stock is also based on other factors in addition to the number of votes cast “FOR”shares outstanding, including our future performance. A second objective of the Reverse Stock Split is to increase the price per share in order to enhance the marketability of our Common Stock.
Risks Associated with a director’s election exceedsReverse Stock Split
While we believe that a higher share price may help generate investor interest in our Common Stock, the Reverse Stock Split may not result in a share price that will attract brokers, institutional investors or investment funds or satisfy the investing guidelines of institutional investors or investment funds. The market price of the Common Stock is also based on our performance and other factors, which are unrelated to the number of votes cast “AGAINST”shares of the Common Stock outstanding. There are numerous factors and contingencies that director’s election.could affect our share price following the Reverse Stock Split, including the status of the market for the Common Stock at the time, our reported results of operations in future periods and general economic, market and industry conditions. Accordingly, although the price of the Common Stock may increase immediately following the Reverse Stock Split, there can be no assurance that the market will sustain any such increase. If the market price of the Common Stock declines after the Reverse Stock Split, our total market capitalization (the aggregate value of all of our outstanding Common Stock at the then existing market price) after the split will be lower than before the split. In addition, a decline in the market price of the Common Stock after the Reverse Stock Split may result in a greater percentage decline than would occur in the absence of a split.
NomineesFollowing the Reverse Stock Split, our outstanding shares would be reduced, which may lead to reduced trading volume and less liquidity for Election to the BoardCommon Stock. That may increase the volatility of our Common Share price.
The following table shows the name, age, and current position(s) or roles held by each director nominee.
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(1)The age and position(s) listed are all asReverse Stock Split may result in some Common Shareholders owning “odd lots” of less than 100 shares of the Record Date.Common Stock on a post-split basis. Odd lots may be more difficult to sell, or require greater transaction costs per share to sell, than shares in lots of even multiples of 100 shares.
THE BOARD UNANIMOUSLY RECOMMENDS THAT OUR COMMON SHAREHOLDERS VOTE “FOR” THE ELECTION OF MESSRS. LOUIS G. CONFORTI, ROBERT J. LAIKIN, J. TAGGART (“TAG”) BIRGE,JOHN F. LEVY, JOHN J. DILLON III, AND MMES. JACQUELYN R. SOFFER AND SHERYL G. VON BLUCHER AS DIRECTORS TO SERVE UNTIL THE 2020 ANNUAL MEETING OF SHAREHOLDERS AND UNTIL THEIR RESPECTIVE SUCCESSORS ARE DULY ELECTED AND QUALIFIED.
PROPOSAL 2: ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION
Our goalConversion Ratio
If you authorize the Proposal, the Board would be authorized to implement the Reverse Stock Split using a conversion ratio of one-for-nine (the “Conversion Ratio”) of all of our issued and outstanding shares of Common Stock. Please note that the number of shares of Common Stock authorized will remain unchanged following the Reverse Stock Split, which will have the effect of increasing the number of authorized but unissued shares of Common Stock available for future issuance. The Company has no current plans, proposals or arrangements to issue any of these authorized and unreserved/unissued shares of Common Stock. Currently, the Company has authority to issue 550,000,000 shares of capital stock, of which 350,000,000 shares are classified as Common Stock, par value $0.0001 per share, 75,000,000 shares are classified as Preferred Stock, par value $0.0001 per share, and 125,000,000 shares are classified as Excess Common Stock, par value $0.0001 per share. The determination of the Conversion Ratio at which the Reverse Stock Split would be effected was based upon market and business factors deemed relevant by the Board, including: the per share trading price of the Common Stock; compliance with the NYSE’s continued listing requirements; existing and expected marketability and liquidity of the Common Stock; prevailing stock market conditions; recent and expected business developments affecting us; our actual and forecasted results of operations; and the likely effect of the Reverse Stock Split on the market price of the Common Stock.
No further action on the part of the shareholders will be required for the Reverse Stock Split to be implemented. By voting to approve the Reverse Stock Split, the holders of the Common Stock will be authorizing our Board and our executive compensation program isofficers to motivate and retain qualified executive level employees in a way that establishes an appropriate relationship between executive pay andimplement the creation of shareholder value on a long-term basis. The Compensation Discussion and Analysis section of this Proxy Statement describes our executive compensation program and the decisions made by the Compensation Committee that affected the compensationother aspects of the named executive officers listedReverse Stock Split as described in this proxy statement.
Timing
To effect the Summary Compensation Table located inReverse Stock Split, the sectionBoard would determine the timing for the split, and we would communicate that timing and any additional details regarding the Reverse Stock Split to the public prior to the effective time of this Proxy Statement entitled “Summary Compensation Table & Other Supporting Tables.” As it pertainsthe Reverse Stock Split. If the Common Shareholders approve the Proposal, the Company will file Articles of Amendment with the Indiana Secretary of State to compensation paid or earned in 2018, highlightsamend Article FOURTH of the Company’s Amended and Restated Articles of Incorporation to add a new sentence at the end of Section (a) of Article Fourth such that discussion include the following:Section (a) of Article FOURTH would read substantially as follows:
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The text of the proposed amendment is subject to modification to include such changes as may be required by the Indiana Secretary of State and as the Board deems necessary and advisable to effect the Reverse Stock Split. We are requestingwould file a Current Report on Form 8-K with the Securities and Exchange Commission (the “SEC”) to announce the amendment of the Amended and Restated Articles of Incorporation. The Reverse Stock Split will become effective at the close of the stock market on the date of filing the Articles of Amendment with the Indiana Secretary of State, which is referred to as the “Effective Time.” Beginning at the Effective Time, each certificate representing pre-split shares of Common Stock will be deemed for all corporate purposes to evidence ownership of the reduced number of post-split shares of Common Stock (based on the Conversion Ratio).
Effects of the Reverse Stock Split
If the Reverse Stock Split is approved and implemented, it would not affect any holder’s percentage ownership interest in WPG, except that our Common Shareholders vote to approveany fractional share resulting from the compensation of our named executive officers as disclosed in this Proxy Statement pursuantReverse Stock Split would be rounded up to the SEC’s compensation disclosure rules and Section 14Anext whole share of Common Stock. Our reporting requirements under the Exchange Act which disclosures includewould not be affected. Our Common Stock would continue to be traded (or listed) on the Compensation Discussion and Analysis,NYSE under the compensation tables andsymbol “WPG” (assuming the narrative discussion following the compensation tables. This advisory vote is generally referred to asshares are not delisted), but our CUSIP number would be changed. We would file a “say-on-pay vote.”
Accordingly, we,Current Report on behalf of the Board and its Compensation Committee, recommend that Common Shareholders vote in favor of the following resolution:
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”
Because this resolution relates to the information about executive compensation contained in this Proxy Statement, beginningForm 8-K with the section entitled “Compensation of Our Executive Officers,” Common Shareholders should review that information in considering their vote on the resolution. UnlikeProposals 1 and 3, the results of this shareholder vote are not binding on the Company, the Board or the Compensation Committee of the Board. Furthermore,SEC to announce the results of the vote on this resolution will not overrule any decisions previously made bySpecial Meeting and, if approved, the Company, the Board or the Compensation Committee with respect to executive compensation and will not create any duty for the Company, Board or the Compensation Committee to take any action in responseamendment to the outcomeAmended and Restated Articles of Incorporation and that our CUSIP number has been changed.
As of the vote. Additionally,Record Date, there were 1,243 record holders of shares of Common Stock and 187,434,835 issued and outstanding shares of Common Stock. If the resultsproposed Reverse Stock Split had been completed on that date then there would be approximately 20,826,093 issued and outstanding shares of Common Stock (without giving effect to the Common Shareholder vote on this Proposal 2 and the aforementioned resolution will not serve to modify or invalidate any other previous shareholder vote on the Company’s named executive officer compensation. However, the Compensation Committee may take into account the outcomerounding up of the vote in making compensation decisions and considering other compensation opportunities in the future. Neither the director compensation disclosed in this Proxy Statement nor the pay ratio disclosure are subject to or covered by this advisory vote. The Company’s non-binding shareholder advisory vote on named executive officer compensation occurs on an annual basis. The Company’s shareholders will next vote on the frequency with which the non-binding advisory vote on named executive officer compensation shall occur will be at the Company’s 2021 Annual Meeting of Shareholders.
VOTE REQUIRED
This proposal is advisory and not binding on the Company, the Board or the Compensation Committee of the Board. Common Shareholders will have approved this proposal if the number of votes cast “FOR” this proposal exceed the number of votes cast “AGAINST” it. Abstentions and broker non-votes will not affect the outcome of the vote.
THE BOARD UNANIMOUSLY RECOMMENDS THAT OUR COMMON SHAREHOLDERS VOTE “FOR” THE FOREGOING RESOLUTION APPROVING THE COMPENSATION PAID TO THE COMPANY’S NAMED EXECUTIVE OFFICERS.
PROPOSAL 3:APPROVAL AND ADOPTION OF THE WPG 2019 EQUITY PLAN
The Board believes that restricted stock, stock options and other stock-based incentive awards play an important role in the success of the Company by aligning the interest of the employees, officers, non-employee directors and other key persons of the Company and its subsidiaries with the interests of the Company and its stockholders. We rely on these people and their judgment, initiative and efforts for the successful conduct of our business. Our Board anticipates that providing our team with awards under the WPG 2019 Equity Plan will assure a closer identification of the interests of these individuals with those of the Company and its stockholders, thereby stimulating their efforts on our behalf and strengthening their desire to remain with the Company.fractional shares).
On February 12, 2019,If the Reverse Stock Split is approved and implemented by the Board, adopted, subject to Common Stockholder approval, the WPG 2019 Equity Plan. The WPG 2019 Equity Plan is designed to enable our Board and the Compensation Committee to grantall outstanding equity awards to our officers, employees, non-employee directors and other key persons. A copy ofunder the WPG 2019 EquityWashington Prime Group, L.P. Stock Incentive Plan, is attached as Appendix A to this Proxy Statement and is incorporated herein by reference.
WPG equity awards have historically been granted under the Washington Prime Group, L.P. 2014 Stock Incentive Plan, (the “2014 Plan”the Glimcher Realty Trust Amended and Restated 2004 Incentive Compensation Plan, and the Glimcher Realty Trust 2012 Incentive Compensation Plan, and all prior such plans (collectively, the “Plans”)., will be adjusted by the Conversion Ratio and will be rounded up to the nearest whole share of Common Stock. As of the Record Date, there were 5,443,455 unvested full value awards under our equity compensation plans and stock options or stock appreciation rights, which we refer to as SARs, to acquire 673,051569,855 shares of Common Stock issuable upon the exercise of stock options outstanding under our equity compensation plans, with such optionsthe Plans and 4,254,195 shares of Common Stock issuable upon the vesting and settlement of restricted stock units (“RSUs”). No cash payment will be made in respect of a fractional share of any stock option, restricted stock units, long term incentive plan units (“LTIPs”) or SARs, having a weighted average exercise priceperformance share units (“PSUs). The Reverse Stock Split will not affect the expiration date of $13.00 and a weighted average remaining term of 5.3 years. Other than the foregoing, noany outstanding awards under our equity compensation plans wereany Plan. The table below reports the outstanding stock options, RSUs, LTIPs, and PSUs issued from each of the Plans as of the Record Date.
Plan | Stock Options | Vested RSUs | Unvested RSUs | LTIPs | PSUs | |||||||||||||||
A. Glimcher Realty Trust (“GRT”) Amended and Restated 2004 Incentive Compensation Plan | 30,415 | - | - | - | - | |||||||||||||||
B. GRT 2012 Incentive Compensation Plan | 201,940 | - | - | - | - | |||||||||||||||
C. Washington Prime Group , L.P. (“WPGLP”) 2014 Stock Incentive Plan | 337,500 | 344,506 | 598,937 | 805,195 | 994,416 | |||||||||||||||
D. 2019 WPGLP Stock Incentive Plan | - | 206,142 | 3,104,610 | - | 1,873,422 |
EFFECT ON OPERATING PARTNERSHIP
On the Effective Time of the Reverse Stock Split, all outstanding future or contingent rights to acquire Common Stock, such as LTIPs in WPGLP, an Indiana limited partnership (the Company’s operating partnership), will be adjusted proportionately to reflect the Reverse Stock Split. As of the Record Date, the total number of Common Shares and Washington Prime Group, L.P operatingCompany had 33,674,697 limited partnership units (the “O.P. Units”) is 220,404,356.outstanding and 34,479,892 shares of Common Stock underlying LTIPs and OP Units. The table below providesaforementioned totals in this paragraph are rounded to the distributionnearest unit and Common Share as applicable.
Fractional Shares
We will not issue fractional shares in connection with the Reverse Stock Split. Common Shareholders who own Common Stock directly or in street name prior to the Effective Time of the Reverse Stock Split and who otherwise would hold fractional shares because the number of shares of Common Stock they held before the Reverse Stock Split would not be evenly divisible by nine will be rounded up to the next whole share in lieu of such fractional shares. For example, if a Common Shareholder held 100 shares of Common Stock prior to the Reverse Stock Split, the Common Shareholder would be issued 12 shares of Common Stock on a post-split basis. Holders of less than nine (9) shares of Common Stock would receive one (1) share of Common Stock.
Treatment of Certificated Shares
As soon as practicable after the Effective Time of the Reverse Stock Split, our transfer agent will mail a transmittal form to each holder of record that holds certificates of our unvested full value awards under our equity compensation plansCommon Stock. The transmittal form would be used in forwarding certificates for surrender and exchange into new post-split Common Stock in book-entry form to which the holder is entitled as a consequence of the Record Date.
Award Type | Performance Share Units | Restricted Stock Units | LTIP Units | Restricted Common Stock | Stock Options | Total |
Amount Outstanding | 2,687,0341 | 1,942,193 | 805,195 | 9,033 | 673,051 | 6,116,506 |
1IncludesReverse Stock Split. The transmittal form will be accompanied by instructions specifying other details of the 846,000 dividend equivalents for performance share units estimated at the maximum level payout.exchange.
SummaryAfter receipt of Material Features:a transmittal form, each holder, as applicable, would surrender the certificates formerly representing shares of the Common Stock and, in exchange, would receive a book-entry statement reflecting the number of shares of Common Stock to which the holder is entitled following the Reverse Stock Split. No shareholder would be required to pay a transfer or other fee to exchange his, her or its certificates. Common Shareholders should not send in certificates until they receive a transmittal form from our transfer agent. The transfer agent will also provide instructions for holders who have lost their certificates or whose certificates have been destroyed.
The material featuresnumber of shares of Common Stock you own would automatically be reduced without any further action on your part and without regard to the WPG 2019 Equity Plan are: date that you physically surrender your certificates to our transfer agent. Each certificate representing pre-split shares of Common Stock would, until surrendered and exchanged as described above, be deemed cancelled and, for all corporate purposes, would be deemed to represent only the number of post-split shares of Common Stock resulting from the Reverse Stock Split. Although our Common Stock dividend is currently suspended, note that you would not be entitled to receive any dividends or other distributions payable by us after the Reverse Stock Split is effective until you surrender and exchange your certificates. If we issue and pay any dividends or make any distributions, these amounts would be withheld, accumulate and be paid to you, without interest, once you surrendered your certificates for exchange.
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Based solely onPlease do not send your certificates until you receive a letter of transmittal following the closing priceEffective Time of ourthe Reverse Stock Split.
All post-split shares issued to you by Computershare in connection with the Reverse Stock Split will be issued in “book-entry” form to an account established for you by Computershare. Most Common SharesShareholders find that this service is more convenient than holding physical certificates, and it protects you against the loss, theft or destruction of $5.19 per share as reported byyour certificates. Periodically, Computershare will send you a report showing the NYSE on the Record Date and the maximumtotal number of Commonshares held for you in book-entry form, along with a description of any additions to or subtractions from that number since the last report. Upon your written request at any time, Computershare will issue and have delivered to you certificates for all shares credited to your account.
Treatment of Existing Book-Entry Shares that would have been available for awards as of such date under the WPG 2019 Equity Plan, the maximum aggregate market value of the Common Shares that could potentially be issued under the WPG 2019 Equity Plan is approximately Forty-Seven Million Two Hundred Eighty-Six Thousand Nine Hundred Forty-One Dollars and Sixteen Cents ($47,286,941.16). The
If you currently hold your shares we issue under the WPG 2019 Equity Planin book-entry form through our transfer agent, no action will be authorized but unissued shares orrequired on your part. The number of shares of Common Shares that we reacquire.Stock you own will automatically be reduced, our transfer agent will update its records accordingly, and a book-entry statement reflecting your new post-split Common Stock will be mailed to your address of record.
Rationale for AdoptionNo Appraisal or Dissenters’ Rights
Under Indiana law, shareholders will not be entitled to exercise appraisal or dissenters’ rights in connection with the Reverse Stock Split, and the Company will not independently provide shareholders with any such right.
Reservation of Rights
The Board reserves the right to not implement the Reverse Stock Split without further action by the holders of Common Stock at any time before the filing of the WPG 2019 Equity Plan.necessary Articles of Amendment with the Indiana Secretary of State, even if the Reverse Stock Split has been approved by the holders of Common Stock at the Special Meeting. By voting in favor of the Reverse Stock Split, you are also expressly authorizing the Board to determine not to proceed with the Reverse Stock Split if it should so decide.
We previously adopted the 2014 Plan. The 2014 Plan is scheduled to expire in 2024. AsMaterial U.S. Federal Tax Consequences of the Record Date, when accounting for both the vested equity awardsReverse Stock Split to Holders of 2,062,330 and unvested equity awards of 6,116,506, only 1,821,164 Common Shares were available for issuance under the 2014 Plan. Accordingly, the WPG 2019 Equity Plan is critical to our ongoing effort to build shareholder value. Equity incentive awards are an important component of our executive and non-executive employees’ compensation. Our Compensation Committee and the Board believe that we must continue to offer a competitive equity compensation program in order to attract, retain and motivate the talented and qualified employees necessary for our continued growth and success.
We manage our long-term shareholder dilution by carefully considering the number of equity incentive awards granted annually. The Compensation Committee carefully monitors our annual net burn rate, total dilution and equity expense in order to maximize shareholder value by granting only the number of equity incentive awards that it believes are necessary and appropriate to attract, reward and retain our employees. Our compensation philosophy reflects eligibility for equity incentive awards for high performing employees. By doing so, we link the interests of those employees with those of our shareholders and motivate our employees to act as owners of the business.Stock
The following table provides detailed information regarding our equity compensation activity for the prior three fiscal years with respect to awards granted toeligible employees and non-employee Board members.
Fiscal Year | Options Granted | Full-Value Shares/Units Granted | Total | Weighted-Average Common Shares Outstanding | Burn Rate |
2018 | N/A | 812,440 | 812,440 | 187,696,339 | 0.43% |
2017 | N/A | 843,435 | 843,435 | 186,829,385 | 0.45% |
2016 | 247,500 | 518,112 | 765,612 | 185,633,582 | 0.41% |
3-Yr. Avg. | 0.43% |
If the WPG 2019 Equity Plan is approved by our Common Shareholders, we will have approximately9,111,164 Common Shares available for grant after the Annual Meeting, which is based on 1,821,164 shares available under the 2014 Plan that will be transferred into the WPG 2019 Equity Plan, and 7,290,000 new Common Shares subject to this proposal. If the WPG 2019 Equity Plan is approved by Common Shareholders, no additional shares or awards will be granted from the 2014 Plan. Our Compensation Committee determined the size of the reserved pool under the WPG 2019 Equity Plan based on projected equity awards to anticipated new hires, projected annual equity awards to existing employees and an assessment of the magnitude of increase that our institutional investors and the firms that advise them would likely find acceptable.
Summary of the WPG 2019 Equity Plan.
If Common Shareholder approval is obtained, below is a summary of the plan provisions.
Purpose.
The primary purposematerial U.S. federal income tax consequences of the WPG 2019 Equity Plan is to attract and retainReverse Stock Split. This summary addresses only Common Shareholders who hold the best available officers, employees, directors and consultants for positions of substantial responsibilities with WPG and its affiliates and to provide an additional incentive to such officers, employees, directors, and consultants to exert their maximum efforts to maintain and enhance WPG’s, and WPGLP’s, performance and profitability. All of WPG’s officers, employees, and consultants and those of WPG’s affiliates, and all directors will be eligible to be granted awards under and participate in the WPG 2019 Equity Plan. Prospective officers, employees and consultants who have accepted offers of employment or consultancy will also be eligible to participate. Board members once elected or appointed to the Board will also be eligible to participate in the WPG 2019 Equity Plan.
Administration.
The WPG 2019 Equity Plan will be administered by the Compensation Committee, which consists entirely of two or more “non-employee directors” as defined in Rule 16b-3 under the Exchange Act. Under the terms of the WPG 2019 Equity Plan, the Compensation Committee (or a subcommittee thereof) will be able to make rules and regulations and establish such procedures for the administration of the WPG 2019 Equity Plan as it deems appropriate. Any determination made by the Compensation Committee (or a subcommittee thereof) under the WPG 2019 Equity Plan will be made in the sole discretion of the Compensation Committee (or a subcommittee thereof) and such determinations will be final and binding on all persons.
Awards.
Awards granted under the WPG 2019 Equity Plan may be in the form of stock options, SARs, restricted Common Stock, restricted stock units, performance units, LTIP units, other stock-based awards or any combination of those awards. The WPG 2019 Equity Plan will provide that awards may be made under the WPG 2019 Equity Plan for ten (10) years.
Shares Available.
The WPG 2019 Equity Plan will provide that the aggregate number of Common Shares that may be subject to awards under the WPG 2019 Equity Plan cannot exceed 7,290,000, plus the number of shares available under the 2014 Plan immediately prior to the effective date, subject to adjustment in certain circumstances to prevent dilution or enlargement. The maximum number of shares that may be granted pursuant to incentive stock options will be 3,000,000.
Common Shares underlying awards granted under the WPG 2019 Equity Plan or the 2014 Plan that expire or are forfeited or terminated without being exercised or awards that are settled for cash, as well as any Common Shares withheld by or delivered to WPG to satisfy tax withholding obligations with respect to any award, other than a stock option or stock appreciation right, granted under the WPG 2019 Equity Plan or the 2014 Plan, will again be available for the grant of additional awards within the limits provided by the WPG 2019 Equity Plan. Common Shares withheld by or delivered to WPG to satisfy the exercise price of stock options or tax withholding obligations with respect to any such award granted under the WPG 2019 Equity Plan will be deemed to have been issued under the WPG 2019 Equity Plan.
Stock Options.
