TABLE OF CONTENTS
Our compensation committee has reviewed our compensation policies and practices to ascertain if the risks arising from such policies or practices are reasonably likely to have a materially adverse effect on us. The compensation committee concluded that while our compensation program takes into account our performance, the program does not encourage excessive or unnecessary risk-taking and our policies and practices achieve an appropriate balance between risk and reward.
Executive Benefits and Perquisites
Full-time Officers:
We provide our full-time officers with a competitive benefits and perquisites program. We recognize that similar benefits and perquisites may be provided at other companies with which we might compete for talent. We review our benefits and perquisites program periodically to ensure it remains fair to our officers and employees.
Part-time Officers
: The perquisites afforded to these officers are provided by Majestic and its affiliates; our board and its committees are not
involved in determining the perquisites paid to such officers.TABLE OF CONTENTS
Employment and Severance Agreements; Post-Employment Benefits; Change of Control
None of our named executive officers have employment or severance agreements with us. They are “at will” employees who serve at the pleasure of our board of directors. We do not provide for any post-employment benefits to our named executive officers other than the accelerated vesting of our restricted stock awards and RSUs as a result of death, disability, retirement or a change of control, as described below.
Generally, in the event of death, disability (
i.e., the inability to engage in gainful activity due to a life threatening or long lasting mental or physical impairment) or retirement (
i.e., having reached the age of 65 and worked for us for at least ten consecutive years), such person’s restricted stock vests fully and a
pro-rataportion (based on, among other things, the amount of time between the grant and the triggering event) of their RSUs will vest if and to the extent the applicable performance or market conditions are met as of the completion of the applicable three year performance cycle. In addition, upon a change of control, the (i) shares of restricted stock vest fully and (ii) the RSU’s vest fully if such change occurs 18 months
fromafter the beginning of the applicable performance cycle ( the “Cycle Mid-Point”) and, if such change occurs on or prior to the Cycle Mid-Point, a
pro-rataportion (based on, among other things, the amount of time between the grant and such triggering event) of such RSUs vests, in each case without regard to satisfaction of market or performance conditions.
Subject to the specific terms and conditions of the applicable plan and award agreement, a change of control is generally deemed to occur if (i) any person, with specified exceptions, becomes the “beneficial owner” of securities representing 25% or more of the combined voting power of our then outstanding securities, (ii) a business combination or sale of all or substantially all of our assets is completed or (iii) there is a change in the composition of a majority of our board of directors, other than changes approved by incumbent directors.
CompensationStock Ownership GuidelinesBecause we believe that the ownership by our named executive officers and non-employee directors of a meaningful financial stake in us serves to align their interests with those of our stockholders, we adopted stock ownership guidelines. Our guidelines reflect that the individuals identified below should own shares of common stock with a value not less than:
Chief Executive Officer | | | 4 times current base salary |
Full-Time NEO | | | 2 times current base salary |
Part-Time NEO | | | The number of shares required to be owned by the full-time NEO with the lowest base salary |
Non-Employee Directors | | | 3 times annual base retainer |
All shares deemed to be beneficially owned as determined under Rule 13d-3 promulgated pursuant to the Exchange Act (including shares as to which beneficial ownership is disclaimed), are counted towards meeting the guidelines. The individuals subject to these guidelines generally have five years from the date they assume such title to achieve the requisite ownership, which will be measured as of December 31 of each year. The stock price used in determining satisfaction of the Chairmanguidelines is the most favorable price during the two years ending on the December 31 measurement date. As of December 31, 2020, each of our named executive officers and Vice Chairmannon-employee directors satisfied these guidelines.