Subject to the terms and provisions of the WPG 2019 Equity Plan, stock options to purchase Common Shares may be granted to eligible individuals at any time and from time to time as determined by the Compensation Committee. Stock options may be granted as incentive stock options, which are intended to qualify for favorable treatment to the recipient under federal tax law, or as non-qualified stock options, which do not qualify for this favorable tax treatment. Subject to the limits provided in the WPG 2019 Equity Plan, the Compensation Committee determines the number of stock options granted to each recipient. Each stock option grant will be evidenced by a stock option agreement that specifies the stock option exercise price, whether the stock options are intended to be incentive stock options or non-qualified stock options, the duration of the options, the number of shares to which the stock options pertain and such additional limitations, terms and conditions as the Compensation Committee may determine.
The Compensation Committee will determine the exercise price for each stock option granted, except that the stock option exercise price may not be less than 100 percent of the fair market value of a Common Share on the date of grant. All stock options granted under the WPG 2019 Equity Plan will expire no later than ten (10) years from the date of grant. The method of exercising a stock option granted under the WPG 2019 Equity Plan is set forth in the WPG 2019 Equity Plan, and the effect on the vesting and exercisability of incentive stock options and nonqualified stock options following certain terminations of employment will be set forth in the applicable award agreement or other document approved by the Compensation Committee. Stock options are nontransferable except by will or by the laws of descent and distribution or, in the case of non-qualified stock options, as otherwise expressly permitted by the Compensation Committee. The granting of a stock option will not accord the recipient the rights of a Common Shareholder, and such rights accrue only after the exercise of a stock option and the registration of Common Shares in the recipient’s name.
Stock Appreciation Rights.
The Compensation Committee in its discretion may grant SARs under the WPG 2019 Equity Plan. SARs may be “tandem SARs,” which are granted in conjunction with a stock option, or “free-standing SARs,” which are not granted in conjunction with a stock option. A SAR will entitle the holder to receive from WPG upon exercise an amount equal to the excess, if any, of the aggregate fair market value of a specified number of Common Shares to which such SAR pertains over the aggregate exercise price for the underlying shares. The exercise price of a free-standing SAR shall not be less than 100 percent of the fair market value of a Common Share on the date of grant.
A tandem SAR may be granted at the grant date of the related stock option. A tandem SAR will be exercisable only at such time or times and to the extent that the related stock option is exercisable and will have the same exercise price as the related stock option. A tandem SAR will terminate or be forfeited upon the exercise or forfeiture of the related stock option, and the related stock option will terminate or be forfeited upon the exercise or forfeiture of the tandem SAR.
Each SAR will be evidenced by an award agreement that specifies the base price, the number of shares to which the SAR pertains and such additional limitations, terms and conditions as the Compensation Committee may determine. Payment of the amount to which the participant exercising SARs is entitled may be made by delivering Common Shares, cash or a combination of Common Shares and cash as set forth in the award agreement relating to the SARs. The method of exercising a SAR granted under the WPG 2019 Equity Plan is set forth in the WPG 2019 Equity Plan, and the effect on vesting and exercisability of SARs following certain terminations of employment will be set forth in the applicable award agreement or other document approved by the Compensation Committee. SARs are not transferable except by will or the laws of descent and distribution or, with respect to SARs that are not granted in “tandem” with a stock option, as expressly permitted by the Compensation Committee. Each SAR will be evidenced by an award agreement that specifies the date and terms of the award and such additional limitations, terms and conditions as the Compensation Committee may determine.
Restricted Stock.
The WPG 2019 Equity Plan will provide for the award of Common Shares that will be subject to forfeiture and restrictions on transferability as set forth in the WPG 2019 Equity Plan and as may be otherwise determined by the Compensation Committee. Except for these restrictions and any others imposed by the Compensation Committee, upon the grant of restricted stock, the recipient will have rights of a stockholder with respect to the restricted stock, including the right to vote the restricted stock and to receive all dividends and other distributions paid or made with respect to the restricted stock on such terms as will be set forth in the applicable award agreement or other document approved by the Compensation Committee. During the restriction period set by the Compensation Committee, the recipient may not sell, transfer, pledge, exchange or otherwise encumber the restricted stock. The vesting of restricted stock, including the vesting following certain terminations of employment, will be set forth in the applicable award agreement or other document approved by the Compensation Committee.
Restricted Stock Units.
The WPG 2019 Equity Plan will authorize the Compensation Committee to grant restricted stock units and deferred share rights. Restricted stock units and deferred share rights will not be Common Shares and do not entitle the recipients to the rights of a Common Shareholder. The restricted stock unit will either: (i) be adjusted to reflect dividend and distributions that are paid on actual Common Shares or (ii) provide for dividend equivalents without regard to the vested status of the underlying restricted stock unit. Restricted stock units granted under the WPG 2019 Equity Plan may or may not be subject to performance conditions. The recipient may not sell, transfer, pledge or otherwise encumber restricted stock units granted under the WPG 2019 Equity Plan prior to their vesting. Restricted stock units will be settled in cash orpre-split shares of Common Stock, in an amount based on the fair market valueor post-split shares of Common Shares on the settlement date. The vesting of restricted stock units following certain terminations of employment will be set forth in the applicable award agreement or other document approved by the Compensation Committee.
LTIP Units.
The WPG 2019 Equity Plan will authorize the Compensation Committee to grant LTIP units awards which are grants of units in WPG L.P. LTIP unit awards may be subject to performance- based conditions, continuing service requirements, and/or other conditions. After an LTIP unit award becomes fully earned and vested, the LTIP units may, subject to certain conditions, be converted into O.P. Units, and thereafter may be exchanged for,Stock as determined by the Company, Common Shares on a one-for-one basis, an equivalent amount of cash, or a combination thereof. The goals for any performance measures to which an award may be subject, and all of the terms and conditions of an award, will be determined by the Compensation Committee.
The granting of an LTIP unit award will not accord the recipient of the rights of a holder of O.P. Units until the LTIP units are converted into O.P. Units. In addition, participants rights to distributions in respect of LTIP units, if any, will be determined in accordance with the partnership agreement of WPGLP, WPG’s operating partnership, and the applicable certificate of designation for such series of LTIP unit. Each LTIP unit award will be evidenced by an award agreement or other document approved by the Compensation Committee that specifies the date and the terms of the award, and such additional limitations, terms and conditions“capital assets,” as the Compensation Committee may determine.
Performance Units.
The WPG 2019 Equity Plan provides for the award of performance units that are valued by reference to a designated amount of cash or other property other than Common Shares. The payment of the value of a performance unit will be conditioned upon the achievement of performance goals set by the Compensation Committee in granting the performance unit and may be paid in cash, Common Shares, other property or a combination thereof. Each performance unit award will be evidenced by an award agreement or other document approved by the Compensation Committee that specifies the date and terms of the award, and such additional limitations, terms and conditions as the Compensation Committee may determine.
Other Stock-Based Awards.
The WPG 2019 Equity Plan will also provide for the award of Common Shares and other awards that are valued by reference to the Common Shares, including unrestricted stock, dividend equivalents and convertible debentures.
Change in Control.
Unless provided otherwise in the applicable award agreement, in the event of a “change in control” of WPG (as defined in the WPG 2019 Equity Plan):
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An award will qualify as a “replacement award” under the WPG 2019 Equity Plan if the following conditions are met in the sole discretion of the Compensation Committee: (i) it is of the same type as the award being replaced, which we refer to as the replaced award; (ii) it has a value equal to the value of the replaced award as of the date of the change in control; (iii) if the underlying replaced award was an equity-based award, it relates to publicly traded equity securities of WPG or the entity surviving WPG following the change in control; (iv) it contains terms relating to vesting (including with respect to a termination of employment) that are substantially identical to those of the replaced award; and (v) its other terms and conditions are not less favorable to the participant than the terms and conditions of the replaced award (including the provisions that would apply in the event of a subsequent change in control) as of the date of the change in control.
Amendment.
WPG may amend, alter, or discontinue the WPG 2019 Equity Plan, but no amendment, alteration or discontinuation shall be made which would materially impair the rights of the participant with respect to a previously granted award without such participant’s consent, except such an amendment made to comply with applicable law, including without limitation Section 409A of the Internal Revenue Code of 1986, as amended supplemented and currently in effect (the “Code”),. The following is not an exhaustive discussion of all possible U.S. federal income tax considerations relating to the Reverse Stock Split. It does not address all of the special tax consequences applicable to certain Common Shareholders, such as financial institutions, real estate investment trusts, regulated investment companies, tax-exempt organizations, insurance companies, partnerships, dealers in securities, traders who elect to use the mark-to-market method of accounting, mutual funds, qualified retirement plans, individual retirement accounts, Common Shareholders who are not U.S. persons for federal income tax purposes, Common Shareholders who hold the pre-split shares of Common Stock as part of a straddle, hedge or conversion transaction, Common Shareholders who are subject to the alternative minimum tax provisions of the Code and Common Shareholders who acquired their pre-split shares of Common Stock pursuant to the exercise of employee stock exchange rulesoptions or accounting rules.otherwise as compensation for services. In addition, noit does not address tax consequences under state, local, foreign or other laws. If an entity treated as a partnership for U.S. federal income tax purposes owns pre-split shares of Common Stock, the U.S. federal income tax treatment of a partner in such amendment shall be made withoutpartnership generally will depend upon the approval of WPG’s shareholders to the extent such approval is required by applicable law or the listing standardsstatus of the applicable stock exchange.partner and the activities of the partnership. Partnerships that are owners of pre-split shares of Common Stock, and partners in such partnerships, should consult their own tax advisors regarding the U.S. federal, state, and local tax, non-U.S. tax, and non-income tax consequences to them of the Reverse Stock Split.
Summary of Federal Income Tax Consequences of Awards.
The following discussionThis summary is a brief summarybased upon provisions of the principalCode and Treasury regulations, published Internal Revenue Service (the “IRS”) guidance and judicial determinations as of the date hereof. These authorities may be changed, perhaps retroactively, so as to result in U.S. federal income tax consequences different from those summarized below. We have not obtained a ruling from the IRS or an opinion of legal or tax counsel with respect to the consequences of the WPG 2019 Equity Plan under the provisions of the Code. The Code and regulations are subject to change.Reverse Stock Split. This summary is not intendedbinding on the IRS, and the IRS is not precluded from taking a position that is different from, and contrary to, be exhaustive and does not describe, among other things, state, local,the positions taken in this summary. Each Common Shareholder is advised to consult his, her or foreign income and otherits own tax consequences. The specificadvisor as to the tax consequences to a participant will depend upon a participant’s individual circumstances.of the Reverse Stock Split.
NonqualifiedThe Reverse Stock Options and Stock Appreciation Rights. A participant generally willSplit is intended to constitute a “reorganization” within the meaning of Section 368 of the Code. As such, the Company should not recognize any income attaxable gain or loss as a result of the time a nonqualified stock option or stock appreciation right is granted, nor will we be entitled to a deduction atReverse Stock Split. In addition, provided that time. When a nonqualified stock option is exercised, the participant will recognize ordinary income in an amount equal to the excess of the fair market value of the ordinarypost-split shares received as of the date of exercise over the exercise price of such shares. When a SARCommon Stock is paid in ordinary shares, the fair market value of the ordinary shares received as of the date of exercise is taxed as ordinary income at the time such shares are issued. Payroll taxes are required to be withheld from the participant on the amount of ordinary income recognized by the participant. WPG generally will be entitled to a tax deduction with respect to a nonqualified stock option or SAR in the taxable year in which such ordinary income is recognized by the participant and in the same amount of such ordinary income participant so recognized. The participant’s subsequent sale of the ordinary shares generally will give rise to capital gain or loss equal to the difference between the sale price and the sum of the exercise price the participant paid for the shares plus the ordinary income the participant recognized with respect to the shares, and these capital gains will be taxable as long-term capital gains if the participant held the shares for more than one year following exercise.
Incentive Stock Options. A participant will not recognize any income at the time an incentive stock option, within the meaning of Section 422 of the Code, is granted. Nor will a participant recognize any income at the time an incentive stock option is exercised. However, the excess of the fair market value of the ordinary shares on the date of exercise over the exercise price paid will be a preference item that could create liability under the alternative minimum tax. If a participant disposes of ordinary shares acquired upon exercise of an incentive stock option after the later of two years after the date of grant of the incentive stock option or one year after the date of exercise of the incentive stock option, which we refer to as the holding period, the gain, if any, will be long-term capital gain, eligible for favorable tax rates. If the participant disposes of such ordinary shares before the end of the holding period, the participant generally will recognize ordinary income in the year of the disposition equal to the excess of the lesser of: (i) the fair market value of the ordinary shares on the date of exercise or (ii) the amount received for the ordinary shares, over the exercise price paid. The balance of the gain or loss, if any, will be short or long-term capital gain or loss, depending on whether the ordinary shares were held by the participant for more than one year prior to disposition. We are not entitled to a deduction as a result of the grant or exercise of an incentive stock option unless a participant recognizes ordinary income as a result of a disposition, in which case we generally will be entitled to a deduction in the taxable year in which such disposition occurred and in the same amount of such ordinary income as the participant so recognized.
Restricted Stock. A participant who receives a restricted stock award generally will not realize taxable income at the time of the grant, and we will not be entitled to a tax deduction at the time of the grant (assuming the shares are not transferable and that the restrictions create a “substantial risk of forfeiture” for federal income tax purposes). When the restrictions lapse, the participant will recognize income, taxable at ordinary income tax rates, in an amount equal to the excess of the fair market value of the shares at such time over the amount, if any, paid for such shares. WPG would then be entitled to a corresponding tax deduction. If an election is not made pursuant to Section 83(b) of the Code, any dividends paid to the participant during the restriction period will be compensation income to the participant and deductible as such by WPG. The holder of a restricted stock may elect pursuant to Section 83(b) of the Code to be taxed at the time of the grant on the fair market value of the shares, which would be compensation income taxable as ordinary income, in which case: (i) WPG generally will be entitled to a deduction in the taxable year of the grant and in the same amount of such ordinary income recognized by the holder, (ii) dividends paid to the participant during the restriction period will be taxable as dividends to him or her and not deductible by WPG and (iii) there will be no further federal income tax consequences when the restrictions lapse.
Restricted Stock Units. A participant who receives a restricted stock unit award generally will not recognize taxable income at the time of grant, and we will not be entitled to a tax deduction at the time of grant. Upon settlement of the award on or after vesting, the participant will recognize income, taxable at ordinary income tax rates, in an amount equal to the value of the cash or the fair market value of the shares on the settlement date. WPG generally would then be entitled to a corresponding tax deduction.
LTIP Units. If a participant receives LTIP units that are subject to a “substantial risk of forfeiture” for federal income tax purposes, in whole or in part, if performance conditions or other vesting requirements are not met, and if the participant makes an election under Section 83(b) of the Code, the participant will not recognize income until the LTIP units have been converted into O.P. Units and are exchanged, as determined by the Company, Common Shares on a one-for-one basis, an equivalent amount of cash, or a combination thereof. A substantial portion of the participant’s income at the time of exchange will be taxed at capital gains rates, and we will not be entitled to a tax deduction when the grant is made or when the LTIP units are exchanged for Common Shares, cash or a combination thereof.
Performance Units. A participant generally will not recognize taxable income at the time of grant of performance units, and we will not be entitled to a tax deduction at such time. A participant will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) at the time of settlement of the award equal to the fair market value of pre-split shares of Common Stock deemed surrendered in exchange therefor, a shareholder should not recognize any gain or loss in the Reverse Stock Split. The aggregate tax basis of the post-split shares or property deliveredof Common Stock should generally be equal to the aggregate tax basis of the pre-split shares of Common Stock and the amountholding period of cashthe post-split shares of Common Stock received and WPG generally will be entitled to a corresponding deduction.
VOTE REQUIREDthe pre-split shares of Common Stock.
The numberIt is unclear whether Common Shareholders who receive rounded-up whole shares of affirmative votes “FOR” this proposal must exceedCommon Stock in the number of votes cast “AGAINST” itReverse Stock Split in order for the proposal to be approved. Abstentions and broker non-votes will not affect the outcomelieu of the vote.fractional shares they would receive if fractional shares of Common Stock were issued in the Reverse Stock Split may be treated as having received a constructive taxable dividend under Section 305(c) of the Code in connection with the Reverse Stock Split. Under certain circumstances, constructive dividend treatment could arise to the extent that the distribution of such rounded-up fractional shares of Common Stock to such Common Shareholders in lieu of the fractional shares such Common Shareholders would receive if fractional shares of Common Stock were issued in the Reverse Stock Split is considered to have the effect of a distribution of property to some Common Shareholders coupled with an increase in the proportionate interests of other Common Shareholders in the assets or earnings and profits of the Company. Consequently, the receipt of the rounded-up fractional shares of Common Stock may result in tax liabilities not material in amount in view of the low value of such rounded-up fractional interests. Common Shareholders receiving rounded-up fractional shares of Common Stock to round up the shares of Common Stock such Common Shareholders receive in the Reverse Stock Split to whole shares should consult their own tax advisors as to the likely tax impact to them of such rounded-up fractional share issuances.
THE TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT TO EACH SHAREHOLDER MAY VARY. YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES.
OURTHE BOARDUNANIMOUSLYRECOMMENDSTHAT OUR COMMON SHAREHOLDERSVOTE “FOR” PROPOSAL 3 TO APPROVE AND ADOPT THE WPG 2019 EQUITY PLANREVERSE STOCK SPLIT AUTHORIZATION.
PROPOSAL 4: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has selected Ernst & Young LLP (“EY”) as our independent registered public accounting firm for the fiscal year ending December 31, 2019. Common Shareholders have the opportunity to ratify that selection in an advisory vote. One or more representatives of EY are expected to be present at the Annual Meeting and available to respond to appropriate questions and, although EY has indicated that no statement is expected to be made, an opportunity for a statement will be provided if the EY representative(s) desire to do so and so indicate to the chairperson of the Annual Meeting.
If the votes cast in favor of this proposal do not exceed the votes cast against it, the Audit Committee will take into consideration the views of the Common Shareholders and may, but will not be required to, appoint a different independent registered public accounting firm.
VOTE REQUIRED
The number of affirmative votes “FOR” this proposal must exceed the number of votes cast “AGAINST” it in order for the proposal to be approved. Abstentions and broker non-votes will not affect the outcome of the vote.
OUR BOARD UNANIMOUSLY RECOMMENDS THAT OUR COMMON SHAREHOLDERS VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF EY AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2019.
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Independent Registered Public Accounting Firm’s Fees
We have incurred fees for EY’s services as shown below. EY has advised us that it has billed or will bill us the amounts shown below for the related categories of services for the years ended December 31, 2018 and 2017, respectively:
Year Ended December 31, | ||||||||
Type of Fee | 2018 | 2017 | ||||||
Audit Fees1 | $1,557,000 | $1,648,066 | ||||||
Audit-Related Fees2 | $522,500 | $510,000 | ||||||
Tax Fees | — | — | ||||||
All Other Fees | — | — | ||||||
Total | $2,079,500 | $2,158,066 |
(1) Audit Fees include fees for: (i) the audit of the annual financial statements and the effectiveness of internal control over financial reporting of WPG and, our operating partnership, WPG L.P., (ii) the review of financial statements included in our Quarterly Reports on Form 10‑Q, and (iii) other services provided in connection with other regulatory filings and out-of-pocket expenses.
(2) Audit‑Related Fees include fees for stand-alone audits of the annual financial statements for certain consolidated entities with mortgage debt and joint venture entities and out-of-pocket expenses.
Pre-Approval of Audit and Non-Audit Services
As provided in the Audit Committee’s Charter, the Audit Committee pre-approves all auditing services and permitted non-audit services, including the terms thereof, to be performed for us by our independent public accounting firm, subject to the de minimus exceptions for non-audit services described in the Exchange Act which are approved by the Audit Committee prior to completion of the audit. The Audit Committee may form and delegate authority to a subcommittee consisting of one or more members of the Audit Committee to grant pre-approvals of audit and permitted non-audit services. However, any pre-approval decisions made by such a subcommittee must be presented to the full Audit Committee at its next scheduled meeting.
EXCEPT WHERE OTHERWISE INSTRUCTED AND AS PERMITTED UNDER NYSE RULES, COMPLETED PROXIES THAT HAVE BEEN SOLICITED BY THIS PROXY STATEMENT WILL BE VOTED: (1) FOR THE ELECTION OF EACH OF THE NOMINEES TO THE BOARD LISTED UNDER PROPOSAL 1, (2) FOR APPROVAL OF THE RESOLUTION STATED UNDER PROPOSAL 2, (3) FOR PROPOSAL 3 REGARDING THE APPROVAL AND ADOPTION OF THE WPG 2019 EQUITY PLAN,AND (4) FOR THE RATIFICATION OF THE APPOINTMENT OF EY AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 2019.
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INFORMATION ABOUT OUR DIRECTORS & EXECUTIVE OFFICERS
The following information is provided with respect to the incumbent members of the Board, each of whom have been nominated to stand for re-election to the Board, and the executive officers of the Company. In addition to the biographical information presented, also included for each director is a listing of the particular skills, qualifications, experience, or attributes that led the Board to conclude that the respective director should be nominated for re-election to the Board. The executive officers listed are elected by the Board and hold the respective offices adjacent to their names set forth below as of the Record Date. The biographical information provided has been furnished to the Company by the respective individuals listed below and is current as of the Record Date. The information on the skills, qualifications, experience, or attributes of each director nominee is current as of the date of the Meeting Notice. As of the Record Date, none of the directors or executive officers of the Company are related to one another. Set forth below is biographical and skills information of the members of our Board standing for re-election at the Annual Meeting.
J. Taggart (“Tag”) Birge became a director of the Company in May 2017. Mr. Birge has over twenty years of healthcare real estate development, leasing and sales experience. Mr. Birge currently serves as President and Principal of Cornerstone Companies, Inc. (“Cornerstone”), a healthcare real estate development, leasing, property management, consulting, and investment company, and has held this position since 2008. Prior to serving in this role with Cornerstone, Mr. Birge served from 2004 to 2006 as Senior Vice President of Healthcare at Lauth Property Group, an Indiana based commercial real estate development company. Additionally, in March 2008, Mr. Birge co-founded Birge & Held (“B&H”), a national apartment, real estate, private equity and investment firm, and has served as B&H’s Chief Executive Officer since 2008. From 1997 to 2004, Mr. Birge practiced real estate law with the law firm of Bose McKinney & Evans, LLP in its Indianapolis, Indiana office. Mr. Birge’s practice focused on representing private real estate developers with office, medical sales and development projects across the United States. Mr. Birge graduated cum laude from Indiana University with a Bachelor of Arts in Political Science and holds a Juris Doctorate from the University of Virginia. Mr. Birge has served as a member of the Board of Directors of Bowen Engineering since 2002, the Board of Directors of the Tindley School since 2015, and the Board of Directors of the Indiana Sports Corp. since 2004.
Skills and Qualifications: Mr. Birge has experience in real estate, sales and real estate development along with substantial entrepreneurial and general business skills as well as legal expertise.
Louis G. Conforti became a director of the Company on May 27, 2014 and served as our Interim Chief Executive Officer from June 20, 2016 until October 6, 2016 when he became our Chief Executive Officer. Mr. Conforti served as Principal/Executive Director of Colony Capital, Inc. as the Global Head of Strategy as well as focusing on publicly traded investing from April 2014 until June 20, 2016. Mr. Conforti was Managing Director of Balyasny Asset Management LP (“Balyasny”), an alternative investment manager firm, from December 2013 until April 2014. Prior to his service with Balyasny, Mr. Conforti was Global Head of Real Estate for UBS O’Connor, the alternative investment management division of UBS AG, a financial services firm, from October 2008 to November 2013. During that time, he also served as Senior Portfolio Manager of O’Connor Colony Property Strategies, a partnership with Colony Capital LLC. Mr. Conforti also served as Managing Director and Head of Real Estate Investments at the hedge fund firm of Stark Investments from January 2005 to October 2008.
Skills and Qualifications: Mr. Conforti has substantial real estate industry experience, with strong skills in real estate investments, executive management, corporate finance, capital markets, financial statement and accounting matters and other public company matters.
John J. Dillon III became a director of the Company on June 20, 2016. Mr. Dillon is currently serving as Managing Director at NFP Corp. (“NFP”), a broker and insurance consulting firm specializing in securing property and casualty insurance and employee benefits coverage for large corporations and institutions. Mr. Dillon has held this position since January 2017. Mr. Dillon previously served as Executive Vice President of the insurance division of City Financial Corporation (“CFC”) from March 2008 until January 2010 when CFC was restructured to become City Securities Insurance, LLC (“CSI”). Mr. Dillon also served on the CFC executive committee between March 2008 until January 2010 following CFC’s restructuring. Mr. Dillon served as President of CSI and served on its board of directors from January 2010 until January 2017 when NFP acquired CSI. Prior to joining CFC, Mr. Dillon was the Chief Deputy Mayor and Chief of Staff for the City of Indianapolis, Indiana from December 2005 to January 2008. Mr. Dillon also served as the Chairman of the Indianapolis Bond Bank from January 2000 until December 2005. Mr. Dillon has been a founding member of the Board of Directors for the Indiana Business Bank from December 2004 to until its sale in October 2016, serving on the executive committee and Chairman of the Asset/Liability Committee. Mr. Dillon is also currently a Trustee of Marian University and has held this position since 2013 serving on the Finance Committee. Mr. Dillon also serves on the Butler University School of Insurance Board and has held this position since 2012. Previously, Mr. Dillon was a member of the board of directors of Century Realty Trust, a publicly traded REIT from 1999 until it was sold in 2006. Mr. Dillon is a graduate of DePauw University with a Bachelor of Arts in Economics.
Skills and Qualifications: Mr. Dillon has experience and expertise in the areas of real estate, risk management, insurance, finance, accounting, corporate governance, public company operations, banking, finance, politics and governmental relations, audit, compliance, charitable and philanthropic matters, real estate development, entrepreneurism, sales, media/public relations, corporate management, general management, and the retail business.
Robert J. Laikin serves as our Chairman of the Board. Mr. Laikin became a director and was appointed as Lead Independent Director of the Company in May 2014. Mr. Laikin held the Lead Independent Director role until the position was eliminated by the Board and he at that time became Chairman of the Board. Mr. Laikin is currently an Executive Advisor to the CEO and Government Relations Executive of Ingram Micro Inc., a position he has held since November 2012.
Skills and Qualifications: Mr. Laikin has an established track record of launching and building successful enterprises, with significant experience in the areas of executive leadership, corporate management, retail, real estate, business strategy and corporate finance, banking, financing, accounting, corporate management, general business and global business operations, accounting, corporate governance, public company compliance, political/governmental matters, audit/compliance, entrepreneurism, real estate development, sales, charitable/philanthropic matters, marketing, risk management/insurance, legal, investor, media and public relations, negotiation and deal structure.
John F. Levy became a director of the Company on June 20, 2016. Mr. Levy currently serves as the Chief Executive Officer and principal consultant for Board Advisory, a consulting firm established to assist public companies, or companies aspiring to be public, with corporate governance, corporate compliance, ethics, financial reporting and financial strategies. He has held this role since May 2005. Mr. Levy is a recognized corporate governance and financial reporting expert with over 30 years of progressive financial, accounting and business experience; including nine years in public accounting with three national accounting firms and having served as Chief Financial Officer of both public and private companies for over 13 years. Mr. Levy currently serves on the board of directors of two other public companies: Applied Minerals, Inc. (since January 2008), a mine owner that extracts, processes, markets halloysite clay and iron oxide for sale to a range of end markets; and Takung Art Co., Ltd. (since March 2016), operator of an electronic online platform for artists, art dealers and art investors to offer and trade in ownership units in valuable artwork. Mr. Levy also served on the board of directors of Applied Energetics, Inc., a company specializing in the development and application of high power lasers, high voltage electronics, advanced optical systems and energy management systems technologies, until January 2016; Gilman Ciocia, Inc., a former financial planning and tax preparation firm, until October 2013; and China Commercial Credit, Inc., a financial services firm operating in China, until December 2016. Mr. Levy is a frequent speaker on the roles and responsibilities of board members and audit committee members. He has authored and presented numerous courses on finance, management and governance to state accounting societies including THE 21ST CENTURY DIRECTOR: Ethical and Legal Responsibilities of Board Members. Mr. Levy is a Certified Public Accountant with several years of experience. Mr. Levy is a graduate of the Wharton School of Business at the University of Pennsylvania, and received his MBA from St. Joseph's University in Philadelphia, Pennsylvania. Mr. Levy has completed the National Association of Corporate Directors’ Board Leadership Fellow program of study.
Skills and Qualifications: Mr. Levy has general business, finance, accounting, corporate governance, public company, banking, financing, audit, compliance, entrepreneurial, and general corporate management experience.
Jacquelyn R. Soffer became a director of the Company on May 27, 2014. Ms. Soffer is a principal for Turnberry Associates, a real estate development and property management company, which she joined in 1989, where she oversees the company's retail, hospitality and office divisions including its landmark Aventura Mall, a super-regional shopping center located in South Florida. Ms. Soffer holds the positions of Co-Chairman and Chief Executive Officer of Turnberry Associates. Ms. Soffer's experience includes her instrumental role in developing Destin Commons, an open air lifestyle center in Northwest Florida. Additionally, Ms. Soffer is a member of the Dean’s Leadership Council at Harvard University Graduate School of Design, the Center of Real Estate and Finance at Cornell University, the Board of Trustees for the University of Miami (FL), and a Founding Member and incumbent member of the Board of Trustees of the Institute of Contemporary Art in Miami, Florida.
Skills and Qualifications: Ms. Soffer has extensive executive management experience in the retail, hospitality and office real estate sectors and real estate generally, with strong overall entrepreneurial skills and extensive experience and skills in the areas of real estate development and property management.
Sheryl G. von Blucher became a director of the Company on August 30, 2016. Ms. von Blucher currently serves as Chief Operations Officer of Churchill Capital Corp, an information and analytics focused company. Ms. von Blucher has held this position since August 2018. Prior to serving in her current role, Ms. von Blucher served as Co-Chief Executive Officer of DTN LLC from January 2017 to July 2018. Prior to this, Ms. von Blucher served as an Advisor to the Chairman & CEO of IHS from 2007 through December 2017. Since 2008, Ms. von Blucher has also worked in private equity portfolio management as a partner and managing director for the JMJS Group, a private equity partnership. Ms. von Blucher has over 30 years of experience in a variety of roles in the global integrated energy, technology services and software, and public and non-profit sectors. She has led strategic and portfolio planning, operations, and corporate finance and development for both domestic and international organizations. Ms. von Blucher currently serves on the Board of Directors of DTN LLC, Churchill Capital Corp, and Capital Canyon Club and Golf Development LLC as well as on the Board of Trustees for the following non-profits: Guideposts, IWF, a museum and designated U.S. National Historic Site, and United Against Human Trafficking or UAHT. Ms. von Blucher holds a bachelor’s degree from Rice University and a master’s degree from Harvard University.
Skills and Qualifications: Ms. von Blucher has experience and expertise in the areas of risk management, insurance, finance, accounting, governmental matters, charitable/philanthropic, media/public relations, environmental, audit and compliance, corporate governance as well as substantial entrepreneurial skills, public company experience and overall general business and corporate management expertise.
The name, age and position(s) held by each of our current executive officers are set forth in the table below. Each person has been identified by the Board as an “executive officer” of our Company as that term is used under Item 401(b) of Regulation S-K (17 C.F.R. §229.401(b)) and defined under Exchange Act Rule 3b-7 (17 C.F.R. §240.3b-7).
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(1)The age and position(s) listed are all as of the Record Date.
Biographical information concerning Mr. Louis G. Conforti is set forth under the heading “Information About Our Directors and Executive Officers.” Biographical information concerning each of our other executive officers is set forth below.
Robert P. Demchak became the Company’s Executive Vice President, General Counsel and Corporate Secretary on June 16, 2016. In his current role, Mr. Demchak oversees all of WPG’s legal, compliance, and corporate governance matters. Previously, Mr. Demchak served as our Executive Vice President, Assistant General Counsel and Assistant Secretary from October 2015 until assuming his current role. Additionally, Mr. Demchak served as General Counsel and Secretary of the Company from May 2014 until October 2015. Prior to joining our company, Mr. Demchak was Senior Vice President, Capital Markets Group/Legal at Simon Property Group, Inc. (“Simon”) from January 2014 to May 28, 2014. Prior to that, Mr. Demchak was Vice President, Capital Markets Group at Simon from 2009 through 2013. In these roles, he was responsible for the acquisition and disposition of certain assets, certain corporate acquisitions and commercial litigation, as well as refinancing and restructuring of commercial mortgage loans. Mr. Demchak has a Bachelor of Arts degree from the State University of New York at Albany and a Juris Doctorate from St. John’s University School of Law.
Stephan G. Gerber has served as Senior Vice President, Head of Property Management of the Company since May 2018. Previously, Mr. Gerber was Vice President, Regional Director of Property Management, of the Company from January 2015 to May 2018. Mr. Gerber also held this position with Glimcher Realty Trust (“GRT”), which was acquired by the Company in January 2015 (the “Merger”). Prior to serving as Vice President, Regional Director of Property Management, Mr. Gerber held the position of Regional Director and Mall General Manager with GRT from March 2001 to September 2007. In his current role, Mr. Gerber manages the Company’s property management department and is responsible for all aspects of property management and center operations at all of the Company’s properties within its portfolio. Mr. Gerber is also actively involved in strategic initiatives at the property level. Mr. Gerber is currently involved in numerous philanthropic and community endeavors including Pelotonia, a grass-roots annual bike tour that funds cancer research at The Ohio State University Comprehensive Cancer Center - Arthur G. James Cancer Hospital and Solove Research Institute.
Melissa A. Indest became our Executive Vice President, Finance and Chief Accounting Officer on February 12, 2019. Ms. Indest had previously served as our Senior Vice President, Finance and Chief Accounting Officer from January 15, 2015 following the Mergeruntil promoted to her current position. She had served as GRT’s Chief Accounting Officer and Senior Vice President, Finance since January 2014. In this capacity while at GRT and in her current role, she oversees all operations of the accounting and finance departments as well as investor relations and corporate communications. Previously, Ms. Indest served as a Senior Vice President, Finance and Accounting at GRT from June 2010 to January 2014, where she was responsible for the day-to-day operations of the accounting department, including external financial reporting, tax reporting, lease accounting, credit and investor relations. Ms. Indest serves on the Board of Directors for Lifeline of Ohio Organ Procurement, Inc. (“LOOP”), a nonprofit organization, and is a member of the Board of Directors of the Network for Life, an affiliated organization of LOOP. Ms. Indest received her Bachelor of Science degree from the University of Akron.
Joshua P. Lindimore has served as the Senior Vice President, Head of Leasing, of the Company since October 2017. Previously, Mr. Lindimore served as Senior Vice President, Leasing for the Company from January 2015 to October 2017 as well as Vice President, Leasing for GRT from November 2010 to January 2015. Before joining GRT in November 2010 as Senior Director, Leasing, Mr. Lindimore had been previously employed with GRT as a Regional Leasing Manager from 2002 to 2004. In his current role, Mr. Lindimore manages the Company’s leasing function and leads the leasing operations and strategy for the Company’s entire portfolio of regional shopping centers and community shopping centers. Mr. Lindimore holds a Bachelor of Arts degree from Ohio University. Mr. Lindimore is a member of the International Council of Shopping Centers.
Mark E. Yale became our Executive Vice President and Chief Financial Officer on January 15, 2015 following the Company’s acquisition of GRT. In this position, Mr. Yale is responsible for the Company’s financial management and reporting. Also, he oversees accounting, finance, investor relations, marketing, and information services for the Company. He had been Executive Vice President of GRT since May 2006, its Chief Financial Officer since August 2004 and its Treasurer since May 2005. In these roles, he was responsible for GRT’s financial reporting, accounting, treasury, budgeting, information technology, and investor relations functions. Mr. Yale holds a Bachelor of Science from the University of Richmond. He is a member of the board of directors for the Wexner Heritage Center.
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Governance Principles
Our Board has adopted a set of Governance Principles to assist it in guiding our corporate governance practices. The Governance Principles are from time-to-time re-evaluated by the Governance and Nominating Committee in light of changing circumstances in order to continue serving our best interests and the best interests of our shareholders. Our Governance Principles are available on the Corporate Governance page of the Investor Relations section of our website at www.washingtonprime.com, or by requesting a copy in print, without charge, by contacting our Corporate Secretary at 180 East Broad Street, Columbus, Ohio 43215.
Director Independence and Independence Determinations
Our Governance Principles provide that at least a majority of our Board must be independent at all times. Independence is determined in accordance with the corporate governance requirements of the NYSE listing standards, and other applicable laws, rules and regulations regarding director independence in effect from time-to-time. The Governance and Nominating Committee annually reviews all commercial and charitable relationships between the Company and the directors and presents its findings and recommendations to the Board, which makes a final determination regarding the independence of the directors. For relationships not covered by the standards described above, the determination of whether a director is independent or not is made by the directors who satisfy those standards. Upon the recommendation of the Governance and Nominating Committee, the Board determined that the following six (6) incumbent directors satisfy the aforementioned independence standards and are independent: Mmes. Sheryl G. von Blucher and Jacquelyn R. Soffer and Messrs. John J. Dillon III, Robert J. Laikin, John F. Levy and. J. Taggart (“Tag”) Birge.
Board Leadership Structure
Our Board believes that it is in our best interests and the best interests of our shareholders for the Board to determine which director is best qualified to serve as Chairman of the Board. Accordingly, our Board does not have a policy as to whether the Chairman should be independent or an individual who is not a member of management. Instead, our Board selects the Chairman in the manner that it determines to be in the best interests of our shareholders, and the Governance and Nominating Committee evaluates and makes recommendations to our Board concerning its leadership structure, including whether the offices of the Chairman and the Chief Executive Officer should be held by the same person. For fiscal year 2018, Mr. Robert J. Laikin, an independent director and non-management member of the Board, served as Chairman of the Board.
Under the Bylaws, the duties of the Chairman of the Board are to preside over meetings of the Board and such person may also preside over shareholder meetings. Other than the Chairman of the Board, our Bylaws and Governance Principles do not provide for any other position to provide leadership over the entire Board or its independent members.
Lastly, the leadership structure of the Board also includes the various chairpersons that lead its standing committees. The Board’s standing committees have a chairperson role held by four different directors. Currently, there is no prohibition in our governance policies preventing a director from serving as chairperson for more than one committee. The chairpersons of the Audit Committee, Governance and Nominating Committee, Compensation Committee and the Sustainability Committee (the “Committees”) are currently held by independent directors as required, with respect to the Audit Committee, Governance and Nominating Committee and Compensation Committee, by the listing standards of the NYSE. Under our Governance Principles, the chairperson for each of the Committees is required to report committee actions and any recommendations to the Board after committee meetings. In addition to their reporting and committee management responsibilities, committee chairpersons, with the assistance of Company management as needed, are responsible for setting the agendas for committee meetings.
Board’s Role in Oversight of Risk Management
While risk management is primarily the responsibility of management, our Board nevertheless provides overall risk oversight with a focus on the most significant risks that we face including, but not limited to, financial risk, legal or compliance risk, audit risk, credit risk, liquidity risk, and business or operational risk. We have implemented a Company-wide enterprise risk management process to identify and assess the major risks we face and developed strategies for controlling, mitigating and monitoring risk. As part of this process, we have gathered information throughout our company to identify and prioritize these major risks. The Board has appointed its Audit Committee to assist it in its oversight responsibilities in this area. The Compensation Committee of the Board administers an annual risk assessment of the Company’s compensation programs and policies. An overview and description of its review is provided in the section of this Proxy Statement entitled “Compensation Risk Assessment.” The Sustainability Committee assists the Company in identifying and evaluating inherent fiscal, operational, and execution risk present in the Company’s efforts to design, fund and complete projects to address sustainability initiatives involving the Company’s business and operations.
In discharging the Board’s risk oversight function, the Audit Committee receives periodic reports from the Company’s internal audit department as well as EY on potential financial and non-financial risks existing in the Company’s operations and the steps management is taking or has taken to identify and minimize such risks. One report, a financial risk assessment, is completed in connection with the Company’s annual and quarterly audit of its internal control over financial reporting and the Audit Committee also receives a report of any adverse findings in connection with the internal control audit reports of both EY and the Company’s internal audit department. The Audit Committee Chairman shares the findings from this report on a quarterly basis with the Board. The Audit Committee also reviews a detailed list, prepared by the Company’s financial reporting and legal departments, which describes the specific risk factors affecting the Company’s business and results of operations. This list is included in the Company’s Annual Report on Form 10-K (and any periodic updates as needed in the Company’s Form 10-Qs, prospectuses, and registration statements). The Board, and as needed the Audit Committee, reviews the risk factors included in the Form 10-K and, on an as needed basis, any prospectuses or registration statements before they are filed with the SEC. The Audit Committee solely reviews any changes to the risk factors included in any Form 10-Q filed by the Company with the SEC.
The Audit Committee further discharges its responsibilities with respect to risk oversight by discussing the Company’s policies over risk assessment and risk management, including financial risk exposure, with certain members of the Company’s senior management team. The Audit Committee periodically discusses our identified financial and operational risks with the Company’s Chief Executive Officer and Chief Financial Officer and receives regular reports from other members of senior management with regard to our identified risks. The Audit Committee Chairman also shares the findings from these discussions with the Board. The Audit Committee also discusses the Company’s fraud risk with management and separately with EY. In connection with the annual update concerning the Company’s compliance with the requirements of the Sarbanes-Oxley Act of 2002, the Audit Committee receives the findings of fraud testing conducted by the Company’s internal audit department in three key areas of the Company’s operations and processes – payroll, travel and entertainment expense, and specialty leasing. The Audit Committee Chairman also shares the findings from these discussions with the Board. The identified risks and risk mitigation strategies are validated with senior management and discussed with the Audit Committee on an ongoing basis. Lastly, the Compensation Committee is responsible for overseeing the process for identifying and addressing any material risks relating to our compensation policies and practices. Specifically, the Compensation Committee oversees the design of incentive compensation arrangements of our executive officers to implement our pay-for-performance philosophy without encouraging or rewarding excessive risk taking by our employees, including our senior executive officers.
The manner in which the Board administers its risk oversight function is reflected in the leadership structure of the Board. EY reports directly to the Audit Committee and the Vice President, Internal Audit reports directly to the Audit Committee Chairman. Under our Governance Principles, however, the Audit Committee Chairman reports to the Board on the deliberations and decisions of the Audit Committee, including the deliberations and decisions relating to the Board’s risk oversight functions. The same is true for the Compensation Committee Chairman with respect to the Compensation Committee’s risk assessment of the Company’s compensation programs and policies. Our management will regularly conduct additional reviews of risks, as needed, or as requested by our Board or the Audit Committee.
Nominations for Director and Elections of Directors
The Governance and Nominating Committee will consider director nominees recommended by shareholders in accordance with the requirements of the Bylaws. A shareholder who wishes to recommend a director candidate should send such recommendation to our Corporate Secretary at 180 East Broad Street, Columbus, Ohio 43215, who will forward it to the Governance and Nominating Committee. Any such recommendation should include a description of the candidate’s qualifications for Board service, the candidate’s written consent to be considered for nomination and to serve if nominated and elected, and addresses and telephone numbers for contacting the shareholder and the candidate for more information. A shareholder who wishes to nominate an individual as a director candidate at the annual meeting of shareholders, rather than recommend the individual to the Governance and Nominating Committee as a nominee, must comply with the requirements described above and, in addition, must comply with the advance notice requirements for shareholder nominations set forth in our Bylaws.
As discussed earlier, under the Bylaws, director nominees in a non-contested election are elected by a vote of the majority of votes cast with respect to that director. The term “majority of votes cast” is defined in the Bylaws to mean that the number of shares voted “for” a director’s election must exceed the number of shares voted “against” such director’s election. Votes cast exclude abstentions. Under our Amended and Restated Articles of Incorporation, Bylaws and Governance Principles, an incumbent director who fails to receive a “majority of votes cast” for his or her re-election in an uncontested election shall tender his or her resignation for consideration to the Board. The Governance and Nominating Committee then will promptly consider the tendered resignation and recommend to the Board whether to accept the tendered resignation or reject it, or whether other action should be taken. The Board will act on the Governance and Nominating Committee’s recommendation no later than 90 days following the date of the certification of the shareholder vote. Following the Board’s decision, the Company will promptly disclose the decision by a press release, a filing with the SEC or other broadly disseminated means of communication. Our Bylaws and Amended and Restated Articles of Incorporation provide that in a contested election – an election in which the number of nominees exceeds the number of directors to be elected, a plurality standard will apply.