Policy Prohibiting Hedging of
the BoardIn 2018, we paidOur Securities
The board believes that transactions in our
chairman and vice chairman, $275,625 and $110,250, respectively, andsecurities engaged in
2019 we intend to pay our chairman and vice chairman $289,406 and $115,763, respectively, for serving in such capacities. These officers did not receive any additional direct compensation from us in 2018 other than equity based awards (i.e., restricted stock and RSUs). Any additional compensation received by
them for services rendered to us is paid to them by Majestic. For additional information regarding compensation of these officers, see “Executive Compensation−Summary Compensation Table” and “Certain Relationships and Related Transactions.”Deductibility of Executive Compensation
Prior to the 2017 Tax Cuts and Jobs Act, compensationCovered Persons (as defined below) (i) that satisfied conditions set forth under Section 162(m) of the Internal Revenue Code to qualify as "performance-based compensation" was not subject to a $1 million limit on deductibility. The 2017 Tax Cuts and Jobs Act eliminates the performance-based compensation exception and additionally applies the limit to certain former executive officers. However, it provides a transition rule with respect to remuneration which is provided pursuant to a written binding contract which was in effect on November 2, 2017, and which was not materially modified after that date. With the elimination of the exemption for performance-based compensation, we expect that we will be unable to deduct all compensation in excess of $1 million paid to our CEO, CFO and our other NEOs covered by the new tax law, other than previously granted awards that comply with the transition rules. Notwithstanding the repeal of the exemption for "performance-based compensation," the compensation committee intends to maintain its commitment to structuring the Company's executive compensation programs in a mannerare designed to align pay with performance.
For 2018, a significant portionhedge (i.e., eliminate or reduce), the risks of ownership of our securities, or (ii) allow for the compensation paid toprofit from any decrease in the value of our full-time executives was deductible by us. While the compensation committee generally intends to preserve the deductibility of a significant portion of compensation payments and benefits to the extent reasonably practicable, it has not adopted a formal policy that requires all such compensation to be fully deductible.
securities, are inappropriate.
TABLE OF CONTENTS
Analysis
Summary
In accordance with
Accordingly, the
compensation setting process described above, the following base salaries, bonuses and equity awards were approved for our full-time named executiveboard has adopted an anti-hedging policy that applies to transactions in securities by directors, officers,
for 2018 and 2017: | Base Salary | Cash Bonus | Equity Grants |
Name | 2018 ($)(1) | 2017 ($)(1) | % Change | 2018 ($)(2) | 2017 ($)(2) | % Change | 2018 ($) (3) | 2017 ($) (4) | % Change |
Patrick J. Callan, Jr. | | 812,700 | | | 789,000 | | | 3.0 | | | 86,000 | | | 78,900 | | | 9.0 | | | 750,991 | | | 689,745 | | | 8.9 | |
Lawrence G. Ricketts, Jr. | | 471,000 | | | 448,500 | | | 5.0 | | | 65,000 | | | 56,700 | | | 14.6 | | | 590,512 | | | 549,255 | | | 7.5 | |
| (1) | Messrs. Callan’s and Ricketts’ base salaries for 2019, determined in November/December 2018, are $837,081 and $494,550, respectively. |
| (2) | Reflects the cash bonuses paid in recognition of performance for such year, which bonuses are paid in the following year. |
| (3) | Represents the aggregate grant date fair value of the shares of restricted stock granted in 2019 for 2018 performance and the RSUs granted in 2018. Messrs. Callan and Ricketts were granted (i) 21,250 and 16,600 shares of restricted stock, respectively in 2019, for 2018 performance and (ii)13,750 and 11,000 RSUs, respectively, granted in 2018. |
| (4) | Represents the aggregate grant date fair value of shares of the restricted stock granted in 2018 for 2017 performance and the RSUs granted in 2017. Messrs. Callan and Ricketts were granted (i) 20,250 and 16,100 shares of restricted stock, respectively in 2018, for 2017 performance and (ii) 13,750 and 11,000 RSUs, respectively, granted in 2017. |
Base Salary and Bonus
In determining 2018 base salary, the compensation committee determined that the 3.0% and 5.0% increase in base salary for Messrs. Callan and Ricketts, respectively, for 2018 from 2017, was appropriate in recognition of their performance in 2017 and as a general cost of living increase.