Our Governance Principles provide that all candidates for election to the Board should possess high personal and professional ethics, integrity and values and be committed to representing the long-term interests of our shareholders and otherwise fulfilling the responsibilities of directors as described in our Governance Principles. Our Governance Principles further provide that our directors should not serve on more than four public company boards, including the Board, unless the Board or Governance and Nominating Committee determines that serving on more than four public company boards does not impair the ability of the director to serve as an effective member of the Board. In recommending candidates to the Board for election as directors, the Governance and Nominating Committee will consider the foregoing minimum qualifications as well as each candidate’s credentials, keeping in mind our desire, as stated in our Governance Principles, to have a Board representing diverse experiences and backgrounds, as well as expertise in or knowledge of specific areas that are relevant to our business activities.
Board and Committee Meetings and Attendance
Our business and affairs are managed under the direction of our Board. During 2018, our Board met four (4) times. Our Board conducts many of its oversight responsibilities through its committees. During 2018, the Audit Committee met four (4) times, the Compensation Committee met six (6) times, Governance and Nominating Committee met four (4) times, and the Sustainability Committee met four (4) times. Each of the incumbent members of the Board attended at least 75% of the aggregate number of meetings of the Board and the committees on which each respective director served during their period of service.
Executive Sessions of Independent Directors
The independent directors met periodically during 2018 in executive sessions without management present. During 2018, the independent directors of the Board held three (3) executive sessions.Mr. Laikin presided over these executive sessions.
We have the following standing Board committees: Audit Committee, Compensation Committee, Sustainability Committee, and Governance and Nominating Committee. Each of these Committees is composed entirely of independent directors. The written charters for each of the Committees are available on the Corporate Governance page of the Investor Relations section of our website at www.washingtonprime.com, or by requesting a copy, in print, without charge by contacting our Corporate Secretary at 180 East Broad Street, Columbus, Ohio 43215.
The following table sets forth the membership of the Committees as of theRecord Date:
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Audit Committee
The Audit Committee assists the Board in monitoring the integrity of our financial statements, the qualifications, independence and performance of our independent registered public accounting firm, the performance of our internal audit function and our compliance with legal and regulatory requirements.
The Audit Committee has sole authority to appoint or replace our independent registered public accounting firm and pre-approves the auditing services and permitted non-audit services to be performed by our independent registered public accounting firm, including the fees and terms thereof. The Audit Committee has authority to retain legal, accounting or other advisors.
Among other roles specified in its charter, the Audit Committee reviews and discusses the following matters with management and our independent registered public accounting firm: (i) our annual audited financial statements, (ii) our quarterly earnings releases and financial statements, (iii) significant financial reporting issues and judgments made in connection with the preparation of our financial statements, and (iv) any major issues regarding the adequacy of our internal controls. It also issues the report on its activities which appears in the section of this Proxy Statement entitled “Audit Committee Statements.”
The charter of the Audit Committee requires that each member meet the independence and experience requirements of the NYSE, the Exchange Act, and the rules and regulations of the SEC. The Board has determined that each of Messrs. Dillon, Levy and Ms. von Blucher is financially literate under NYSE rules and that Mr. Levy is qualified to serve as an “audit committee financial expert” as defined by SEC rules and served in that role for all of 2018.
Compensation Committee
The Compensation Committee is appointed to discharge the Board’s responsibilities relating to the establishment and administration of the Company’s policies, programs and procedures for the annual and long-term compensation of our senior executive officers. The Compensation Committee also administers our equity-based compensation plans and programs. Pursuant to its charter, the Compensation Committee also has the power, authority, and discretion to retain, at the Company’s expense, independent counsel and other advisors and experts as it deems necessary or appropriate to carry out its duties.
Among other roles specified in its charter, the Compensation Committee periodically reviews, and makes necessary changes to, our compensation philosophy, reviews and approves the compensation structure for our senior executive officers and other officers, makes recommendations to the Board regarding all equity-based plans and other compensation arrangements which require approval by our shareholders, and approves and authorizes the Company to enter into any employment agreements, severance arrangements, change in control agreements or provisions, or other compensation-related agreements, with our senior executive officers. It also issues a report on its activities which appears in the section of this Proxy Statement entitled “Compensation Committee Report.”
The charter of the Compensation Committee requires that each member meet the independence requirements of the NYSE and the rules and regulations of the SEC. Ms. Soffer and Messrs. Laikin and Dillon served on the Compensation Committee for all of fiscal year 2018 and each satisfied during all of 2018 the independence requirements of the NYSE for compensation committee members. Mr. Birge was appointed to the Compensation Committee, effective January 1, 2019, and also satisfies the independence requirements of the NYSE for compensation committee members.
During 2018, Frederic W. Cook & Co., Inc. (“FW Cook”) served as independent consultant to the Compensation Committee. In this role, FW Cook provided the Compensation Committee with peer executive compensation data, as well as expertise and advice on various matters brought before the Compensation Committee relating to executive compensation. FW Cook has, through written correspondence, provided the Compensation Committee affirmation of its independence for fiscal year 2018 as well as the independence of its partners, consultants, and employees as measured by the independence factors for compensation consultants under the listing standards of the NYSE. Based on a review of this information, the Compensation Committee determined that no work provided by its independent consultant raised any conflict of interest.
In making its compensation decisions, the Compensation Committee relies upon performance data, statistical information and other data regarding executive compensation programs and peer practices provided from time to time from its consultant and from the Company’s human resources department, finance department and the Company’s senior management team, including our senior executive officers. The Compensation Committee has access to individual members of management and employees and may invite them to attend any Compensation Committee meeting.
Governance and Nominating Committee
The Governance and Nominating Committee is appointed by the Board to address the broad range of issues surrounding the composition and operation of the Board, develop and recommend to the Board, the governance guidelines or principles applicable to the Company and the Board, lead the Board in its annual review of Board performance, review, consider and recommend to the Board the candidates to be nominated for election to the Board to fill new or vacant positions to serve as independent members of the Board, and periodically review and make recommendations to the Board regarding compensation for independent members of the Board. The Governance and Nominating Committee has the authority to retain legal, accounting or other advisors. The charter of the Governance and Nominating Committee requires that each member meet the independence requirements of the NYSE. Ms. Soffer and Messrs. Laikin and Levy served on the Governance and Nominating Committee during all of 2018 and satisfied the independence requirements of the NYSE.
Sustainability Committee
The Sustainability Committee is a standing committee of the Board, the purpose of which is to: (1) review, assess, monitor and evaluate the Company’s efforts to address sustainability issues inherent in the Company’s business and operations; (2) review economic incentives for applicable projects offered by local, state or federal governments; (3) make an assessment and recommend, where appropriate, to the Board if the Company should pursue and adopt such incentives; and (4) perform such additional duties as stated in its charter or required by applicable laws or regulations. The Sustainability Committee shall also assist the Board and the Company in fulfilling its responsibilities and objectives in matters related to implementing sustainable business practices and the Company’s role as a responsible corporate citizen; this includes but is not limited to, environmental performance and opportunities, community engagement and investment, and sustainable energy consumption.
Communications with the Board
Our Governance Principles include procedures by which shareholders and other interested parties may communicate with our Board, or one or more specific members thereof, by writing a letter to our Board, c/o the Corporate Secretary at 180 East Broad Street, Columbus, Ohio 43215. The Corporate Secretary will regularly forward to the addressee all letters other than mass mailings, advertisements and other materials not relevant to our business or the Board’s operations.
Attendance at Annual Shareholder Meetings by Directors
All of the members of the Board attended the 2018 Annual Meeting of Shareholders. We encourage all of the members of the Board to attend the Annual Meeting.
Policies on Business Ethics
We have adopted a Code of Business Conduct and Ethics, which we refer to as our code of conduct, which requires all business activities to be conducted in compliance with laws, regulations and ethical principles and values. All of our directors, officers and employees are required to read, understand and abide by the requirements of the code of conduct.
The code of conduct is accessible on the Corporate Governance page of the Investor Relations section of our website at www.washingtonprime.com. Any amendment to, or waiver from, a provision of the code of conduct may be granted only by an employee’s immediate supervisor and only after advance notice to, and consultation with, the General Counsel, or in those instances required by the code of conduct, the Chief Executive Officer. Waivers involving any of our executive officers or directors may be made only by the Audit Committee, and all waivers granted to executive officers and directors will be disclosed to our shareholders as required under applicable law and regulations. Our General Counsel, who is responsible for overseeing, administering, and monitoring the code of conduct, reports to the Chief Executive Officer with respect to all matters relating to the code of conduct.
Procedures for Treatment of Complaints Regarding Accounting, Internal Accounting Controls and Auditing Matters
In accordance with the Sarbanes-Oxley Act of 2002, our Audit Committee has adopted procedures for the receipt, retention, and treatment of complaints regarding accounting, internal accounting controls, and auditing matters and to allow for the confidential, anonymous submission by employees and others of concerns regarding questionable accounting or auditing matters.
Policies and Procedures for Reviewing and Approving Related Person Transactions
As contemplated by our code of conduct, the Audit Committee must review and approve or ratify all related person transactions. Under the code of conduct, a “related person transaction” is a transaction, arrangement or relationship in which the Company (including any subsidiary) was, is or will be a participant, and in which any related person had, has or will have a material direct or indirect interest. Our code of conduct defines a “related person” to be: (i) any person who is, or at any time since the beginning of the Company’s last fiscal year was, an executive officer, director, or director nominee, (ii) any person known to be the beneficial owner of more than 5% of any class of the Company’s voting securities, and (iii) any family members of any of the foregoing persons. Pursuant to the charter of the Audit Committee, the Audit Committee in reviewing a related person transaction shall consider, among other things, whether the transaction in question is in, or not inconsistent with, the best interests of the Company and, where applicable, the terms of such transaction are at least as favorable to the Company as could be obtained from an unrelated third party. Under our code of conduct, related person transactions are prohibited unless approved or ratified by the Audit Committee.
Corporate Compliance and Ethics Program
The Board has adopted a corporate compliance and ethics program. The program is designed to prevent and detect criminal and other wrongdoing that violates the Company’s existing policies, guidelines, codes, bylaws, and procedures. The program incorporates the terms and conditions of the Company’s existing compliance policies, guidelines, codes, bylaws, and procedures where appropriate and establishes the processes and procedures by which certain personnel of the Company shall report ethics and compliance violations to the Board or a duly authorized committee of the Board. The Company’s General Counsel and its Vice President, Internal Audit have been appointed by the Audit Committee of the Board to have shared responsibility for the day-to-day administration and oversight of the program. The Vice President, Internal Audit oversees and monitors compliance with the Company’s audit, tax, accounting, financial reporting, and finance policies and procedures that are covered by the program while the Company’s General Counsel oversees and monitors compliance with the Company’s ethics, governance, operational, records retention, and legal policies and procedures that are covered by the program. On an annual basis, the Company’s General Counsel reports to the Audit Committee on the implementation and effectiveness of the program.
The Disclosure Committee
The Disclosure Committee currently consists of Ms. Janette P. Bobot, Chairperson of the Disclosure Committee and also Vice President of the Company’s internal audit department, and four (4) additional persons consisting of, as of the Record Date, Messrs. Louis G. Conforti, Mark E. Yale, Robert P. Demchak and Ms. Melissa A. Indest. The function of the Disclosure Committee is to ensure the accuracy, completeness, and timeliness of any and all material disclosures made to the Company’s shareholders, the investment community, and the SEC, that pertain to Company matters, including, but not limited to, the Company’s financial condition and results of operations. The Disclosure Committee is not a committee of the Board. The Disclosure Committee met four (4) times during the fiscal year ended December 31, 2018. The Chief Executive Officer and the Chief Financial Officer have adopted a Disclosure Committee Charter and it sets out the responsibilities, authority, and specific duties of the Disclosure Committee.
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Management has the primary responsibility for the preparation, presentation and integrity of our consolidated financial statements; accounting and financial reporting principles; maintaining effective internal control over financial reporting and issuing management’s report on internal controls over financial reporting, and procedures in accordance with applicable laws and regulations.
EY, our independent registered public accounting firm, is responsible for performing an independent audit of our consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (the “PCAOB”) and expressing an opinion on whether our consolidated financial statements present fairly, in all material respects, our consolidated financial position, results of operations and cash flows in conformity with U.S. generally accepted accounting principles. EY is also responsible for expressing an opinion on the effectiveness of internal controls over financial reporting.
The Audit Committee has reviewed our audited financial statements for the fiscal year ended December 31, 2018 and discussed them with our management team and our independent registered public accounting firm.
The Audit Committee also has received from, and discussed with, our independent registered public accounting firm various communications that our independent registered public accounting firm is required to provide to the Audit Committee, including the overall scope and plan for the audit, as well as the matters required to be discussed under applicable PCAOB standards.
The Audit Committee has received the written disclosures and the letter from the Company’s independent registered public accounting firm required by the applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and has discussed with our independent registered public accounting firm their independence. When analyzing EY's independence, we considered if the services EY provided to the Company beyond those rendered in connection with its audit of the Company's consolidated financial statements including (i) its audit of the effectiveness of internal controls over financial reporting and (ii) its reviews of the Company's quarterly unaudited consolidated financial statements, and whether such items were compatible with EY maintaining its independence. We concluded that the provision of such services by EY in the past year has not jeopardized EY's independence.
Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
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In addition to the risk oversight responsibilities of the Board and Audit Committee that were discussed earlier, the Compensation Committee conducts, in accordance with applicable SEC rules, an annual risk assessment of the Company’s compensation plans, policies, programs and practices to determine whether such plans, policies, programs and practices create risks that are reasonably likely to have a material adverse effect on the Company. The review conducted by the Compensation Committee focused on a number of aspects relating to our compensation program, but primarily on whether any compensation related risks have developed inherently or otherwise in connection with the operation of our business, modification of our compensation programs, periodic adjustments to existing compensation arrangements and plans, and if any compensation incentives have been adopted that encourage high risk behavior at the expense or detriment of long-term Company value and which are reasonably likely to create a material adverse effect. Based on this assessment, the Compensation Committee concluded that the Company’s compensation plans, policies, programs and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. As part of its assessment, the Compensation Committee evaluated the Company’s compensation plans, policies, programs and practices, including, but not limited to, the plans and policies relating to the Company’s salaried compensation, cash incentive plans, and long-term equity incentive awards, to determine their propensity to cause undue risk taking by employees, including the Company’s executive officers, relative to the level of risk associated with the Company’s business model and operations.
As of the end of 2018, our company, on a consolidated basis, had 834 employees, of which approximately 107 were part-time. Certain employees are compensated on an hourly basis and others receive salaried compensation with some eligible for additional equity compensation as well as incentive cash compensation. With regard to executive officer pay in 2018, the emphasis continues to be on improving long-term performance to enhance shareholder return and enterprise value. Furthermore, the Company incorporates a number of design features to mitigate undue risk in its compensation programs including, limits on both annual and long-term incentive plan payouts, the use of multiple performance metrics to measure individual and corporate performance, stock ownership guidelines, and equity compensation that encourages a long-term perspective on performance. The Company has clawback policies applicable to performance-based compensation as well as internal controls and financial transparency that limit the degree of financial risk that can be undertaken without scrutiny. Lastly, the Compensation Committee received during 2018 market compensation data and counsel from its external compensation consultant to consider in making compensation related decisions. The Compensation Committee completed its annual assessment shortly after the end of 2018 as part of its obligation to oversee the Company’s compensation risk assessment process and made the findings summarized above available to the full Board.
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Compensation Discussion and Analysis
This Compensation Discussion & Analysis (“CD&A”) section of this Proxy Statement describes our executive compensation philosophy and programs, the decisions the Compensation Committee made with regard to fiscal year 2018 compensation for the named executive officers (“Named Executives” or “NEOs”), and the factors considered in making those decisions. The Named Executives for 2018 were:
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Unless otherwise indicated or the context otherwise suggests, all references in this CD&A to the “Named Executives” shall mean the individuals listed above on a collective basis.
Executive Summary
For 2018, the Company focused primarily on:
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2018 Business Highlights
Redevelopment and Department Store Progress
In 2018, an objective of the Company was to generate $6.5 million of net operating income (“NOI”) from redevelopment projects. The actual amount of NOI generated from redevelopment for fiscal year 2018 was $7.8 million, 20% more than the target. This was comprised of 39 projects with a yield of nearly 12%. Furthermore, at the end of 2018, the pipeline of projects was robust with 44 projects in process with high single digit yields.
Also during 2018, the Company identified twenty-nine department store locations within its core portfolio for strategic redevelopment. Generally, these locations were formerly occupied by Sears or The Bon-Ton Stores, both of which filed for bankruptcy protection during 2018. We anticipate investing between $300 million to $350 million over the next three to five year period to complete this redevelopment effort. While the short term disruption from lost rents and the related co-tenancy will impact our near term growth, it also presents the opportunity to enhance the quality of our properties by bringing new offerings to the assets.
Enhance our Strong Balance Sheet to Ensure Ample Liquidity to Execute on Our Plans
In January 2018, we closed on the recast of our restated credit facility and related term loan of over $1 billion resulting in no change in pricing and extending the term through the end of 2022. In October 2018, we completed the transition of Rushmore Mall back to its lender affiliate in exchange for a complete satisfaction of the $94 million non-recourse mortgage loan. This non-core property’s mortgage had a debt yield of less than 8% and the transition to the lender was an effective way to reduce leverage. During 2018, we sold restaurant outparcels to Four Corners for proceeds of $20 million. This was a great source of capital to fund our redevelopment needs.
We are focused on our near term debt maturities that includes our April 2020 $250 million inaugural bond issuance. We have an executed term sheet for a 10-year commercial mortgage-backed securities (CMBS) financing on our Waterford Lakes Town Center property, a tier one (“Tier One”) unencumbered asset located in Orlando, Florida, which we expect to raise approximately $180 million in proceeds. Coupled with the opportunity to generate $70 million of excess proceeds in 2019 through the mortgage refinancing of four open air (“Open Air”) assets with extremely low leverage, we are confident in our plan to address this upcoming payoff of the aforementioned bonds.
We finished 2018 with approximately $420 million of current available liquidity when considering cash on hand and capacity on our credit facility. In addition, we expect approximately $40 million of proceeds from the remaining Four Corners outparcel transactions, with the majority expected to close by the middle of 2019, giving us close to $500 million of overall liquidity. We expect a transition back to the servicer of our Towne West Square and West Ridge Mall and Plaza properties, along with the $95 million of related mortgage debt with single digit debt yields in 2019. Accordingly, when considering our available liquidity and manageable debt maturity profile over the next four years, we feel confident in our ability to fully commit to our current redevelopment pipeline.
Focus on Operational Stability
While we cannot control the disruption created by large retailer bankruptcies and liquidations, we remain focused on stabilizing our cash flows. During 2018, comparable NOI for our Tier One and Open Air assets decreased year over year by 1.8% and 1.7%, respectively. When excluding the approximate $7 million negative impact due to lost rental income and the related co-tenancy stemming from anchor bankruptcies, 2018 comparable NOI for our Tier One and Open Air assets was practically flat, down only 0.3%. Even with the heightened retailer disruption in recent years, our five year NOI growth for our Tier One and Open Air properties has grown 0.9% over that period, demonstrating the stability of our cash flows.
Our year-end 2018 operating metrics also support the stability of our portfolio with occupancy for our 41 Tier One assets increasing 90 basis points to 94.2% year over year, while our 51 Open Air properties decreased only 20 basis points to 95.6% year over year. Combined occupancy for our Tier One and Open Air properties exhibited a 50 basis point increase to 94.9%. Sales per square foot in our Tier One properties increased by six dollars to $399 as of December 31, 2018 and the occupancy cost in our Tier One properties decreased 60 basis points to 11.7%. Reconciliation of our fiscal year 2018 comparable NOI can be found in our press release, dated February 20, 2019, that was included as an exhibit to a Form 8-K filed by the Company with the SEC on February 21, 2019.
Robust Leasing Volume and Tenant Diversification Mandate
Leasing continued to be robust with volume totaling 4.2 million square feet during 2018 of which 60% of the new leasing being attributable to lifestyle tenancy which includes food, beverage, entertainment, home furnishings, fitness and professional services in accordance with the Company's tenant diversification mandate.
Company Consideration of Past Shareholder Voting Results in Determining Fiscal Year 2018 Executive Compensation
At the 2018 Annual Meeting of Shareholders (the “2018 Meeting”), we held for the third time a non-binding advisory vote on executive compensation. Over 96% of the Common Shares voted at our 2018 Meeting on the proposal relating to our executive compensation were in favor of the proposal. No material changes or modifications to structure or components of our executive compensation program or policies were made during fiscal year 2018 in response to the voting results from the 2018 Meeting for the non-binding shareholder advisory vote on our executive compensation. Despite the positive response of our shareholders to the non-binding advisory proposal on executive compensation presented at the 2018 Meeting, our Board and Compensation Committee will continue to engage with shareholders on executive compensation matters and review and examine the results of non-binding advisory shareholder votes on executive compensation that we hold in the future in light of our existing governance policies and procedures, bylaws, as well as our executive compensation programs, policies, and objectives.
Pay for Performance
The majority of the compensation opportunity during fiscal year 2018 for certain of our Named Executives is “at risk” and tied to pre-established performance goals.
*Other NEOs include Messrs. Yale, Demchak, Ajdaharian, and Zimmerman, who were employed for all of 2018. It excludes Mr. Mastropietro, whose employment terminated May 7, 2018.
Our pay-for-performance philosophy is further illustrated by comparing target total direct compensation (“TDC”) to “realizable” compensation for our CEO, after taking into account actual performance. Based on our operational and strategic performance and Mr. Conforti’s individual performance versus the goals in our annual cash bonus plan, 2018 actual bonuses (for fiscal year 2017 performance) were 90% of target. As of December 31, 2018, our outstanding performance share units (“PSUs”) are tracking below target based on our relative performance versus the payout schedule. If the performance period for our performance share units (“PSUs”) granted in early 2017 had ended on December 31, 2018, 87% of the target number of shares would have been earned because our relative total shareholder return from the grant date through December 31, 2017 was at the 55th percentile of the comparator group. If the performance period for our PSUs granted in early 2018 had ended on December 31, 2018, 65% of the target number of shares would have been earned because our relative total shareholder return from the grant date through December 31, 2017 was at the 46th percentile of the comparator group. Additionally, our stock price at the end of fiscal year 2018 was lower than the stock price on the date of grant for 2017 and 2018 equity awards, which reduced the value of both the restricted stock units (“RSUs”) and PSUs that were awarded. As a result, as of December 31, 2018, “realizable” compensation for our CEO was substantially less than target TDC in both 2017 and 2018.
Business challenges in the retail sector have continued to impact the shareholder returns of landlords, in particular retail REITs. As previously discussed, our TSR compared to the broader retail REIT peer group used for measuring relative performance for our PSUs granted in 2017 and 2018 was near median (as of December 31, 2018, 55th percentile for the 2018 PSUs and 46th percentile for the 2017 PSUs). However, we continued to outperform our direct competitors CBL & Associates Properties, Inc. (NYSE: CBL) and Pennsylvania Real Estate Investment Trust (NYSE: PEI), which have assets most similar to ours. As shown in the following table, our TSR outperformed these direct competitors in fiscal year 2018 and during the period beginning on the date Mr. Conforti became Interim CEO to the end of fiscal year 2018.
| Annualized TSR | |
REIT | (1/1/2018 – 12/31/2018) | (6/20/2016 – 12/31/2018) |
Washington Prime Group Inc. | -21.20% | -16.93% |
CBL & Associates Properties, Inc. | -59.91% | -39.49% |
Pennsylvania Real Estate Investment Trust | -45.61% | -34.98% |
Changes to the 2019 Annual Incentive Cash Bonus Planto be More Financially Result Oriented
To strengthen our commitment to pay for performance, the Compensation Committee determined that for 2019, the performance goals for a cash bonus will be weighted more in favor of the Company’s financial metrics. For 2018, 50% of the cash awards vested based on Funds From Operations (“FFO”), and 25% vested based on the achievement of each of corporate and personal goals. In 2019, 75% of the cash awards under the plan will vest based on FFO goals, and 12.5% will vest with respect to the achievement of each of the corporate and personal goals. These changes result in weighting more of the plan participants’, including certain of the Named Executives, cash bonus based on financial performance metrics of the Company rather than other performance goals.
Compensation and Corporate Governance
Our commitment to strong corporate governance can be understood by reviewing the following list of what we do and do not do:
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Compensation Decision-Making Process
Role of the Compensation Committee. Our Compensation Committee reviews and approves the compensation, including severance compensation, for our executive officers, reviews our overall compensation structure and philosophy, and authorizes awards under our incentive plans.
Role of Management. Management provides input into the design of incentive compensation programs, to ensure these programs support the Company’s business objectives and strategic priorities. With respect to performance measures and goals, the annual operating plan initially established by management and approved by our Board, is an important factor in the Compensation Committee’s decision-making process. Additionally, our CEO works with the Compensation Committee and its independent compensation consultant to develop recommendations for pay levels for executives other than himself, based on competitive market data, internal compensation consistency between executives, past performance and future potential. Upon invitation, members of the management team attend Compensation Committee meetings, but are not present for executive sessions. The Compensation Committee makes all final decisions with respect to compensation of our Named Executives, which it then recommends to the Board for approval where appropriate.
Role of Compensation Consultant. The Compensation Committee may, in its sole discretion, retain or obtain the advice of one or more compensation consultants as it deems necessary to assist in the evaluation of executive officer compensation and is directly responsible for the appointment, compensation and oversight of the work of any such compensation consultant. In 2018, the Compensation Committee retained FW Cook as its independent advisor. As requested by the Compensation Committee, FW Cook periodically provides reviews of the various elements of our compensation programs, including evolving compensation trends and market data.
Target pay opportunities and our overall executive compensation program design and structure remained largely the same in 2018 as compared to 2017. As one of many inputs into the Compensation Committee’s decision-making process for designing the pay elements used in 2017 and continued in 2018 and approving compensation opportunities for fiscal year 2017, which were held constant in 2018, the Compensation Committee considered FW Cook’s various competitive analyses conducted in 2016 and in 2017, which only consisted of an analysis of CEO compensation. FW Cook’s competitive analysis compared our target executive compensation opportunities and the design of our annual and long-term incentive programs to comparable programs then in place at a peer group of retail REITs of similar size to us in terms of enterprise value or total capitalization. The peer group used for the competitive analysis included the following companies (the “Pay Study Peer Group”):
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In 2016, FW Cook observed that base salaries for our executive officers were generally in the median range, target annual cash bonuses were above the median range, and target long-term incentive values were below the median range. The resulting target TDC was generally in the median range compared to named executive officers at the companies within the Pay Study Peer Group. As a result, the Compensation Committee, starting in 2017, made certain modifications to our salary, bonus and long-term compensation elements to achieve better consistency with market practice within our industry. The Compensation Committee used the competitive market data as one of many factors in making its compensation decisions for fiscal year 2017. Other factors considered included, but were not limited to, the scope of the executive’s role and its importance to the organization, the individual’s experience, performance, and future potential, past performance, internal pay equity considerations, succession planning considerations and promotions. 2018 target TDC opportunities remained largely unchanged compared to 2017.
Objectives of Our Executive Compensation Program
Our executive compensation program is designed to achieve the following objectives:
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How the Compensation Elements of Our Executive Compensation Program Achieve the Objectives of Our Program
The table below indicates how each compensation element for the Named Executives is intended to achieve each of the aforementioned objectives.
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Fiscal Year 2018 Compensation for the Named Executives
2018 Salary Compensation
Base salaries were initially set for each of the Named Executives under the employment agreementseach has with the Company. Under these agreements, periodic adjustments to base salaries are permitted or contemplated as circumstances warrant. Historically, the Compensation Committee annually evaluates base salaries to determine whether adjustments are warranted to achieve better market comparability, to enhance internal pay equity among the Company’s senior executive personnel, recognize promotions, and to reward performance. Base salaries for the Named Executives were not modified in 2018 from 2017 levels. The fiscal year 2018 base salaries for the Named Executives are listed in the table below.
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During fiscal year 2018, our CEO and Chief Financial Officer each had, respectively, the highest salary compensation among the Named Executives because of their management and oversight responsibilities. These differences in compensation are also reflected in our bonus, equity incentive opportunities, and change in control arrangements for the same reasons.In establishing base salaries for fiscal year 2018, the eventual amount of a Named Executive’s 2018 annual base salary was not affected or influenced by the amount of any other compensation element within our executive compensation program. However, annual paid salary or, in some instances, base salary is a variable used in the formula to determine the annual performance bonus targets for certain Named Executives and the target grant value of the annual equity awards for certain Named Executives. Annual base salary is a variable in the formula to determine parts of certain Named Executive’s particular severance or change in control payout under our executive severance arrangements. Salaries earned by the Named Executives for fiscal year 2018 are reflected in column (c) of the Summary Compensation Table and account for approximately 7% to 43% of a Named Executive’s total annual compensation reported in the Summary Compensation Table.
2018 Annual Incentive Cash Bonus Plan
The annual cash bonuses for our senior executive officers, including the eligible Named Executives, are designed to motivate the senior executive officers to achieve our company’s short-term goals and objectives. The amount of the 2018 bonus payment for our senior executive officers, including eligible Named Executives, is for performance during 2018, determined based upon the terms and conditions of the 2018 WPG Executive Bonus Plan (the “2018 Plan”) or, in certain instances, the terms of the respective Named Executive’s employment agreement relating to bonus compensation.
With respect to the bonus compensation for Mr. Ajdaharian for fiscal year 2018 performance, he received a payout despite his separation from the Company in February 2019. Mr. Ajdaharian’s employment agreement may entitle him, as part of his severance related compensation, to his accrued annual bonus for fiscal year 2018 if such bonus has not been paid as of the date of termination and subject to Compensation Committee review and consent. The following discussion regarding bonus compensation for the Named Executives under the 2018 Plan is, as applied to Mr. Ajdaharian, provided in light of the above-described contractual provisions.
Target Bonus Opportunities
As shown by the table below, each participant in the 2018 Plan has a target bonus opportunity equal to a percentage of base salary. The target bonus percentage for the Named Executives eligible for a payout from the 2018 Plan were unchanged from 2017 levels. Dollar amounts are rounded to the nearest dollar.
Named Executive | Target Bonus (% Salary*) | Target Bonus Payout Amount ($) |
Mr. Conforti | 150% | $1,350,000 |
Mr. Yale | 125% | $640,625 |
Mr. Demchak | 150% | $600,000 |
Former Executives | ||
Mr. Ajdaharian | 100% | $404,513 |
Mr. Mastropietro | N/A | N/A |
Mr. Zimmerman | 100% | $383,398 |
*Per the 2018 Plan, based on actual base earnings during 2018. All values are rounded to the nearest dollar. |
Except as may be otherwise determined by the Compensation Committee pursuant to its discretionary authority under the 2018 Plan, in order for a participant to receive a bonus payment, under the 2018 Plan, the participant must be actively employed with the Company (or any affiliate) on the date the bonus payment is approved by the Compensation Committee. Mr. Mastropietro is not eligible for a bonus payout under the 2018 Plan as he was terminated in May 2018 and was not employed by the Company on the date the bonus payments for the 2018 Plan were approved by the Compensation Committee. Mr. Zimmerman remained eligible to receive a bonus payment under the 2018 Plan as his resignation was tendered after the approved bonuses were paid.
Performance Measures and Weightings
The 2018 Plan is funded if a specified threshold level of FFO per diluted Common Share, as adjusted and described in more detail below, is achieved by WPG for fiscal year 2018. If actual FFO per diluted Common Share, as adjusted, is below the threshold level, the 2018 Plan is not funded and no bonuses are paid to any 2018 Plan participants including eligible Named Executives.
Under the 2018 Plan, performance is measured in three categories with the following weightings for each 2018 Plan participant:
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Each of the components above are performance-based using goals or objectives that are set at, or near, the beginning of the performance period.
The structure of the Company’s annual bonus plan normally provides for a payout ranging from 25% of target for threshold performance to 200% of target for maximum performance. However, in 2018, the Compensation Committee reduced the maximum payout under the 2018 Plan from 200% of target to 150% of target in light of the lower FFO/Common Share goal for the year and in light of the continued challenges facing the retail REIT sector. In addition, the Compensation Committee decided that payout for the FFO/share component would be limited to 100% unless the maximum FFO/share goal was achieved. For the Company-wide Strategic Objectives, and each Named Executive’s Individual Objectives, the maximum payout was similarly reduced to 150% of target.
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| 2018 Structure | |
Performance Level | 2017 Structure | FFO Component | Strategic Objectives and Individual Objective Components |
Below Threshold | 0% | 0% | 0% |
Threshold | 25% | 25% | 25% |
Target | 100% | 100% | 100% |
Between Target and Maximum | Interpolated | 100% | Interpolated |
Maximum | 200% | 150% | 150% |
a. FFO per Diluted Common Share
Our company is a REIT that primarily owns, leases, acquires, develops, and operates enclosed retail properties and community shopping centers. In order to maintain WPG’s REIT status, we must distribute at least 90% of our ordinary taxable income, exclusive of net capital gains, to WPG’s shareholders. We use FFO as a supplemental metric to net income to measure our operating performance. FFO is the commonly accepted and recognized measure of operating performance for REITs by the real estate industry. FFO is defined by the National Association of Real Estate Investment Trusts, or NAREIT, as net income (or loss) computed in accordance with generally accepted accounting principles, or GAAP, excluding real estate related depreciation and amortization, excluding gains and losses from extraordinary items and cumulative effects of accounting changes, excluding gains and losses from the sale or disposal of previously depreciated retail operating properties, excluding gains and losses upon acquisition of controlling interests in properties,excluding impairment charges of depreciable real estate,plus the allocable portion of FFO of unconsolidated entities accounted for under the equity method of accounting based upon economic ownership interest. We believe that per share growth in FFO is an important factor in enhancing shareholder value. Therefore, a component of our executive compensation program is designed to reward achievement of our company’s fiscal year FFO goals. Although FFO is partly influenced by market forces that are beyond our control, we feel that our senior executive officers, including the Named Executives currently employed by us, have the greatest opportunity to influence performance in this area. Therefore, we base a large portion of their total cash compensation on an evaluation of WPG’s annual FFO results. FFO does not represent cash flow from our operating activities in accordance with GAAP and our FFO may not be directly comparable to similarly titled measures reported by other REITs. Moreover, FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as a measure of operating performance, as an indication of our financial performance, as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make cash distributions. Our executive bonus plan uses FFO performance targets to determine a portion of each eligible Named Executive’s annual bonus. We calculate WPG’s reported FFO (with adjustment for non-recurring items) per Common Share for reporting purposes by dividing WPG’s FFO by the weighted average number of diluted Common Shares outstanding for the fiscal year which WPG’s per Common Share FFO is being determined. Please refer to the Management's Discussion and Analysis of Financial Condition and Results of Operations section in our 2018 Annual Report on Form 10-K for a reconciliation of FFO to net income and FFO per Common Share to net income per Common Share.
Under the terms of the 2018 Plan, the fiscal impact, whether positive or negative, of certain unanticipated or unplanned factors or events not contemplated in the Company’s fiscal year 2018 consolidated corporate budget shall be excluded from the calculation of WPG’s year-end FFO per diluted Common Share metric used to determine payout amounts for FFO performance under the 2018 Plan. Examples of factors enumerated under the 2018 Plan the impact of which may be excluded or disregarded in determining the Company’s 2018 fiscal year end FFO per diluted Common Share include: (1) non-cash asset write downs or impairments, (2) the financial impact of dispositions, acquisitions, ventures, or similar transactions, and (3) the financial impact of charges and expenditures associated with the early extinguishment of debt and the discontinuation of certain transactions or pre-development and development projects. The terms of the 2018 Plan authorize the Compensation Committee to use its discretion to reject any of the aforementioned adjustments described above in approving the final payout amount for the FFO Component of the bonus payment. The terms of the 2018 Plan also empower the Compensation Committee to use its discretion to make any other adjustments they believe are appropriate in approving the final bonus payout amount for the Company’s 2018 FFO performance.
b. Strategic Objectives
With respect to incentive compensation for fiscal year 2018 performance, our Company’s strategic performance is rewarded through our annual cash bonus awards based upon the Compensation Committee’s assessment of the Company’s performance compared to our corporate strategic objectives (the “Strategic Objectives”). The Strategic Objectives are reviewed and approved annually by the Compensation Committee at the time the annual cash bonus plan and annual equity awards are approved, typically in the first fiscal quarter of the performance period. Performance on each objective is evaluated at the threshold, target and maximum levels with target achievement constituting expected performance, threshold achievement constituting acceptable performance that is below target performance, and maximum achievement constituting performance that exceeds expectations. The Company believes achievement of the Strategic Objectives are critical to long-term value creation and as such, are critical to aligning the interests of the Company’s senior executive officers, including the Named Executives currently employed by us, with shareholders as well as with the long-term success of our company.
c. Individual Performance
Individual performance is evaluated and rewarded based primarily upon an assessment of the executive’s achievement of predetermined individual objectives that are linked thematically to our overall corporate goals and the Strategic Objectives for the plan year. Generally, individual objectives of the executives differ for each officer and are established prior to or near the beginning of the evaluation year in connection with the adoption of the executive bonus plan for that year.
Actual Performance for 2018
a. Evaluation of the FFO Component
Following the Compensation Committee’s review and evaluation of our year-end FFO performance, the amount of the FFO Component of a Named Executive’s annual bonus under the 2018 Plan was determined using the following scale:
| Evaluation Levels for Per Common Share FFO Performance(1) | |||
| Threshold | Target | Maximum | Actual |
FFO Component | $1.49 | $1.52 | $1.56 | $1.51(2) |
Payout (% of Target for FFO Component) | 25% | 100% | 150% | 80% |
(1) Payouts for performance between threshold and target levels is interpolated; payout for performance between target and maximum is 100% of target (no interpolation). | ||||
(2) Reported by the Company as adjusted FFO. Unadjusted FFO per diluted Common Share was reported at $1.73. |
The FFO targets contained in the 2018 Plan include a range for FFO per diluted Common Share performance that the Company initially announced at the beginning of 2018 and, as necessary, adjusted throughout 2018. The targeted FFO per share for 2018 was lower than the $1.63 per share FFO for fiscal year 2017 due to a full year of dilutive impact which resulted from key strategic transactions completed during 2017. The Company completed a $750 million bond offering in August 2017, a material joint venture transaction in May 2017 and disposition of six (6) non-core assets throughout 2017. Each of these transactions provided strategic capital for redevelopment needs; however, the combined FFO dilution from the transactions to fiscal year 2018 was approximately $0.12 per share. The Company set target performance under the FFO Component of the 2018 Plan at $1.52 per diluted Common Share. For fiscal year 2018, the Company reported a per diluted Common Share FFO (unadjusted) of $1.73. For determining per Common Share FFO performance under the 2018 Plan, FFO was adjusted to exclude our $50.4 million gain on debt extinguishment, net of default interest, for the twelve months ended December 31, 2018 which resulted in FFO per diluted Common Share under the 2018 Plan of $1.51.
b. Strategic Objectives
In determining the payout for the Strategic Objectives Component of the annual bonus, the Compensation Committee assessed the Company’s performance in achieving the following Strategic Objectives established for fiscal year 2018:
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The Compensation Committee evaluated the Company’s performance on the Strategic Objectives and assessed achievement at the 100% of target level. Except for Messrs. Ajdaharian and Mastropietro, this achievement percentage was applied to 25% of an eligible Named Executive’s target annual bonus in order to determine the payout for the Strategic Objectives Component.
c. Individual Objectives
Individual objectives and performance assessment for each of the bonus eligible Named Executives who participated in the 2018 Plan are as follows:
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As with the Strategic Objectives Component of the annual bonus, the achievement level of each eligible Named Executive (except for Messrs. Ajdaharian and Mastropietro) on their respective individual objectives was applied to 25% of the Named Executive’s Target Bonus Payout Amount in order to determine the payout for the Individual Objectives Component.
Total Payouts to Eligible Named Executives Under the 2018 Plan
The chart below summarizes the payout amounts for each bonus-eligible Named Executive based upon the Company’s performance in FFO per diluted Common Share, the Strategic Objectives, and each person’s performance on his Individual Objectives (amounts are rounded to the nearest dollar):
Named Executive | FFO Component (80% of Target) | Strategic Objectives Component (100% of Target) | Individual Objectives Score (% of Target) | Individual Objectives Component | Total Bonus Award | |||||
Mr. Conforti | $540,000 | $337,500 | 100% | $337,500 | $1,215,000 | |||||
Mr. Yale | $256,250 | $160,156 | 100% | $160,156 | $576,562 | |||||
Mr. Demchak | $240,000 | $150,000 | 100% | $150,000 | $540,000 | |||||
Former Executives | ||||||||||
Mr. Ajdaharian | $161,805 | N/A | N/A | N/A | $161,805 | |||||
Mr. Mastropietro | N/A | N/A | N/A | N/A | N/A | |||||
Mr. Zimmerman | $153,358 | $95,850 | 100% | $95,850 | $345,058 |
The bonus payout award under the 2018 Plan for each of the listed Named Executives is reflected in column (e) of the Summary Compensation Table. The bonus payout awarded, generally, accounts for approximately 17% to 39% of a Named Executive’s total annual compensation that is reported in the Summary Compensation Table.
2018Long-Term Equity Compensation
Overview
Our long-term equity compensation program is designed to: (a) to reward executives based on financial and market performance, (b) align the interests of executives and our shareholders, and (c) attract and retain qualified and experienced executives. Although we anticipate that the size and nature of our future equity compensation awards will be influenced by our compensation objectives generally; historical practices, market or peer group comparisons, and individual performance will also influence our decision-making and practices with respect to this aspect of our executive compensation program. In 2018, equity incentive compensation awards to executives and certain non-executive personnel (the “2018 Annual Awards”) consisted of three-year time-based RSU grants. Additionally, executive personnel received PSU awards as part of the 2018 Annual Awards with performance conditions measured over a three-year performance period.
2018 Annual Awards
In February 2018, the Compensation Committee approved the 2018 Annual Awards. Grant sizes were determined based upon either the terms of a recipient’s employment agreement or the terms and rules for our 2018 long-term incentive compensation awards (the “2018 Rules”) that were approved by the Compensation Committee at the time the awards were made. Under the employment agreements for Messrs. Conforti, Yale, and Demchak, the size of their 2018 equity awards was determined by dividing a target value as determined by the Compensation Committee and set forth in the 2018 Rules by $6.10 which was the closing price on the NYSE for our Common Shares on the award date. With respect to Messrs. Ajdaharian, Mastropietro and Zimmerman, the Compensation Committee also determined a target value for each executive’s award as a multiple of their earned salary for fiscal year 2017 and the number of RSUs and PSUs determined by dividing that target value by $6.10. The target values as well as RSU and PSU award sizes for the 2018 Annual Awards to the Named Executives were as listed in the table below. Award amounts were rounded to the nearest whole unit at the time of the award.
Named Executive | RSU Target Value | PSU Target Value | RSU Award | PSU Award | ||||
Mr. Conforti | $1,500,000 | $1,500,000 | 245,902 | 245,902 | ||||
Mr. Yale | $300,000 | $300,000 | 49,180 | 49,180 | ||||
Mr. Demchak | $250,000 | $250,000 | 40,984 | 40,984 | ||||
Former Executives | ||||||||
Mr. Ajdaharian | $202,257 | $202,257 | 33,157 | 33,157 | ||||
Mr. Mastropietro | $129,815 | $129,815 | 21,281 | 21,281 | ||||
Mr. Zimmerman | $191,699 | $191,699 | 31,426 | 31,426 |
The RSU awards for the Named Executives currently employed with the Company vest in one-third tranches over three years on the annual anniversary of the February 20, 2018 award date, subject to the award recipient’s continued employment with the Company through each vesting date. Similar to the RSUs awarded in prior years, unvested RSUs awarded as part of the 2018 Annual Awards are a derivative security of our Common Shares that entitle the holder, subject to vesting and continued employment, to one Common Share for each issued, outstanding and vested RSU. During the period(s) prior to vesting, dividend equivalents are to be paid with respect to the RSUs granted. Pursuant to their employment agreements, vesting of the RSU awards granted to Messrs. Mastropietro and Ajdaharian was accelerated as of the respective termination date for each executive and the RSUs converted, on a one-to-one basis, to Common Shares. Mr. Zimmerman forfeited unvested RSUs as a result of his resignation.
With respect to the awarded PSUs, award recipients are eligible to receive actual PSUs ranging from 0% to 150% of the target number of PSUs awarded based on the achievement of the Company’s relative TSR performance compared to a pre-determined retail REIT peer group over a three-year performance period that commences on the award date. The subject peer group is set forth below:
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During the three-year performance period, dividend equivalents will accrue and be deemed reinvested in additional PSUs and will be paid with respect to the number of PSUs that actually vest at the end of the applicable performance period. The TSR performance schedule for the PSUs awarded as part of the 2018 Annual Awards is as follows:
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Payouts for PSUs are limited to 100% of target PSUs awarded if absolute TSR is negative. The values relating to our equity awards, which are reported in column (d) of the Summary Compensation Table for each Named Executive, represent the aggregate grant date fair value computed in accordance with FASB Accounting Standards Codification (“ASC”) Topic 718, Compensation – Stock Compensation (“FASB ASC Topic 718”) for each Named Executive’s respective award(s) during the listed year. Generally, with respect to the fiscal year 2018, the aggregate grant date fair value of the 2018 Annual Awards account for approximately 16% to 56% of a Named Executive’s total annual compensation that is reported in the Summary Compensation Table.