In determining cash bonuses for 2018, the compensation committee took into account the factors to be consideredemployees, persons performing services pursuant to our Performance Based Cash Bonus Program – the committee considered our funds from operations,compensation and Messrs. Callan’sservices agreement and Ricketts’ efforts (through the datecertain relatives of the committee meetingforegoing (collectively, the “Covered Persons”). Under the policy, Covered Persons are prohibited from:
engaging in short sale transactions in our securities,
engaging in hedging or monetizing transactions through transactions in our securities or through the use of financial instruments designed for such purposes,
engaging in any transaction in securities where a reasonable investor would conclude that such transaction is for short-term gain or is speculative, and giving effect to transactions contemplated to be completed
owning financial instruments (other than those issued by
year-end), with respect to the properties acquiredus) or participating in
2018 for an aggregate of approximately $70 million, the mortgage financings completed in 2018 for gross proceeds of approximately $62 million, and the overall management of our real estate portfolio. In its considerationinvestment strategies that represent a direct or indirect hedge of the
managementeconomic risk of
owning our securities or any other that give the
portfolio, the compensation committee, among other things, took into account our attaining a physical occupancy rate (based on square footage) of 99%, the sales of five properties (including two properties owned by unconsolidated joint ventures), for an aggregate net gain on sale of real estate of $7.3 million, and the negotiation and execution of 15 new leases, lease amendments, modifications and extensions with respectholder any rights to
more than 436,000 square feet.In furtherance of the committee’s efforts to provide that long-term equity and long-term equity incentive compensation should represent a more significant component of total compensation for the full-time senior executive officers than it had in the past, the Committee’s determinations resulted in:
Equity Awards accounting for 89.7% and 90.1% of the performance/incentive based component of compensation awarded to Messrs. Callan and Ricketts, respectively, in 2018; andacquire any such securities.
| • | Equity Awards accounting, as a percentage of base annual compensation (i.e., salary, cash bonus and the grant date fair value of the Equity Awards), increasing for (i) Mr. Callan from 44.3% for 2017 to 45.5% for 2018 and (ii) Mr. Ricketts from 52.1% for 2017 to 52.4% for 2018. |
TABLE OF CONTENTS
Long-term Equity and Equity Incentive Awards
We believe that our long-term equity and equity incentive compensation programs, using restricted stock awards with five-year cliff vesting and RSUs that vest after three years, subject to satisfaction of market or performance based conditions, is a beneficial retention tool and provides an appropriate incentive for our officers. We are mindful of the potential dilution and compensation cost associated with awarding shares of restricted stock and RSUs and therefore we are conservative in granting such awards.
RSUs
In July 2018, we granted RSUs exchangeable for up to an aggregate of 76,250 shares of common stock. These RSUs vest on a cliff basis three years from the grant date if and to the extent applicable performance or market based conditions are satisfied. These RSUs were issued as both a retention and motivational tool, had a grant date fair value of $1,136,000 and represent 0.4% of our outstanding shares of common stock as of the grant date. In the two years ended December 31, 2018, we awarded an aggregate of 152,500 RSUs, representing an average of 0.4% per annum of our outstanding shares of common stock as of the respective grant dates.
Restricted Stock Awards
After reviewing the aggregate compensation received by our full-time named executive officers, our performance in 2018, and the performance and responsibilities of each named executive officer, and taking into account the compensation committee’s desire to emphasize equity based awards as a more significant component of total compensation for our full-time named executive officers while at the same time minimizing stockholder dilution, we awarded in 2019, for 2018 performance, 21,250 shares and 16,600 of restricted stock to Messrs. Callan and Ricketts, respectively, representing a 4.9% and 3.1% increase, respectively, from the awards they were granted in 2018, for 2017 performance. In addition, we awarded in 2019, for 2018 performance, 10,330 shares of restricted stock to each of David W. Kalish, Fredric H. Gould and Matthew J. Gould, representing a 3.8% increase from the awards they were granted in 2019, for 2018 performance. All of such shares vest in full, assuming a continued relationship with us, in 2024, subject to accelerated vesting upon the occurrence of specified events.