Vesting Activity for Other Outstanding Performance-Based Equity Awards
Certain Named Executives received a grant of performance-based long term incentive plan units (“LTIP Units”) in 2015 as part of inducement awards in connection with the consummation of the Merger in 2015. The performance criteria for each set of awards, and possible payout, was based on absolute and relative TSR performance of the Common Shares versus the MSCI US REIT Index (NYSE: RMZ) divided over three distinct performance periods that each concluded on December 31st for each set of awards made. Up to one-third of the maximum number of LTIP Units can could be earned during each performance period. Unearned LTIP Units are forfeited at the conclusion of the respective performance period. No LTIP Units vested and no subsequent payouts occurred for the performance period that concluded on December 31, 2018 (“2018 Performance Period”), which was the last of the three performance periods. The table below shows, for each Named Executive that received the above-described performance-based LTIP Units, the year of the grant, the LTIP Units that were forfeited after the end of the 2018 Performance Period and the number of LTIP Units remaining for the particular award.
Named Executive | Year Allocated | LTIP Units Subject to Possible Vesting During 2018 Performance Period | Remaining Performance-Based LTIP Units |
Mr. Yale | 2015 | 17,110 | 0 |
Mr. Mastropietro | 2015 | 5,703 | 0 |
Messrs. Conforti, Demchak, Ajdaharian, and Zimmerman did not receive performance-based LTIP Unit inducement awards or any other comparable award in 2015. Despite Mr. Mastropietro’s separation in May 2018, the terms of his employment agreement addressing severance-related compensation permit outstanding performance based awards such as the LTIP Units to vest (or not) following such termination based on actual performance over the applicable performance period without regard to any applicable service vesting condition. In this case, however, none of Mr. Mastropietro’s LTIP Units were earned based on actual performance.
During some or all 2018, each of the Named Executives held PSUs awarded as part of the Company’s annual equity awards granted in February 2017 (the “2017 Annual Awards”). The PSUs awarded as part of the 2017 Annual Awards have similar terms and conditions as the PSUs that comprise a part of the 2018 Annual Awards as well as TSR performance goals that are identical to those for the 2018 Annual Awards as shown in the chart in the preceding section. The three year performance period for the 2017 Annual Awards is February 21, 2017 to February 21, 2020. The PSU awards from the 2017 Annual Awards and 2018 Annual Awards for Messrs. Ajdaharian, Mastropietro and Zimmerman were forfeited in connection with their separation and terms of each executive’s employment agreements based on actual performance over the applicable performance period. The outstanding PSU awards from the 2017 Annual Awards for the remaining Named Executives are as follows: (a) Mr. Conforti: 156,576, (b) Mr. Yale: 31,315 and (c) Mr. Demchak: 26,096.
Executive Employment Agreements
In addition to our formal compensation and benefit plans which are an important component of our executive compensation program, the primary elements of our program for fiscal year 2018 – salary, equity compensation, bonus/incentive compensation, and severance/change in control arrangements – are governed by the employment agreements we had with the Named Executives during 2018. The employment arrangements for each of the Named Executives were entered into at different times and under different circumstances.
Employment Agreement for Mr. Louis G. Conforti
Under Mr. Conforti’s current employment agreement, Mr. Conforti serves as our CEO for a term ending on December 31, 2019 (the “Employment Period”) unless the Employment Period is earlier terminated. Provided there is not an early termination of the agreement, on December 31, 2019 and each annual anniversary of such date thereafter (such date and each annual anniversary thereof, a “Renewal Date”), the Employment Period automatically extends so as to terminate one year from such Renewal Date unless, at least 120 days prior to the Renewal Date, either party to the agreement gives written notice that the Employment Period will not be extended. The agreement sets forth Mr. Conforti’s base salary compensation, the conditions for his equity compensation, severance compensation and other related benefits. The agreement sets Mr. Conforti’s annual base salary at Nine Hundred Thousand Dollars ($900,000) subject to review by the Compensation Committee for adjustment at least annually(“Conforti Base Salary”). Additionally, the agreement provides that Mr. Conforti shall be eligible for an annual cash bonus pursuant to the terms of the Company’s annual cash incentive plan as in effect from time to time. Under the agreement, Mr. Conforti’s target annual bonus shall be 150% of the Conforti Base Salary (“Bonus Target”) with the actual bonus payment ranging from 0% to up to 200% of the Bonus Target based upon the level of achievement of performance goals established under the respective bonus plan at the discretion of the Compensation Committee. These terms in the Conforti agreement related to the performance bonus are satisfied by the terms, conditions and operation of the 2018 Plan. With respect to equity compensation awarded to Mr. Conforti in 2018, Mr. Conforti is eligible to receive RSUs, PSUs or other equity-based long term incentives as deemed appropriate by the Compensation Committee taking into account competitive market compensation opportunities, Mr. Conforti’s performance and other factors the Compensation Committee deems appropriate. The terms of Mr. Conforti’s employment agreement that address severance and change in control compensation require that, if during the Employment Period (including any renewals thereof): (a) the Company terminates Mr. Conforti’s employment for cause (as defined in the agreement), for any reason other than cause, or as a result of Mr. Conforti’s death or disability (as defined in the agreement); or (b) Mr. Conforti terminates his employment for good reason (as defined in the agreement) or without good reason, then the Company shall, as appropriate and applicable under the agreement, pay to Mr. Conforti (or his estate) certain cash payments and provide other specified benefits. Lastly, in the event of a change in control (as defined in the agreement) of the Company, the agreement permits the accelerated vesting of certain equity awards held by or earned by Mr. Conforti subject to the satisfaction of certain conditions and, in the event that Mr. Conforti’s employment is terminated upon or within two years following a change in control, then the Company shall pay and provide to Mr. Conforti, as applicable, certain cash payments and specified benefits. The details of Mr. Conforti’s severance and change in control compensation under the agreement is explained more fully in the section of this Proxy Statement entitled “Potential Payments upon Termination or Change in Control.”
Employment Agreements for Messrs. Mark E. Yale and Robert P. Demchak
The amended and restated employment agreements for Messrs. Yale and Demchak describe the annual base salary, cash incentive, equity, severance, and change in control compensation for each. Generally, the agreements are comparable in terms of structure and scope with the principal differences being the specific terms for the aforementioned elements of compensation for each executive. Under Mr. Yale’s employment agreement (the “Yale Agreement”), he is to serve as the Executive Vice President and Chief Financial Officer of the Company for a term ending on December 31, 2019 (the “Yale Employment Period”) unless the Yale Employment Period is earlier terminated. Similarly, Mr. Demchak’s employment agreement provides an initial term of employment for him to serve as Executive Vice President, General Counsel and Corporate Secretary of the Company until December 31, 2019 unless such term is earlier terminated. The renewal of the employment terms under the Yale Agreement and Mr. Demchak’s agreement operate like the renewal provisions of Mr. Conforti’s agreement.
Like Mr. Conforti’s employment agreement, the annual base salaries for Messrs. Yale and Demchak are initially set and then each is subject to review by the Compensation Committee for adjustment at least annually. Each executive is eligible for an annual cash bonus in 2018, and each year thereafter, during the employment period pursuant to the terms of the Company’s annual incentive plan as in effect from time to time. Mr. Yale’s target annual bonus shall be 125% of his base salary and Mr. Demchak’s target annual bonus shall be 150% of his base salary. The actual bonus payment in the case of each executive may range from 0% to up to 200% of the target bonus based upon the level of achievement of performance goals established under the cash incentive plan in place and, under certain circumstances, subject to the discretion of the Compensation Committee. Similar to Mr. Conforti’s arrangement, the terms of the Yale Agreement and Mr. Demchak’s agreement regarding bonus compensation are satisfied by the terms, conditions and operation of the 2018 Plan.
With respect to equity compensation, under the Yale Agreement and Mr. Demchak’s agreement, both executives, respectively, are eligible to receive RSUs, PSUs or other equity-based long term incentives as deemed appropriate by the Compensation Committee taking into account competitive market compensation opportunities, individual performance and other factors the Compensation Committee deems appropriate. With respect to severance and change in control compensation, the terms of the Yale Agreement and the agreement for Mr. Demchak are comparable to the terms of Mr. Conforti’s agreement and are more fully discussed in the section of this Proxy Statement entitled “Potential Payments upon Termination or Change in Control.”
Employment Arrangements for Messrs. Gregory E. Zimmerman, Armand Mastropietro and Paul S. Ajdaharian
At the beginning of fiscal year 2018 Messrs. Zimmerman, Mastropietro and Ajdaharian were parties to new employment agreements with the Company that were executed in late 2017. The provisions and structure of each of these agreements are similar in structure and scope to agreements for Messrs. Yale and Demchak with respect to term, annual base salary, equity, cash incentive, and severance and change in the control compensation. Additionally, the agreements for Messrs. Ajdaharian, Mastropietro and Zimmerman governed the severance payments, related compensation and other benefits each received in connection with their respective separation from the Company. The severance compensation Mr. Mastropietro received following his separation is summarized below and set forth in column (f) of the Summary Compensation Table as it was paid during 2018. Additionally under the section of this Proxy Statement entitled “Potential Payments upon Termination or Change in Control,” further explanation, analysis and discussion is provided for the severance payments, related compensation and other benefits provided following the termination of both Messrs. Ajdaharian and Mastropietro as well as the resignation of Mr. Zimmerman.
At the time of Mr. Mastropietro’s not for cause separation, his employment agreement entitled him to a severance payment equal to two times the sum of his 2018 annual base salary and target bonus under the 2018 Plan (the “Severance Payment”). Additionally, per the terms of his employment agreement, Mr. Mastropietro received: (i) accrued salary compensation through the date of his termination, (ii) accrued vacation pay through the date of termination (the “Additional Payment”) and (iii) reimbursement of business expenses incurred by Mr. Mastropietro as of the date of his termination. Also, per the terms of Mr. Mastropietro’s employment agreement, the vesting of all outstanding time-based equity awards held by Mr. Mastropietro at the time of his termination were accelerated and the performance based equity awards were forfeited. Lastly, a payment (through six installments over a six month period starting June 2018) was made by the Company, on behalf of and for the benefit of Mr. Mastropietro, equal to the monthly amount of Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) continuation coverage premium for eighteen (18) months following the date of Mr. Mastropietro’s separation (the “Premium”). In total, following the Company’s receipt of the appropriate release from Mr. Mastropietro, expiration of the applicable revocation period, and exclusive of the pro rata bonus payment under the 2018 Plan, Mr. Mastropietro received $1,080,556 in connection with his separation of which $1,038,516 constituted the Severance Payment, $4,026 comprised the Additional Payment, and the remaining $38,014 represented the Premium.
Other Benefits
Our senior executive officers are entitled to participate in our retirement plan, group medical insurance plan, short-term and long-term disability plan and other benefits on the same basis as other salaried employees. Our tax-qualified retirement plan, or 401(k) plan, is called the Washington Prime Group Retirement Savings Plan (the “WPG Savings Plan”). The WPG Savings Plan currently has a feature that permits the Company to partially match employee contributions, including contributions made by executive officers including certain Named Executives (the “Match Feature”). During 2018, under the Match Feature, the Company matched 100% of the first 3% of salary deferrals that an employee contributed to the WPG Savings Plan and 50% of the next 2% of salary deferrals that an employee contributed to the WPG Savings Plan. Compensation related to the Match Feature for the Named Executives is included in the amounts reported in column (f) of the Summary Compensation Table. During 2018, for Named Executives who were participants in the WPG Savings Plan, we provided matching contributions via the Match Feature of up to $11,000 per person. Additionally, during 2018, WPG paid life insurance premiums for life insurance for the benefit of the Named Executives ranging from $630 to $1,806. Moreover, Mr. Yale, per the terms of the Yale Agreement and as included in column (f) for Mr. Yale, received $15,000 from the Company during fiscal year 2018 as reimbursement for premiums paid by him during 2018 for disability and life insurance policies covering him.
Compensation Policies and Practices
Common Share Ownership Guidelines
Our Board has established Common Share ownership guidelines (the “Guidelines”) for certain executive officers and all non-management Board members to encourage higher levels of Common Share ownership and further align director and management interests with those of our shareholders as well as mitigate any unnecessary risk-taking in trading in our securities by persons covered by the Guidelines.
Under the Guidelines, Common Shares acquired by the Company’s senior executive officers subject to the Guidelines through purchase, gift, exchange or other means are counted toward the ownership requirement level in addition to Common Shares received through grants, awards or payments from the Company. Also, earned PSUs, vested and unvested time-based RSUs, LTIP Units, or Common Shares may count toward a senior executive officer and Board member’s ownership requirement level under the Guidelines. Stock options, any SARs, unearned LTIP Units, unearned PSUs, Common Shares issuable to a subject executive officer or director upon exchange or redemption of direct or indirectly owned O.P. Units, or other securities of the Company do not count toward satisfying the ownership requirements under the Guidelines. Company executives covered by the Guidelines are prohibited from selling Common Shares received by such person in connection with the exercise of any Company stock option until such person is in compliance with his or her ownership requirement. Notwithstanding the aforementioned prohibition, executives may immediately sell Company stock acquired by exercising stock options for the limited purposes of paying the exercise price of the stock option and any applicable tax liability. Furthermore, under the Guidelines, unless an executive officer has satisfied his or her ownership requirement, he or she must retain 50% of his or her vested LTIP Units, RSUs, PSUs or other securities received as part of our long-term incentive compensation program or, with respect to non-employee directors, the annual equity retainer (after tax).
The ownership requirements established by the Guidelines are as follows:
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Under the Guidelines, a senior executive officer’s base salary shall be the actual paid annual salary received by the senior executive officer from the Company (or any applicable affiliated company or subsidiary) annualized for the Company’s fiscal year in which any compliance measuring occurs. For purposes of measuring compliance with the Guidelines, the applicable per share market value of the Common Shares shall be determined by using the average closing price of the Common Shares on the NYSE (or such other exchange that the Common Shares are principally traded on at the time compliance is measured) for the fiscal year immediately preceding the year in which compliance with the Guidelines is measured.
Clawback Provisions
We have an executive compensation clawback policy (the “Officer Policy”) that applies to Company associates that are designated by our Board as executive officers (other than our CEO and Chief Financial Officer) and a specific policy applicable to our CEO and Chief Financial Officer (“CFO”) (the “CEO-CFO Policy”). Under the Officer Policy, except as may otherwise be provided in any applicable employment, award or other Board or Compensation Committee approved agreement, a subject officer who the Compensation Committee determines engaged in fraud or intentionally illegal conduct that materially contributed to the need for a restatement of the Company’s financial statements may be compelled by the Compensation Committee to return all bonuses and other incentive and equity compensation awarded to the executive officer, the amount, payment and/or vesting of which was calculated based wholly or partly on the application of objective and financial performance criteria measured during any part of the period covered by the restatement. Pursuant to the Officer Policy, to the extent that the performance-based compensation paid or awarded to such executive officer is greater than it would have been had it been calculated based upon the restated financial results, then the Compensation Committee may seek to recover from the executive officer the after-tax portion of the difference. The Officer Policy empowers the Compensation Committee to use its discretion in determining the applicability of the Officer Policy to a particular situation and evaluate each situation based on its individual facts and circumstances. Under the Officer Policy, the Compensation Committee shall not seek recovery of such excess compensation if it determines that to do so would: (a) violate applicable law; (b) adversely impact the interests of the Company in any related proceeding or investigation; (c) incur costs in excess of the recoverable excess compensation; or (d) be unreasonable relative to the executive officer’s accountability for the error that resulted in the restatement. In the event the Company is entitled to, and seeks, recoupment under the Officer Policy, the executive officer shall, no later than sixty (60) days following the recoupment request, reimburse the amounts which the Company is entitled to recoup. If the executive officer fails to pay such reimbursement and to the extent permitted by applicable law, the Company shall have the right to: (a) deduct the amount to be reimbursed from the compensation or other payments due to the executive officer from the Company or (b) take any other appropriate action to recoup such payments; provided that any offsets against amounts under nonqualified deferred compensation plans (as defined in Section 409A of the Code) shall be made in compliance with Section 409A.
The CEO-CFO Policy applies in the event of a restatement of the Company’s consolidated financial statements. In addition, other terms of the CEO-CFO Policy are substantially similar to the Officer Policy except: (a) there is no requirement that either the CEO or CFO be found by the Board, Compensation Committee or any other Board committee to have committed any malfeasance or other conduct that materially contributed to the need for a restatement of the Company’s financial statements before recoupment of incentive compensation is requested following a restatement and (b) the Company is permitted under the CEO-CFO Policy to seek recoupment of incentive compensation following a Company restatement at any time the CEO or CFO is employed by the Company and for three years thereafter (unless a longer period is permitted under the Dodd-Frank Wall Street Reform and Consumer Protection Act).
Anti-Pledging and Hedging Policies
We have adopted an anti-pledging policy pursuant to which directors and executive officers are prohibited from pledging shares. Additionally, our policies regarding trading in our securities by senior executive officers and Board members prohibit such persons from short selling or hedging their ownership of the Common Shares, including trading in publicly-traded options, puts, calls or other derivative instruments related to the Common Shares, our preferred shares, or debt securities. Also, our senior executive officers and members of the Board shall notify the General Counsel before establishing a standing or limit order to buy or sell our securities. If the General Counsel consents to the senior executive officer or Board member’s establishment of a standing or limit order then such person shall provide the details of the order to the General Counsel as well as any future changes or modifications to such order.
Independent Compensation Advisor
During fiscal year 2018, FW Cook was engaged by the Compensation Committee to serve as its independent compensation consultant. FW Cook provided advice and market data to assist the Compensation Committee in determining target executive pay opportunities for 2018, as well as the design and structure of the annual and long-term incentive programs. The Compensation Committee has the sole authority under its charter to retain and terminate its compensation consultant and approve fees and other engagement terms. FW Cook did not provide during fiscal year 2018 any additional consulting services to the Company or any of its affiliates that were unrelated to its service as the Compensation Committee’s consultant.
Tax Treatment of Executive Compensation
Substantially all of the services rendered by our Named Executives during 2018 are performed on behalf of WPGLP. Section 162(m) of the Code disallows a tax deduction for any publicly held corporation for individual compensation of more than $1.0 million paid in any taxable year to the CEO, CFO, and the three other most highly compensated officers (including the former executives). The Internal Revenue Service (“IRS”) has issued a series of private letter rulings which indicate that compensation paid by an operating partnership to named executive officers of a REIT that serves as its general partner is not subject to limitation under Section 162(m) of the Code to the extent such compensation is attributable to services rendered to the operating partnership. Although we have not obtained a ruling on this issue, our management believes the positions taken in the rulings would apply to our operating partnership subsidiary as well. If we later determine that compensation paid by WPGLP to the Named Executives is subject to Section 162(m) of the Code, then this could result in an increase to our income subject to federal income tax and could require us to increase distributions to our shareholders in order to maintain our qualification as a REIT.
Section 409A of the Code imposes taxes and interest on compensation deferred under nonqualified deferred compensation plans unless the plan and any compensation paid under the plan qualifies for certain exemptions or exceptions from the applicability of Section 409A. At this time, we believe that the plan-based compensation of the Named Executives (including the former executives) inclusive of potential compensation payable from the 2014 Plan, our cash incentive bonus plans, including, but not limited to, the 2018 Plan, and the severance arrangements under various executive employment agreements are either within an exception or exemption from the applicability of Section 409A and is not intended to be deferred compensation or, alternatively, the applicable plan or agreement complies with Section 409A. The Compensation Committee will continue to monitor the implications of Section 409A on our current executive compensation plans as well as future arrangements provided by the Company.
SUMMARY COMPENSATION TABLE & OTHER SUPPORTING TABLES
The following tables and accompanying footnotes set forth certain information with respect to the cash and other compensation paid or accrued by the Company for the Named Executives for fiscal years ended December 31, 2018 and, as applicable, December 31, 2017 and December 31, 2016. All values stated are rounded to the nearest dollar.
SUMMARY COMPENSATION TABLE
Name and Principal Position
(a) | Year
(b) | Salary ($)
(c) | Stock Awards(1) ($)
(d) | Non-Equity Incentive Plan Compensation(2) ($)
(e) | All Other Compensation ($)
(f) | Total(8) ($)
(g) | |||||
Louis G. Conforti Chief Executive Officer & Director | 2018 2017 2016 | $900,000 $900,000 $1,825,000 | $2,700,000 $2,708,765 $3,420,000 | $1,215,000 $1,325,010 N/A | $11,966(3) $11,766 $1,071,993 | $4,826,966 $4,945,541 $6,316,993 | |||||
Mark E. Yale Executive Vice President and Chief Financial Officer | 2018 2017 2016 | $512,500 $512,500 $509,135 | $540,000 $541,750 $352,211 | $576,562 $680,664 $654,238 | $26,966(4) $26,766 $11,366 | $1,656,028 $1,761,680 $1,526,950 | |||||
Robert P. Demchak Executive Vice President, General Counsel and Corporate Secretary | 2018 2017 2016 | $400,000 $399,039 $339,231 | $450,000 $451,461 $740,827 | $540,000 $748,197 $585,282 | $11,630(5) $11,430 $11,462 | $1,401,630 $1,610,127 $1,676,802 | |||||
Former Executives(9) | |||||||||||
Paul S. Ajdaharian Former Executive Vice President, Head of Open Air Centers | 2018 2017 | $404,513 $373,346 | $364.062 $321,797 | $161,805 $443,348 | $11,966(3) $11,919 | $942,346 $1,150,410 | |||||
Armand Mastropietro Former Executive Vice President, Property Management | 2018 | $100,856 | $233,666 | $0 | $1,091,436(6) | $1,425,958 | |||||
Gregory E. Zimmerman Former Executive Vice President, Development | 2018 2017 | $383,398 $352,396 | $345,058 $303,407 | $345,058 $374,421 | $12,806(7) $12,606 | $1,086,320 $1,042,830 |
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GRANTS OF PLAN-BASED AWARDS
FOR 2018
The following table and accompanying footnotes set forth certain information concerning grants and allocations of cash and non-cash awards made to each of the Named Executives under the Company’s equity and non-equity incentive compensation plans during the fiscal year ended December 31, 2018. All monetary values are rounded to the nearest dollar and all share or unit amounts are rounded to the nearest whole share or unit. None of the Named Executives has transferred any of the awards that he received during the fiscal year ended December 31, 2018.