In 2018, we awarded 144,750 shares of restricted stock with an aggregate grant date fair value of $3.7 million—such shares represented 0.76% of our issued and outstanding shares at the grant date. In the five years ended December 31, 2018, we awarded an aggregate of 672,900 shares of restricted stock, representing an average of 0.78% per annum of our outstanding shares of common stock as of the respective grant dates.
We believe the cumulative effect of the restricted stock awards and RSUs is not overly dilutive and has created significant incentives for our officers and employees. We intend to continue to award restricted stock and RSUs as we believe such awards (i) align management’s interests and goals with stockholders’ interests and goals and (ii) are an excellent motivator and employee retention tool.
Perquisites
Generally, the perquisites we provide to our full-time officers represent a small percentage of the compensation paid by us to these officers. We believe that such perquisites are competitive and appropriate.
Clawbacks
We are entitled to clawback or obtain reimbursement of an executive’s compensation under the following circumstances:
in the event we are required to restate our financial statements due to our material non-compliance, as a result of misconduct, with any financial reporting requirement under the securities laws, our chief executive officer and chief financial officer are required to reimburse us for (i) any bonus or other incentive based compensation or equity based compensation they receive from us during the 12 months following the initial public issuance of the financial document embodying such financial reporting requirement and (ii) the profits from the sale of our common stock during such 12 months;
if an executive officer’s relationship with us is terminated for cause (e.g., insubordination, dishonesty, incompetence, moral turpitude, the refusal to perform such person’s duties and responsibilities and other misconduct of any kind, as determined by the compensation committee), then the officer’s rights to all restricted stock, RSUs and performance share awards (except to the extent such awards have vested) are forfeited immediately; and
TABLE OF CONTENTS
| • | if an executive officer’s relationship with us is terminated for cause (e.g., insubordination, dishonesty, incompetence, moral turpitude, the refusal to perform such person’s duties and responsibilities and other misconduct of any kind, as determined by the compensation committee), then the officer’s rights to all restricted stock, RSUs and performance share awards (except to the extent such awards have vested) are forfeited immediately; and |
in accordance with any additional claw-back policy implemented by us, whether implemented prior to or after the grant of an award pursuant to our equity incentive plans, with respect to such awards.
Compensation of Part-Time Named Executive Officers In 2020, we paid Majestic $3,011,000 (excluding $275,000 of office expenses), of which 20.2% was allocated to our part-time named executive officers. The compensation allocated to these part-time named executive officers is variable/incentive pay and is based on the determinations of Fredric H. Gould, the chairman of Majestic. See “Certain Relationships and Related Transactions.”
Compensation of the Chairman and Vice Chairman of the Board In 2020, we paid and in 2021, we intend to pay our chairman and vice chairman $298,088 and $119,235, respectively, for serving in such capacities. These officers did not receive any additional direct compensation from us in 2020 other than equity based awards (i.e., restricted stock and RSUs). Any additional compensation received by them for services rendered to us is paid to them by Majestic. For additional information regarding compensation of these officers, see “Summary Compensation Table” and “Certain Relationships and Related Transactions.”
TABLE OF CONTENTS
Summary
The following base salaries, bonuses and equity awards were approved for our full-time named executive officers for 2020 and 2019:
Patrick J. Callan, Jr.(1) | | | 865,000 | | | 837,100 | | | 3.3 | | | 73,100 | | | 86,000 | | | (15.0) | | | 600,200 | | | 774,325 | | | (22.5) |
Lawrence G. Ricketts, Jr.(1) | | | 520,000 | | | 494,550 | | | 5.1 | | | 55,250 | | | 65,000 | | | (15.0) | | | 474,054 | | | 611,042 | | | (22.4) |
(1)
| Messrs. Callan’s and Ricketts’ base salaries for 2021, determined in December 2020, are $865,000 and $520,000, respectively. |
(2)
| Reflects the cash bonuses paid in recognition of performance for such year, which bonuses are paid in the following year. |
(3)
| Represents the aggregate grant date fair value of the shares of restricted stock granted in 2021 for 2020 performance and the RSUs granted in 2020. Messrs. Callan and Ricketts were granted (i) in 2021, for 2020 performance, 21,750 and 17,100 shares of restricted stock, respectively, and (ii) in 2020, 13,750 and 11,000 RSUs, respectively. |
(4)
| Represents the aggregate grant date fair value of shares of the restricted stock granted in 2020 for 2019 performance and the RSUs granted in 2019. Messrs. Callan and Ricketts were granted (i) in 2020, for 2019 performance, 21,750 and 17,100 shares of restricted stock, respectively and (ii) in 2019, 13,750 and 11,000 RSUs, respectively. |
Base Salary and Bonus
In determining 2020 base salary, the compensation committee determined that the 3.3% and 5.1% increase in base salary for Messrs. Callan and Ricketts, respectively, for 2020 from 2019, was appropriate in recognition of their performance in 2019 and as a general cost of living increase.
In determining cash bonuses for 2020, the compensation committee took into account the factors to be considered pursuant to our Performance-based Cash Bonus Program – the committee considered funds from operations, adjusted funds from operations, the two properties acquired in 2020 for an aggregate of approximately $28.3 million, the sale of four retail properties for an aggregate net gain on sale of real estate of $17.3 million, and the overall management of our real estate portfolio. In its consideration of the management of the portfolio, the compensation committee, among other things, took into account management’s efforts to resolve the litigation involving the assisted living facility in Round Rock, TX that we previously owned, our maintaining a physical occupancy rate (based on square footage) of approximately 96.9% as of early November 2020, and, through early November 2020, the negotiation and execution of more than 60 leases, lease extensions and rent deferral and abatement arrangements. The committee, however, ascribed overriding importance to the impact on us of the economic dislocations resulting from COVID-19 pandemic and our desire to conserve cash. Accordingly, despite being very satisfied with Messrs. Callan’s and Rickett’s performance during 2020, we reduced for 2020 each of their cash bonuses by 15% from the cash bonus paid for 2019.
Long-term Equity and Equity Incentive Awards
We believe that our long-term equity and equity incentive compensation programs, using restricted stock awards with five-year cliff vesting and RSUs that vest after three years, subject to satisfaction of market or performance-based conditions, is a beneficial retention tool and provides an appropriate incentive for our officers. We are mindful of the potential dilution and compensation cost associated with awarding shares of restricted stock and RSUs and therefore we are conservative in granting such awards.
RSUs
In July 2020, we granted RSUs exchangeable for up to an aggregate of 75,026 shares of common stock. These RSUs vest on a cliff basis three years from the grant date if and to the extent applicable performance or market-based conditions are satisfied. These RSUs were issued as both a retention and motivational tool, had a grant date fair value of $861,000 and represent 0.4% of our outstanding shares of common stock as of the grant date. For the four years ended December 31, 2020, we awarded an aggregate of 305,302 RSUs, representing an average of 0.4% per annum of our outstanding shares of common stock as of the respective grant dates.
Restricted Stock Awards
After reviewing the aggregate compensation received by our full-time named executive officers, our performance in 2020, and the performance and responsibilities of each named executive officer, and taking into account the compensation committee’s continuing desire to emphasize equity based awards as a more significant component of
TABLE OF CONTENTS
total compensation for our full-time named executive officers while at the same time minimizing stockholder dilution, we awarded in 2021, for 2020 performance, 21,750 shares and 17,100 of restricted stock to Messrs. Callan and Ricketts, respectively, representing the same number of the restricted stock awards they were granted in 2020, for 2019 performance. In addition, we awarded in 2021, for 2020 performance, 10,670 shares of restricted stock to each of David W. Kalish, Fredric H. Gould and Matthew J. Gould, representing the same number of awards they were granted in 2020, for 2019 performance. Assuming a continuing relationship with us, all of the restricted stock awarded in 2021 vests in full in 2026, subject to accelerated vesting upon the occurrence of specified events.