Name | Grant Date(1) | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(2) | Estimated Future Payouts Under Equity Incentive Plan Awards(3) | All Other Stock Awards: Number of | Grant Date Fair Value of Stock and Option | ||||
(a) | (b) | Threshold ($)
(c) | Target ($)
(d) | Maximum ($)
(e) | Threshold (#)
(f) | Target (#)
(g) | Maximum (#)
(h) | Shares of Stock or Units(4) (#) (i) | Awards(5)
(j) |
Mr. Conforti | 2/20/18 2/20/18 2/20/18 | $337,500 | $1,350,000 | $2,025,000 |
61,475 |
245,902 |
368,853 |
245,902 |
PSUs: $1,200,000 RSUs: $1,500,000 |
Mr. Yale | 2/20/18 2/20/18 2/20/18 | $160,156 | $640,625 | $960,938 |
12,295 |
49,180 |
73,770 |
49,180 |
PSUs: $240,000 RSUs: $300,000 |
Mr. Demchak | 2/20/18 2/20/18 2/20/18 | $150,000 | $600,000 | $900,000 |
10,246 |
40,984 |
61,476 |
40,984 |
PSUs: $200,000 RSUs: $250,000 |
Former Executives | |||||||||
Mr. Ajdaharian | 2/20/18 2/20/18 2/20/18 | $101,128 | $404,513 | $606,770 |
8,289 |
33,157 |
49,735 |
33,157 |
PSUs: $161,805 RSUs: $202,257 |
Mr. Mastropietro | 2/20/18 2/20/18 2/20/18 | $25,214 | $100,856 | $151,284 |
5,320 |
21,281 |
31,921 |
21,281 |
PSUs: $103,852 RSUs: $129,814 |
Mr. Zimmerman | 2/20/18 2/20/18 2/20/18 | $95,850 | $383,398 | $575,097 |
7,856 |
31,426 |
47,139 |
31,426 |
PSUs: $153,359 RSUs: $191,699 |
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Actual payouts under the 2018 Plan are reported in column (e) of the Summary Compensation Table. Mr. Mastropietro is not eligible for a bonus payout under the 2018 Plan as he was terminated in May 2018 and was not employed by the Company on the date the bonus payments for the 2018 Plan were approved by the Compensation Committee.
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Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table
The data listed in column (d) of the Summary Compensation Table for the year 2018 and column (j) of the Grants Plan-Based Awards for 2018 table represent the aggregate grant date fair value for the 2018 Annual Awards for the respective Named Executive. With respect to the 2018 Annual Awards that have a market-performance component impacting whether the award is earned, the aggregate grant date fair value was determined using the Monte Carlo simulation model which establishes a value by first simulating one or more variables that may affect or influence the value of the allocated PSUs and then determines their average value over the range of resultant outcomes. Compensation related to the 2018 Annual Awards is being recognized ratably from the beginning of the service period through the applicable vesting date or, as it pertains to the PSUs, the end of the performance period. The performance conditions for the 2018 Annual Awards are described in greater detail in the section of the CD&A subtitled “2018 Long-Term Equity Compensation.”The fair value of the RSU portion of the 2018 Annual Awards is determined by the closing price of the Common Shares on the grant date.The size of each Named Executive’s 2018 Annual Award was determined pursuant to the terms of 2018 Rules. Quarterly dividends are paid on RSUs at the same rates payable on the Common Shares. No dividends, distributions, or dividend equivalents were paid out or allocated during 2018 for the PSU portion of the 2018 Annual Awards; however, during the three-year performance period for the PSUs awarded in 2018, as well as other PSUs awarded in past years, dividend equivalents accrue with respect to the number of PSUs that actually vest at the end of the applicable performance period corresponding to the amount of any dividends paid by the Company. The dividend equivalents for PSUs are released at the time earned PSUs, if any, are settled and are paid by the issuance of Common Shares unless otherwise determined by the Compensation Committee. The dollar value of RSU dividends and dividend equivalents that accrue for PSUs are factored into the FASB ASC Topic 718 grant date fair values reported in the tables above.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
OUTSTANDING EQUITY AWARDS AT
FISCAL YEAR-END 2018
The following table and accompanying footnotes set forth certain information concerningunvested restricted Common Shares, unvested RSUs, unvested LTIP Units, and allocated yet unearned LTIP Units and PSUsfor each Named Executive that are outstanding or allocated as of December 31, 2018. All monetary values are rounded to the nearest dollar and, to the extent appropriate or necessary, all share or unit amounts are rounded to the nearest whole share or unit. None of the Named Executives has transferred any of the awards that are reported in the table below.
Stock Awards | ||||||||||||||||
Name
(a) | Number of Shares or Units of Stock That Have Not Vested (#)
(b) | Market Value of Shares or Units of Stock That Have Not Vested(1) ($)
(c) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(2) (#)
(d) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(3) ($)
(e) | ||||||||||||
Mr. Conforti | 634,769(4) | $3,084,977 | 402,478 | $1,956,043 | ||||||||||||
Mr. Yale | 125,221(5) | $608,574 | 82,774 | $402,282 | ||||||||||||
Mr. Demchak | 137,182(6) | $666,705 | 67,080 | $326,009 | ||||||||||||
Former Executives | ||||||||||||||||
Mr. Ajdaharian | 72,880(7) | $354,197 | 51,758 | $251,544 | ||||||||||||
Mr. Mastropietro | N/A | N/A | N/A | N/A | ||||||||||||
Mr. Zimmerman | 78,592(8) | $381,957 | 48,964 | $237,965 |
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OPTION EXERCISES AND STOCK VESTED
DURING THE YEAR 2018
The following table sets forth certain information concerning the vesting of restricted Common Stock, RSUs, and certain LTIP Unit awards held by certain of the Named Executives during the fiscal year ended December 31, 2018. All reported dollar amounts are rounded to the nearest dollar.
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Pension Benefits and Non-Qualified Deferred Compensation
None of our Named Executives participate in or have account balances in qualified or nonqualified defined benefit plans sponsored by us.
Potential Payments upon Termination or Change in Control
The arrangements we have with the Named Executives for severance payments and benefits following a change in control, termination of employment, or a change in control in connection with or that precedes a qualifying termination are memorialized in the respective Named Executive’s employment agreement. With the exception of Mr. Mastropietro, the payment and benefits discussed in this section will cover terminations of each of the Named Executives, for cause (defined below), no cause, good reason (defined below), death, disability (defined below), or following a change in control (defined below) of the Company. For purposes of this disclosure and except as otherwise provided, the triggering date for the payments and benefits described below shall be December 31, 2018 (the “Triggering Date”), the last business day for our company in 2018, when the per share closing market price for the Common Shares was $4.86. Additionally, in this section, we will also discuss and quantify the actual severance payment and related benefits provided to Messrs. Armand Mastropietro, Paul S. Ajdaharian and Gregory E. Zimmerman in connection with their actual separations.
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Payment and benefits upon termination for any reason other than cause or by an Executive for good reason
The termination and severance benefits disclosed in this section for Messrs. Conforti, Yale, Demchak, Ajdaharian and Zimmerman (collectively, the “Executives” and each an “Executive”) are included in their respective employment agreements and remain enforceable for the term of the respective employment agreement, including any extensions. The change in control severance benefits under the employment agreements of the Executives are structured as “double trigger” benefits. In other words, change in control does not itself trigger the severance benefits; rather, severance benefits discussed herein only become payable in the event of a termination of employment upon or within two (2) years after a change in control.
Under the employment agreements for the Executives (all with the Yale Agreement, collectively, the “Employment Agreements” and each, singly, an “Employment Agreement”), if during the respective employment period under one or more of the Employment Agreements, the Company terminates the employment of an Executive for a reason other than cause or the Executive terminates employment for good reason (defined below), then the Company shall pay and provide to the terminated Executive a lump sum cash payment within thirty (30) days after the date of termination (defined below) as follows: (i) the Executive’s unpaid annual base salary and vacation pay through the date of termination, (ii) subject to the terms of the bonus plan in affect during the applicable fiscal year, the Executive’s accrued annual bonus for the fiscal year immediately preceding the fiscal year in which the date of termination occurs (other than any portion of such annual bonus that was previously deferred, which portion shall instead be paid in accordance with the applicable deferral election) if such bonus has not been paid as of the date of termination, and (iii) the Executive’s business expenses that have not been reimbursed by the Company as of the date of termination and were incurred by the Executive prior to the date of termination in accordance with applicable Company policy, in the case of each of clauses (i) through (iii), to the extent not previously paid (the sum of the amounts described in clauses (i) through (iii) shall be referred to herein as the “Accrued Obligations.”
Furthermore, subject to the terminated Executive’s continued compliance with the restrictive covenants regarding non-competition, non-solicitation, confidentiality and non-disparagement in the applicable Employment Agreement (the “Covenants”) and timely delivery (and non-revocation) of an executed release of claims against the Company, its affiliates and certain agents (a “Release”), the Company will further pay or provide the following to the terminated Executive:
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Payment and benefits upon termination for cause or by an Executive without good reason
Under the Employment Agreements, in the event the Company terminates the employment of an Executive for cause or the Executive terminates employment without good reason (which may include a termination of employment resulting from the Executive giving a notice to the Company of his non-renewal of the respective employment agreement), then the respective Employment Agreement, as applicable, shall terminate without further obligations to the Executive other than the obligation to provide the terminated Executive with the: (i) Accrued Obligations and (ii) Other Benefits. In the event the Executive is terminated for cause then the Accrued Obligations shall not include the Executive’s unpaid annual bonus for the year immediately preceding the year in which the date of termination occurred. Payments made under these circumstances shall be made at the same time and form as payments made for Accrued Obligations following a termination for any reason other than cause or by the Executive for good reason.
Payment and benefits to an Executive upon termination for death or disability
In the event the employment of an Executive is terminated due to death or disability then the respective Employment Agreement shall terminate without further obligations to the Executive’s legal representatives, in the case of death, or to the Executive, in the case of disability, other than payment or provision of the: (i) Accrued Obligations, (ii) Other Benefits, and (iii) subject to the timely delivery of a Release (from the Executive in the case of disability and the legal representative(s) of the Executive in the case of death), the Time-Based Award Vesting Benefits, the Performance Award Vesting Benefits, the Post-Employment Health Care Benefits, and the Pro Rata Bonus. The term “Other Benefits,” in the context of payments and benefits following a termination due to the death of an Executive, shall include death benefits as in effect on the date of the Executive’s death with respect to senior executives of the Company and, in the context of payments and benefits following a termination due to the disability of an Executive, shall include short-term and long-term disability benefits as in effect on the date of the Executive’s disability with respect to senior executives of the Company. Payments made and benefits provided under these circumstances shall be made at the same time and form as payments made and benefits provided following a termination for any reason other than cause or by the Executive for good reason.
Payment and benefits to an Executive upon termination following a change in control
In the event that during the respective employment period under any Employment Agreement either: (i) the Company terminates the employment of an Executive for any reason other than cause or due to the Executive’s death or disability or (ii) the Executive terminates employment with the Company for good reason, in either case upon or within two (2) years after a change in control, then the Company shall pay to and provide the Executive with the following:
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In the event of a change in control, with respect to any performance-based equity awards outstanding as of the date of the change in control, (A) the performance period shall be deemed to have ended on the date of the change in control and the attainment of the performance goals shall be calculated by reference to performance as of the date of the change in control, as determined by the Compensation Committee in good faith in its sole discretion and (B) the number of performance-based equity awards earned pursuant to clause: (A) shall be converted to time-vesting RSUs which shall vest as follows: (I) if the surviving or successor entity in the change in control does not continue, assume or replace such RSUs with a substitute grant with the same intrinsic value (“Substitute Stock”), such RSUs will vest on the date of the change in control; or (II) if the surviving or successor entity in the change in control continues, assumes or replaces such shares of stock with Substitute Stock, then such shares of Substitute Stock shall vest on the earlier of: (a) the last day of the original performance period (as set forth in the applicable award agreement between the Executive and the Company) if the Executive provides continuous service to the Company, the surviving or successor entity, or one of their respective affiliates until the last day of such performance period or (b) the date that Executive’s service to the Company, the surviving or successor entity, or one of their respective affiliates is terminated pursuant to the terms of the respective Employment Agreement, as applicable.
With respect to time-based equity awards outstanding as of the date of the change in control, such awards shall vest as follows: (A) if the surviving or successor entity in the change in control does not continue, assume or replace such RSUs with Substitute Stock, such RSUs will vest on the date of the change in control; or (B) if the surviving or successor entity in the change in control continues, assumes or replaces such shares of stock with Substitute Stock, then such shares of Substitute Stock shall vest on the earlier of: (I) the original vesting date or dates (as set forth in the applicable award agreement between the Executive and the Company) if the Executive provides continuous service to the Company, the surviving or successor entity, or one of their respective affiliates through such vesting date or (II) the date that Executive’s service to the Company, the surviving or successor entity, or one of their respective affiliates is terminated pursuant to the terms of the respective Employment Agreement, as applicable.
No Executive has any obligation to seek employment or take any other action in the event employment is terminated in order to mitigate amounts payable or level of benefits due under any Employment Agreement following a covered termination. Furthermore, nothing in any Employment Agreement is intended to prevent or limit continuing or future participation in any plan, program, policy, contract, agreement, or practice provided by the Company or any affiliate and for which an Executive qualifies to participate. Also, under Mr. Conforti’s Employment Agreement, WPG will reimburse Mr. Conforti to the fullest extent permitted by law for legal fees and expenses reasonably incurred by Mr. Conforti as a result of Mr. Conforti, the Company, or others seeking to enforce the terms of the Conforti Employment Agreement; provided, however: (i) if such contest is initiated on or after a change in control or a change in control occurs during the pendency of such a contest, reimbursement of such fees and expenses will not be provided if Mr. Conforti is found pursuant to a judgment, decree, or order to not have acted in good faith in bringing or defending the contest and (ii) if such contest is initiated prior to a change in control and a change in control does not occur during the pendency of the contest, reimbursement of Mr. Conforti’s legal fees and expenses shall be provided only if Mr. Conforti substantially prevails on at least one substantive issue in the contest.
The table below and its accompanying footnotes illustrate for each Executive the various payments and benefits due each under the respective Employment Agreements of each following the employment termination events described above. As stated earlier, the amounts in the table are provided under the assumptions that the employment termination occurred on the Triggering Date, the closing market price of the Company’s Common Stock is $4.86 per share, each of the aforementioned agreements are effective as of the Triggering Date (assuming the annual base salary in effect for each Executive is that in place as of the Triggering Date), there is no underlying dispute concerning the termination or the amounts to be paid, and no violation of the Covenants. For purposes of this disclosure, no compensation provided shall constitute deferred compensation or be deferred by the respective Executive, and the Compensation Committee did not exercise any discretion in approving any of the payments or benefits described below. Any performance assessments for cash bonus payments shall be based upon target performance unless otherwise indicated. Also, the disclosures in the table below assume that all pre-conditions to payments and benefits have been satisfied by the Company and the respective Executive including, but not limited to, the Company’s timely receipt of a Release and the expiration of the non-revocation period. Additionally, no equity awards held by Executives have been replaced, substituted or exchanged in connection with a change in control. The amounts stated below represent aggregate or lump sum totals that may, in some instances, be paid out in installments or over time under the respective agreement. All monetary values are rounded to the nearest dollar and all share or unit amounts are rounded to the nearest whole share or unit.
Termination by Cause or by the Executive for Good
(a) | Termination by Executive without Good Reason
(b) | Termination due to Death or Disability of the Executive
(c) | Qualifying Termination upon or following a Change in Control
(d) | ||||||||
Mr. Conforti | |||||||||||
Cash Payments | $5,767,168(1) | $52,168(2) | $1,267,168(3) | $5,902,168(4) | |||||||
Equity Award Vesting Benefits | $2,970,719(5) | N/A | $2,970,719(5) | $2,970,719(5),(6),(7) | |||||||
Additional Benefits | $0 | N/A | $0 | $0 | |||||||
Total Value of Payments & Benefits | $8,737,887 | $52,168 | $4,237,887 | $8,872,887 | |||||||
Mr. Yale | |||||||||||
Cash Payments | $2,912,592(1) | $29,780(2) | $606,342(3) | $2,976,655(4) | |||||||
Equity Award Vesting Benefits | $586,034(5) | N/A | $586,034(5) | $586,034(5),(6),(7) | |||||||
Additional Benefits(8) | $31,680 | N/A | $31,680 | $31,680 | |||||||
Total Value of Payments & Benefits | $3,530,306 | $29,780 | $1,224,056 | $3,594,369 | |||||||
Mr. Demchak | |||||||||||
Cash Payments | $2,563,277(1) | $23,277(2) | $563,277(3) | $2,623,277(4) | |||||||
Equity Award Vesting Benefits | $642,012(5) | N/A | $642,012(5) | $642,012(5),(6),(7) | |||||||
Additional Benefits(8) | $31,680 | N/A | $31,680 | $31,680 | |||||||
Total Value of Payments & Benefits | $3,236,969 | $23,277 | $1,236,969 | $3,296,969 | |||||||
Former Executives | |||||||||||
Mr. Ajdaharian | |||||||||||
Cash Payments | $1,804,233(1) | $24,376(2) | $186,181(3) | $2,046,941(4) | |||||||
Equity Award Vesting Benefits | $341,078(5) | N/A | $341,078(5) | $341,078(5),(6),(7) | |||||||
Additional Benefits(8) | $33,321 | N/A | $33,321 | $33,321 | |||||||
Total Value of Payments & Benefits | $2,178,632 | $24,376 | $560,580 | $2,421,340 | |||||||
Mr. Zimmerman | |||||||||||
Cash Payments | $1,901,041(1) | $22,411(2) | $367,469(3) | $1,939,381(4) | |||||||
Equity Award Vesting Benefits | $367,811(5) | N/A | $367,811(5) | $367,811(5),(6),(7) | |||||||
Additional Benefits(8) | $0 | N/A | $0 | $0 | |||||||
Total Value of Payments & Benefits | $2,268,852 | $22,411 | $735,280 | $2,307,192 |
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With respect to Executives, each of their Employment Agreements provide that the Accrued Obligations include the respective Executive’s accrued annual bonus for the fiscal year immediately preceding the fiscal year in which the termination date occurs if such bonus has not been paid as of the date of termination. However, these amounts were not included in the table above for any of the Executives because fiscal year 2017 bonuses were approved by the Compensation Committee of the Board and paid prior to the Triggering Date. Additionally, pursuant to each of the Employment Agreements, none of the Executives are entitled to a gross-up payment if such person incurs an excise tax due to the application of Section 4999 of the Code. Rather, the amounts received by the Executives that are contingent upon a change in ownership or effective control of the Company will either be: (a) reduced to the extent necessary to avoid the excise tax, or (b) paid in full, whichever results in the higher after-tax benefits to the respective executive.
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ii. Actual Severance Payments Made to Messrs. Mastropietro, Ajdaharian and Zimmerman
a. Armand Mastropietro
As discussed in the CD&A of this Proxy Statement, at the time of Mr. Mastropietro’s not for cause separation on May 7, 2018, his employment agreement entitled him to a severance payment and related benefits. The severance benefits and compensation under Mr. Mastropietro’s employment agreement were designed to be the same, in structure and operation, to the severance benefits and payments payable to the Executives under the Employment Agreements following terminations for cause, good reason, death, disability or following a change in control. The provisions regarding termination, severance compensation and benefits under Mr. Mastropietro’s employment agreement were in force and effective throughout the entire term of his agreement which became effective on January 1, 2018. Additionally, Mr. Mastropietro’s employment agreement had restrictive covenants with terms and conditions comparable to the Covenants.
Following his termination and upon the satisfaction of applicable conditions precedent similar to those found in the Executives’ Employment Agreements, such as receipt by the Company of a Release from Mr. Mastropietro and expiration of the non-revocation period, he received: (i) accrued salary compensation and vacation pay through the date of his termination, (ii) reimbursement of business expenses incurred by Mr. Mastropietro as of the date of his termination and unused vacation time, (iii) accelerated vesting of all outstanding time-based equity awards held by Mr. Mastropietro at the time of his termination and (iv) a payment, made by the Company on behalf of and for the benefit of Mr. Mastropietro, in six installments, equal to the monthly amount of COBRA continuation coverage premium for eighteen (18) months following the date of Mr. Mastropietro’s separation. Mr. Mastropietro’s PSU awards were forfeited. The table below and its accompanying footnotes contain and explain the total amount of payments and benefits received by Mr. Mastropietro in connection with his termination of employment on May 7, 2018. All values are rounded to the nearest dollar and all share or unit amounts are rounded to the nearest whole share or unit.
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b. Paul S. Ajdaharian
As discussed in the CD&A of this Proxy Statement, Mr. Ajdaharian’s employment was terminated on February 5, 2019. Similar to other Executives under the Employment Agreements, Mr. Ajdaharian’s employment agreement entitled him to certain severance benefits and compensation following a not for cause termination and such payments and benefits were designed to be the same, in structure and operation, to the severance benefits and payments payable to the Executives under the Employment Agreements following similar terminations. The provisions regarding termination, severance compensation and benefits under Mr. Ajdaharian’s employment agreement were in force and effective throughout the entire term of his agreement which became effective on January 1, 2018. Additionally, Mr. Ajdaharian’s employment agreement had restrictive covenants with terms and conditions comparable to the Covenants.
Following his termination and upon the satisfaction of applicable conditions precedent similar to those found in the Executives’ Employment Agreements, such as receipt by the Company of a Release from Mr. Ajdaharian and expiration of the non-revocation period, he received: (i) accrued salary compensation and vacation pay through the date of his termination, (ii) reimbursement of business expenses incurred by Mr. Ajdaharian as of the date of his termination and unused vacation time, (iii) accelerated vesting of all outstanding time-based equity awards held by Mr. Ajdaharian at the time of his termination and (iv) a payment, made by the Company on behalf of and for the benefit of Mr. Ajdaharian, in six installments, equal to the monthly amount of COBRA continuation coverage premium for eighteen (18) months following the date of Mr. Ajdaharian’s separation. Mr. Ajdaharian’s PSU awards were forfeited. The table below and its accompanying footnotes contain and explain the total amount of payments and benefits received by Mr. Ajdaharian in connection with his termination of employment. All values are rounded to the nearest dollar and all share or unit amounts are rounded to the nearest whole share or unit.
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c. Gregory E. Zimmerman
On March 18, 2019, Mr. Zimmerman resigned without good reason from the Company as its Executive Vice President, Development. Under such circumstances, Mr. Zimmerman forfeited all of his unvested RSUs and unearned PSUs. Under the terms of his Employment Agreement, the Company paid to Mr. Zimmerman, upon his execution and delivery (and non-revocation) of a Release, the Accrued Obligations more fully set forth in the table below. All values are rounded to the nearest dollar.
Unpaid Annual Base Salary
(a) | Vacation Pay
(b) | Unreimbursed Business Expenses
(c) | Total of Payments Received
(d) | |
Payments From Company | $7,373 | $13,368 | $320 | $21,061 |
Mr. Zimmerman’s accrued annual bonus for 2018 was not part of the Accrued Obligations as he received, in the normal course, it before he tendered his resignation to the Company. After payments of the amounts listed above, no other payments or benefits from the Company are due to Mr. Zimmerman in connection with his resignation.
Definitions Used Above
For purposes of the discussion and disclosures provided above, the following definitions shall apply:
“cause” shall mean (i) an Executive’s willful failure to perform or substantially perform the Executive’s material duties with the Company; (ii) illegal conduct or gross misconduct by the Executive that, in either case, is willful and demonstrably and materially injurious to the Company’s business, financial condition or reputation, or, in the good faith determination of the Board, is potentially materially injurious to the Company’s business, financial condition or reputation; or (iii) a material breach by the Executive of the Executive’s obligations under the respective employment agreements, including without limitation, a material breach of the Covenants; or (iv) the Executive’s conviction of, or entry of a plea of guilty or nolo contendere with respect to, a felony crime or a crime involving moral turpitude, fraud, forgery, embezzlement or similar conduct; provided, however, that the actions in (i), (ii) and (iii) above will not be considered cause unless the Executive has failed to cure such actions within thirty (30) days of receiving written notice specifying, with particularity, the events allegedly giving rise to cause; and, further provided, that such actions will not be considered cause unless the Company provides such written notice within ninety (90) days of any executive officer of the Company (excluding the respective Executive, if applicable at the time of such notice) or, with respect to Mr. Conforti, any member of the Board having knowledge of the relevant action. Further, no act or failure to act by the Executive will be deemed “willful” unless done or omitted to be done not in good faith or without reasonable belief that such action or omission was in the Company’s best interests, and any act or omission by the Executive pursuant to authority given pursuant to a resolution duly adopted by the Board or on the advice of counsel for the Company will be deemed made in good faith and in the best interests of the Company.
“good reason” shall mean the occurrence of any one of the following events without the prior written consent of the respective Executive: (i) a material reduction in the Executive’s annual base salary or a material diminution of the Executive’s duties or responsibilities, authorities, powers or functions; or (ii) a relocation that would result in the Executive's (excluding Mr. Conforti) principal location of employment being moved thirty-five (35) miles or more away from the Executive's (excluding Mr. Conforti) principal place of employment as of the date of the respective Employment Agreement and, as a result, the Executive's (excluding Mr. Conforti) commute increasing by 35 miles or more; or (iii) any material breach of the respective Employment Agreement by the Company, including without limitation any material breach of the award agreements contemplated hereby or the Executive (excluding Mr. Conforti) being required to report other than directly to the CEO or the Board or, with respect to Mr. Conforti, being required to report other than solely and directly to the Board; or (iv) the Company’s issuance to the Executive of a notice of non-renewal; provided, however, that the actions in (i) through (iii) above will not be considered good reason unless the Executive shall describe the basis for the occurrence of the good reason event in reasonable detail in a notice of termination provided to the Company in writing within sixty (60) days of the Executive’s knowledge of the actions giving rise to the good reason, and the Company has failed to cure such actions within thirty (30) days of receiving such notice of termination (and if the Company does effect a cure within that period, such notice of termination shall be ineffective) and, provided, furtherthat the action in (iv) above will not be considered good reason unless the Executive shall duly serve through the end of the then-applicable employment period. Unless the Executive gives the Company a notice of termination for good reason within 120 days of the initial existence of any event which, after any applicable notice and the lapse of any applicable 30-day grace period, would constitute good reason, such event will cease to be an event constituting good reason.
“disability” shall mean the “permanent and total disability” of the Executive as defined in Section 22(e)(3) of the Code, or any successor provision thereto.
“change in control”shall mean the happening of any of the following events:
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Additionally, to the extent the impact of a change in control on a payment would subject an Executive to additional taxes under the Section 409A of the Code, a change in control for purposes of such payment will mean both a change in control and a “change in the ownership of a corporation,” “change in the effective control of a corporation,” or a “change in the ownership of a substantial portion of a corporation’s assets” within the meaning of Section 409A of the Code and the regulations promulgated thereunder as applied to the Company.
“date of termination” shall mean (i) if the Executive’s employment is terminated by the Company (A) for cause or (B) for any reason other than for cause, or due to the Executive’s death or disability, the date of receipt of the notice of termination or any later date specified therein (which date shall not be more than thirty (30) days after the giving of such notice), (ii) if the Executive’s employment is terminated by reason of death or by the Company for disability, the date of death of the Executive or the disability effective date, as the case may be, (iii) if the Executive’s employment is terminated by the Executive for good reason or without good reason, thirty (30) days from the date of the Company’s receipt of the notice of termination, or such later date as is mutually agreed by the Company and the Executive (subject to the Company’s right, if applicable, to cure the good reason event), or (iv) if Executive’s employment is terminated as a result of the Company’s issuance to him of a notice of non-renewal, the date of termination shall be the last day of the applicable employment period or such later date as is mutually agreed by the Company and the Executive. Notwithstanding the foregoing, in no event shall the date of termination occur until the Executive experiences a “separation from service” within the meaning of Section 409A of the Code and, notwithstanding anything contained herein to the contrary, the date on which such separation from service takes place shall be the date of termination.
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As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, we are providing the following information about the relation of the annual total compensation of our median employee and the annual total compensation of Mr. Conforti, our CEO. For purposes of reporting the annual total compensation and the ratio of annual total compensation of the CEO to the median employee, both the CEO and median employee’s annual total compensation (“Median Employee Pay”) were calculated consistent with the disclosure requirements for executive compensation under the Summary Compensation Table.
In analyzing our compensation data to determine Median Employee Pay, we collected the fiscal year 2018 salary, incentive, and equity compensation along with other benefits for the person who also served as our median employee for our disclosure of our pay ratio for fiscal year 2017. The fiscal year 2018 annual total compensation for this person using the compensation components disclosable in the Summary Compensation Table was $61,260 and therefore constitutes our Median Employee Pay for purposes of determining our pay ratio for fiscal year 2018. Our CEO’s total annual compensation for 2018 as reported in the Summary Compensation Table is $4,826,966. Therefore, the ratio of our CEO’s total annual compensation to Median Employee Pay is 78.80:1.
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Compensation Committee Interlocks and Insider Participation
Messrs. John J. Dillon III, Robert J. Laikin and J. Taggart (“Tag”) Birge currently comprise the Board’s Compensation Committee. During fiscal year 2018, Ms. Jacquelyn R. Soffer served on the Compensation Committee until the end of 2018 at which time Mr. Birge joined the committee on January 1, 2019. Messrs. Dillon, Laikin, and Ms. Soffer were the only individuals who were members of the Compensation Committee during fiscal year 2018. No person who served as a member of the Compensation Committee during fiscal year ended December 31, 2018 was a current or former officer or employee of the Company during the period in which they served or engaged in any transactions with the Company required to be publicly disclosed under the regulations of the SEC. Additionally, there were no compensation committee “interlocks” during the fiscal year ended December 31, 2018, which generally means that no executive officer of the Company served as a director or member of the compensation committee of another entity, one whose executive officers served as a director or member of the Compensation Committee of the Board.
The Board has appointed the Compensation Committee (or a duly authorized subcommittee thereof) to serve as the administrator of the Company’s compensation and equity-based plans. The Compensation Committee is the administrator for the WGPLP Plan, Glimcher Realty Trust Amended and Restated 2004 Incentive Compensation Plan (the “2004 GRT Plan”), and the Glimcher Realty Trust 2012 Incentive Compensation Plan (the “2012 GRT Plan”). The Company assumed the 2004 GRT Plan and 2012 GRT Plan in connection with the Merger, but all equity awards issued by the Company during 2018 were from the 2014 Plan.
As the administrator, the Compensation Committee determines the number of RSUs, LTIP Units and other awards granted to the directors and employees of the Company under the 2014 Plan and, the 2004 GRT Plan and 2012 GRT Plan, to the extent that outstanding awards from those plans, are modified or adjusted.
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The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based upon this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
The Compensation Committee has furnished the foregoing report.
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COMPENSATION OF OUR DIRECTORS & DISCLOSURE OF
RELATED PARTY TRANSACTIONS
Director Compensation
During 2018, the non-employee members of our Board received a compensation package consisting of a combination of cash payments and an equity grant (the “Director Retainer Package”). Additionally, the Board and the Governance and Nominating Committee approved a change to the compensation regime for our non-employee Board members, including the Board Chairman, that would permit such members to elect to receive some or all of the cash portion of the Director Retainer Package in the form of RSUs (the “Equity Election”) that would vest on the same schedule as the RSUs that comprise the equity portion of the Director Retainer Package (i.e., from May to the following May). Two Board members made the Equity Election for fiscal year 2018 as reflected in the table below. The elections became effective May 17, 2018 and the new equity issued equaled the applicable portions of the last two installments of cash payments for fiscal year 2018 and first two installments of cash payments in 2019. Because the Equity Election was applied in this manner, the total value of the fiscal year 2018 Director Retainer Package for these Board members was larger than in a normal cycle.
For non-employee directors (other than the Board Chairman and one other director) who did not make the Equity Election, the aggregate value of the Director Retainer Package is $230,000 with the cash portion accounting for $110,000, or approximately 48%, of the aggregate value and the equity portion accounting for the remaining value of $120,000 (“Target Grant Value”). The value of the cash component of the Director Retainer Package for the Board Chairman is $330,000 (the “Chairman Fee”) with the equity component equal to the Target Grant Value, but was adjusted upward as a result of the Equity Election as reflected in the table below. Except for the Equity Election, the Director Retainer Package and Chairman Fee for fiscal year 2018 was substantively the same as that provided to non-employee Board members in 2017.
Payment of the cash portion of the Director Retainer Package and Chairman Fee are made in quarterly installments even if such payments to a respective director are reduced following the application of the Equity Election. The equity compensation component of the Director Retainer Package consists solely of RSUs. The Company awards RSUs to non-employee directors in May of each year that are a contingent right to receive one Common Share. For the 2018 awards, RSU grant sizes for non-employee directors who did not make the Equity Election were determined by dividing the Target Grant Value by $6.78, the closing price of the Common Shares on the date of grant, May 17, 2018, which resulted in an award per director of 17,700 RSUs. For Board members who made the Equity Election, the Target Grant Value is increased by the amount of the cash portion of the Director Retainer Package such director elected to receive in RSUs and then divided by $6.78 to determine the RSU grant size. The Target Grant Value for Board members making the Equity Election increased by $110,000 which resulted in a new Target Grant Value for such directors of $230,000 and an award size per director of 33,924 RSUs.
Each RSU will vest, unless forfeited or earlier vested by acceleration, on May 17, 2019 and be convertible into a Common Share when the Board member’s service on the Board ends unless otherwise forfeited. In the event the independent director leaves the Board, he or she will receive one Common Share for each vested RSU. Additionally, pursuant to their applicable RSU award agreements, while the award is outstanding, each non-employee director is also paid Common Share dividend equivalent payments in connection with our quarterly dividend payments for the Common Shares, in cash, equal to regular cash dividends paid on the Common Shares, regardless of whether the RSUs have vested. The value of dividend equivalent payments is factored into the grant date fair value reported in the table below and computed in accordance with FASB ASC Topic 718.
The following table and accompanying footnotes set forth certain information with respect to the cash and other compensation paid or accrued by the Company for services rendered by the persons serving on the Board during the fiscal year ended December 31, 2018. All values stated are rounded to the nearest dollar.
DIRECTOR COMPENSATION TABLE FOR THE YEAR 2018(1)
Name
(a) | Fees Earned or Paid in Cash(2) ($)
(b) | Stock Awards(3) ($)
(c) | All Other Compensation(4) ($)
(d) | Total(5) ($)
(e) |
John J. Dillon III | $110,000 | $120,006 | $0 | $230,006 |
Robert J. Laikin | $275,000 | $230,005 | $0 | $505,005 |
John F. Levy | $110,000 | $120,006 | $0 | $230,006 |
J. Taggart (“Tag”) Birge | $55,000 | $230,005 | $0 | $285,005 |
Jacquelyn R. Soffer | $110,000 | $120,006 | $0 | $230,006 |
Sheryl G. von Blucher | $110,000 | $120,006 | $0 | $230,006 |
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Certain Relationships & Related Party Transactions
None.
INFORMATION ABOUT SECURITY OWNERSHIP & OUR EQUITY COMPENSATION PLANS
The tablestable and accompanying footnotes set forth below under the heading “Security Ownership of Certain Beneficial Owners & Management” provide the beneficial ownership information for each director, the Named Executives,our named executive officers, and all current directors and executive officers of the Company as a group of the Company’s Common Shares and other equity securities as well as all other persons or entities known by the Company to be beneficial owners of more than five percent of the Company’s outstanding Common Shares and such other classes of equity securities of the Company as of the Record Date, except as otherwise noted. All partial Common Shares and units have been rounded up to the next whole Common Share or unit. TheThis table under the heading “Equity Compensation Plan Information” disclosesincludes information about Common Shares issued or available to be issuedissuable pursuant to our equity compensation plans as of December 31, 2018.the Record Date. The information in the table is presented without giving effect of the Reverse Stock Split should the Proposal be approved by the Common Shareholders during the Special Meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS & MANAGEMENT
COMMON STOCK OWNERSHIP
Name of Beneficial Owner(1) | Amount Beneficially Owned | Percent
Class | ||||||
Louis G. Conforti | 940,773(5) | (3) | ||||||
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Mark E. Yale | 340,023 | |||||||
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| 149,940(7) | (3) | ||||||
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Melissa A. Indest | 85,519 | |||||||
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| 55,802(9) | (3) | ||||||
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Paul S. Ajdaharian | 11,459 | (3) | ||||||
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J. Taggart (“Tag”) Birge | 128,663(11) | (3) | ||||||
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John J. Dillon III | 71,347(12) | (3) | ||||||
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Robert J. Laikin | 418,106 | |||||||
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| 86,147(14) | (3) | ||||||
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Jacquelyn R. Soffer | 186,859 | |||||||
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Sheryl G. von Blucher | 93,743(16) | (3) | ||||||
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BlackRock, Inc. | 20,417,162 | 10.89% | ||||||
| 19,906,256(18) | 10.62%(4) | ||||||
State Street Corporation | 10,370,233 | 5.53%(4) | ||||||
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All directors and executive officers as a group (12 persons) |
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(1) | Unless otherwise indicated in the footnotes below, the address for each beneficial owner listed is 180 East Broad Street, Columbus, Ohio 43215. |
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(2) | Unless otherwise indicated in the footnotes below, the listed beneficial owner has sole voting and investment power with respect to the Common |
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(3) | As applicable and as of the Record Date, the percentage ownership of the listed person or group does not exceed one percent (1%) of WPG's outstanding Common Shares. Common Shares issuable upon exercise of stock options, |
(4) | For the entity listed, the Percent of Class was computed based on |
(5) | Represents |
(6) | Represents |
(7) | Represents |
(8) | Represents 85,519 unrestricted Common Shares held directly by Ms. Indest. Excluded from the total are: (i) 25,164 vested LTIPs which may be converted (at Ms. Indest’s option) into a corresponding number of O.P. Units on a one-for-one basis subject to the terms and conditions of the applicable certificate of designation that relates to the units and (ii) 91,888 unvested RSUs of which 6,196 RSUs will vest in February 2021, 17,850 RSUs will vest in installments in February 2021 and 2022, and 67,842 RSUs shall vest in one-third installments in February 2021, 2022 and 2023, provided, in each instance that Ms. Indest is in continued compliance with certain covenants in her employment agreement and subject to certain provisions of such agreement relating to a change in control of the Company. Also excludes 113,204 unearned and unvested PSUs which shall be earned based upon the satisfaction of certain relative TSR criteria with the number of earned PSUs ranging from 0% to 150% of the allocated amount awarded to Ms. Indest based on the Company’s TSR performance over the three-year performance period established at the time the respective PSU is allocated; provided, in each instance that Ms. Indest is in continued compliance with certain covenants in her employment agreement and subject to certain provisions of such agreement relating to a change in control of the Company. The RSUs and PSUs each represent a contingent right to receive one Common Share. All vesting of the aforementioned securities is subject to Ms. Indest’s continued employment on the date the respective security vests or is earned. None of Ms. Indest’s holdings are pledged as collateral or security. |
| Represents |
(10) | Represents 11,459 unrestricted registered Common Shares held directly by Mr. Ajdaharian. Excluded from the total are 17,357 vested |
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(12) | Represents |
(13) | Includes 69,200 unrestricted Common Shares held directly by Mr. Laikin, |
(14) |
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(15) | Includes 100,000 unrestricted Common Shares held directly by Ms. Soffer as well as |
| Includes 25,000 unrestricted Common Shares held directly by Ms. von Blucher as well as |
| Based solely upon information contained in a Schedule 13G/A filed with the SEC on |
| Based solely upon information contained in a Schedule 13G/A filed with the SEC on |
| Based solely upon information contained in a Schedule 13G filed with the SEC on February |
| Includes the beneficially owned amounts reported in the table for each |
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our senior executive officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file with the SEC reports of ownership of our securities and changes in reported ownership. WPG executive officers, directors and greater than 10% shareholders are required by SEC rules to furnish us with copies of all Section 16(a) reports they file. Based solely on a review of the reports furnished to us, or written representations from reporting persons that all reportable transactions were reported, we believe that, except for one executive officer who was terminated in 2019, all Section 16 filing requirements for WPG’s directors and executive officers were complied with on a timely basis during our fiscal year ended December 31, 2018.
EQUITY COMPENSATION PLAN INFORMATION
Information about our existing equity compensation plans as of December 31, 2018 is as follows:
Plan category | Number of securities to | Weighted-average | Number of securities | |||
(a) | (b) | (c) | ||||
Equity compensation plans approved by security holders | 5,175,210(1) | $12.96(2) | 3,141,890 | |||
Equity compensation plans not approved by security holders | N/A | N/A | N/A | |||
Total | 5,175,210 | $12.96 | 3,141,890 |
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SHAREHOLDERSHAREHOLDER PROPOSALS AT OUR 20202120ANNUAL MEETING ANNUAL MEETINGOF SHAREHOLDERS
Rule 14a-8 Shareholder Proposals
To be considered for inclusion in the proxy materials for the 20202021 Annual Meeting of Shareholders pursuant to Rule 14a-8 of the Exchange Act, a shareholder proposal made pursuant to such rule must be received by our Corporate Secretary at 180 East Broad Street, Columbus, Ohio 43215 by the close of business on NovemberDecember 30, 2019.2020. If the date of such meeting is changed by more than 30thirty (30) days from May 16, 2020,June 15, 2021, the proposal must be received by us at a reasonable time before we begin to print and send our proxy materials. In addition, shareholder proposals must otherwise comply with the requirements of Rule 14a-8 promulgated under the Exchange Act and any other applicable laws and regulations.
Shareholder Proposals or Other Business Outside of the Rule 14a-8 Process
Our Amended and Restated Bylaws (the “Bylaws”) also establish an advance notice procedure for shareholders who wish to present a proposal of business or nominate a director before an annual meeting of shareholders but do not intend for the proposal to be included in our proxy statement pursuant to Rule 14a-8. Pursuant to our Bylaws, such a proposal of business or nomination of a director may be brought before the meeting by a shareholder who is entitled to vote at such meeting and who gives timely notice of such proposal or nomination and otherwise satisfies the applicable requirements set forth in our Bylaws. To be timely for the 20202021 Annual Meeting of Shareholders, such notice must be received by our Corporate Secretary at 180 East Broad Street, Columbus, Ohio 43215 by the close of business on January 17, 2020.February 15, 2021. If the date of the 20202021 Annual Meeting of Shareholders is changed by more than 30thirty (30) days from May 16, 2020,June 15, 2021, the proposal must be received by us not later than the close of business on the later of 120 calendar days in advance of the 20202021 Annual Meeting of Shareholders or ten (10) calendar days following the date upon which public announcement of the date of the meeting is first made.
HOUSEHOLDING OF PROXY MATERIALS
SEC rules permit companies and intermediaries such as brokers to satisfy the delivery requirements for proxy statements and notices with respect to two or more shareholders sharing the same address by delivering a single annual report to shareholders and proxy statement addressed to those shareholders. This process, which is commonly referred to as “householding,” provides cost savings for companies. Some brokers household proxy materials, delivering a single annual report to shareholders and proxy statement to multiple shareholders sharing an address unless contrary instructions have been received from the affected shareholders. Once you have received notice from your broker that it will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate annual report to shareholders and proxy statement (or other shareholder materials like this Proxy Statement), or if your household is receiving multiple copies of these documents and you wish to request that future deliveries be limited to a single copy, please notify your broker. You can also request prompt delivery of a copy of thethis Proxy Statement and annual report by contacting Investor Relations, Washington Prime Group Inc., 180 East Broad Street, Columbus, Ohio 43215, (614) 621-9000.
FINANCIAL AND OTHER INFORMATION
The Company'sCompany’s Annual Report to Shareholders and Annual Report on Form 10-K for the fiscal year ended December 31, 2018,2019, including certain financial statements and schedules, are beinghave been previously made available to the Company's shareholders concurrently with this Proxy Statement.Company’s shareholders.
EXPENSES OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. Brokers and nominees should forward soliciting materials to the beneficial owners of the Common Shares held of record by such persons and the Company will reimburse them for their reasonable forwarding expenses. Additionally, we have retained Georgeson LLC to assist in the solicitation of proxies. Georgeson LLC will receive a fee of $9,000 and reimbursement of reasonable expenses.
In addition to the use of the mails, proxies may be solicited by directors, executive officers, and regular employees or other representatives of the Company, who will not be specially compensated for such services, by means of personal calls upon, or telephonic, facsimile or telegraphice-mail communications with, shareholdersCommon Shareholders or their personal representatives.
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