In 2020, we awarded 149,550 shares of restricted stock with an aggregate grant date fair value of $4.2 million—such shares represented 0.75% of our issued and outstanding shares at the grant date. In the five years ended December 31, 2020, we awarded an aggregate of 723,675 shares of restricted stock, representing an average of 0.78% per annum of our outstanding shares of common stock as of the respective grant dates.
We believe the cumulative effect of the restricted stock awards and RSUs is not overly dilutive and has created significant incentives for our officers and employees. We intend to continue to award restricted stock and RSUs as we believe such awards (i) align management’s interests and goals with stockholders’ interests and goals and (ii) are an excellent motivator and employee retention tool.
Emphasis on Equity Awards
The compensation committee’s efforts to provide that long-term equity and long-term equity incentive compensation represent a significant component of total compensation for the full-time named executive officers, resulted in determinations of:
Equity Awards accounting for 89.1% and 89.6% of the performance/incentive based component of compensation awarded to Messrs. Callan and Ricketts, respectively, in 2020; and
Equity Awards accounting for 39.0% and 45.2% of base annual compensation (i.e., salary, cash bonus and the grant date fair value of the Equity Awards), for Messrs. Callan and Ricketts, respectively, in 2020.
Perquisites
Generally, the perquisites we provide to our full-time officers represent a small percentage of the compensation paid by us to these officers. We believe that such perquisites are competitive and appropriate.
Employment and Severance Agreements
We do not enter into employment agreements or severance agreements with any of our officers or employees as we believe such agreements are not beneficial to us, and that we can provide sufficient motivation to officers by using other types of compensation.
Post-Employment Benefit Programs
The following table sets forth the value (based on our
closing stock price of
$24.22$20.07 per share as of December 31,
2018)2020) of equity awards that would vest upon the occurrence of the specified events as of December 31,
2018: | Upon Death or Disability(1) | Upon a Change of Control |
Name | Restricted Stock ($) | RSUs ($)(2) | Restricted Stock ($) | RSUs ($) |
Patrick J. Callan, Jr.(3) | | 2,197,965 | | | 222,726 | | | 2,197,965 | | | 443,832 | |
David W. Kalish | | 1,112,909 | | | 73,702 | | | 1,112,909 | | | 146,868 | |
Lawrence G. Ricketts, Jr.(3) | | 1,782,592 | | | 178,181 | | | 1,782,592 | | | 355,065 | |
Matthew J. Gould | | 1,112,909 | | | 76,942 | | | 1,112,909 | | | 153,324 | |
Fredric H. Gould | | 1,112,909 | | | 76,942 | | | 1,112,909 | | | 153,324 | |
2020:
Patrick J. Callan, Jr.(3) | | | 2,032,088 | | | 415,245 | | | 2,032,088 | | | 643,914 |
David W. Kalish | | | 998,483 | | | 137,408 | | | 998,483 | | | 213,077 |
Lawrence G. Ricketts, Jr.(3) | | | 1,621,656 | | | 332,196 | | | 1,621,656 | | | 515,131 |
Matthew J. Gould | | | 998,483 | | | 143,448 | | | 998,483 | | | 222,443 |
Fredric H. Gould | | | 998,483 | | | 143,448 | | | 998,483 | | | 222,443 |
| (1)
| Because they have reached the age of 65 and have satisfied the period of service requirements, only the RSUs (assuming satisfaction of performance and market conditions as of the end of applicable performance cycle) and restricted stock owned by Messrs. Kalish and Fredric H. Gould would vest upon their retirement as of December 31, 2018;2020; the market value of such person’s restricted stock awards and RSUs are reflected in the applicable column. |
(2)
| (2) | Assumes that the maximum level of market and performance conditions is achieved at the end of the applicable performance cycle. See “− “— Outstanding Equity Awards at Fiscal Year End.” |
(3)
| (3) | See “− “— Summary Compensation Table” for information regarding the amount accumulated for this individual pursuant to our defined contribution plan. |
Stock Ownership Guidelines
Because we believe that the ownership by our named executive officers and non-employee directors of a meaningful financial stake in the Company serves to align their interests with those of our stockholders, in March 2018, we adopted stock ownership guidelines. Our guidelines reflect that the individuals identified below should own shares of common stock with a value not less than:
Title
| Minimum Ownership Requirement
|
Chief Executive Officer
| 4 times current base salary
|
Full-Time NEO
| 2 times current base salary
|
Part-Time NEO
| The number of shares required to be owned by the full-time NEO with the lowest base salary
|
Non-Employee Directors
| 3 times annual base retainer
|
TABLE OF CONTENTS
All shares deemed to be beneficially owned as determined under Rule 13d-3 promulgated pursuant to the Exchange Act (including shares as to which beneficial ownership is disclaimed), are counted towards meeting the guidelines. The individuals subject to these guidelines have five years to achieve the requisite ownership, which will be measured as of December 31 of each year. The stock price used in determining satisfaction of the guidelines is the most favorable price during the two years preceding, and ending, on the December 31 measurement date. As of December 31, 2018, each of our named executive officers and non-employee directors satisfied these guidelines.
Summary Compensation Table TABLE OF CONTENTS
SUMMARY COMPENSATION TABLE
The following table lists the annual compensation for the periods indicated of our CEO, CFO, and our three other named executive officers in 2018:
Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2) | All Other Compensation ($)(3) | Total ($) |
Patrick J. Callan, Jr. | | 2018 | | | 812,700 | | | 86,000 | | | 717,394 | | | 218,454 | (6) | | 1,834,548 | |
President and Chief Executive
| | 2017 | | | 789,000 | | | 78,900 | | | 659,842 | | | 131,217 | | | 1,658,959 | |
Officer(4)
| | 2016 | | | 765,000 | | | 93,000 | | | 402,190 | | | 86,250 | | | 1,346,440 | |
David W. Kalish | | 2018 | | | — | | | — | | | 319,628 | | | 176,856 | (7) | | 496,484 | |
Senior Vice President and
| | 2017 | | | — | | | — | | | 296,249 | | | 190,124 | | | 486,373 | |
Chief Financial Officer(5)
| | 2016 | | | — | | | — | | | 200,008 | | | 145,008 | | | 345,016 | |
Lawrence G. Ricketts, Jr. | | 2018 | | | 471,000 | | | 65,000 | | | 571,383 | | | 50,329 | (8) | | 1,157,712 | |
Executive Vice President and
| | 2017 | | | 448,500 | | | 56,700 | | | 525,389 | | | 48,371 | | | 1,078,960 | |
Chief Operating Officer(4)
| | 2016 | | | 411,500 | | | 56,700 | | | 336,970 | | | 47,057 | | | 852,227 | |
Matthew J. Gould | | 2018 | | | 275,625 | | | — | | | 322,605 | | | 331,762 | (9) | | 929,992 | |
Chairman of the Board(5)
| | 2017 | | | 275,625 | | | — | | | 298,811 | | | 354,809 | | | 929,245 | |
| | 2016 | | | 262,500 | | | — | | | 200,008 | | | 268,869 | | | 731,377 | |
Fredric H. Gould | | 2018 | | | 110,250 | | | — | | | 322,605 | | | — | (10) | | 432,855 | |
Vice Chairman of the Board(5)
| | 2017 | | | 110,250 | | | — | | | 298,811 | | | — | | | 409,061 | |
| | 2016 | | | 105,000 | | | — | | | 200,008 | | | — | | | 305,008 | |
2020:
Patrick J. Callan, Jr. | | | 2020 | | | 865,000 | | | 73,100 | | | 768,980 | | | 124,150(6) | | | 1,831,230 |
President and Chief Executive
| | | 2019 | | | 837,100 | | | 86,000 | | | 709,275 | | | 180,626 | | | 1,813,001 |
Officer(3)
| | | 2018 | | | 812,700 | | | 86,000 | | | 717,394 | | | 218,454 | | | 1,834,548 |
David W. Kalish | | | 2020 | | | — | | | — | | | 352,054 | | | 211,482(7) | | | 563,536 |
Senior Vice President and
| | | 2019 | | | — | | | — | | | 319,473 | | | 164,595 | | | 484,068 |
Chief Financial Officer(4)
| | | 2018 | | | — | | | — | | | 319,628 | | | 176,856 | | | 496,484 |
Lawrence G. Ricketts, Jr. | | | 2020 | | | 520,000 | | | 55,250 | | | 606,750 | | | 50,821(8) | | | 1,232,821 |
Executive Vice President and
| | | 2019 | | | 494,550 | | | 65,000 | | | 557,152 | | | 51,016 | | | 1,167,718 |
Chief Operating Officer(3)
| | | 2018 | | | 471,000 | | | 65,000 | | | 571,383 | | | 50,329 | | | 1,157,712 |
Matthew J. Gould | | | 2020 | | | 298,088(5) | | | — | | | 354,342 | | | 397,950(7) | | | 1,050,380 |
Chairman of the Board(4)
| | | 2019 | | | 289,406 | | | — | | | 321,851 | | | 308,997 | | | 920,254 |
| | | 2018 | | | 275,625 | | | — | | | 322,605 | | | 331,762 | | | 929,992 |
Fredric H. Gould | | | 2020 | | | 119,235(5) | | | — | | | 354,342 | | | — | | | 473,577 |
Vice Chairman of the Board(4)
| | | 2019 | | | 115,763 | | | — | | | 321,851 | | | — | | | 437,614 |
| | | 2018 | | | 110,250 | | | — | | | 322,605 | | | — | | | 432,855 |
| (1)
| Reflects bonuses paid in 2019, 20182021, 2020 and 20172019 for services rendered in 2018, 20172020, 2019 and 2016,2018, respectively. |
(2)
| (2) | Represents RSUs granted in 2017 and 2018 and restricted stock granted in 2018, 20172020, 2019 and 20162018 at the grant date fair value of such awards calculated in accordance with Item 402 of Regulation S-K and Accounting Standards Codification Topic 718—Stock Compensation. These amounts do not correspond to the actual values that will be realized by the named executives. Grant date fair value assumptions are consistent with those disclosed in Note 12 — Stockholders’ Equity – Stock Based Compensation, in the consolidated financial statements included in our 20182020 Annual Report on Form 10-K. See “ – Grant of Plan Based Awards During 20182020” for additional information as to the grant date fair value of the RSUs. On January 10, 2019,6, 2021, we granted: (a) 21,25021,750 and 16,60017,100 shares of restricted stock to Messrs. Callan and Ricketts, respectively, with a grant date fair value of $546,125$442,395 and $426,620,$347,814, respectively; and (b) 10,33010,670 shares of restricted stock to each of Messrs. Kalish, M. Gould and F. Gould, with a grant date fair value of $265,481$217,028 for each such award. |
| (3) | Includes for Messrs. Kalish and M. Gould the amounts, if any, Majestic paid them for services they performed on our behalf. See “Executive Compensation – Compensation Disclosure and Analysis – Background” and “Certain Relationships and Related Transactions.” |
| (4)
| All compensation received by Messrs. Callan and Ricketts is paid solely and directly by us. |
| (5)(4)
| Other than the restricted stock awarded to these individuals and the fees paid to Messrs. M. Gould and F. Gould for serving as Chairman and Vice Chairman, respectively: (a) we did not pay, nor were we allocated, any portion of such person’s base salary, bonus, defined contribution plan payments or perquisites in 2018, 20172020, 2019 and 2016;2018; and (b) the services of these individuals isare provided to us pursuant to the compensation and services agreement with Majestic. |
(5)
| Such amounts are duplicative of the amounts reported as compensation for the Chairman and Vice Chairman of the Board of Directors under “Governance of the Company – Compensation of Directors.” |
(6)
| Includes a $41,250$42,750 contribution to our defined contribution plan and perquisites aggregating $177,204,$81,400, of which $153,140$54,351 represents an education benefit, $18,139$21,124 represents an automobile allowance and related insurance, maintenance and repairs and $5,925 represents the annual premium for additional disability insurance. Approximately $609,000$999,000 has accumulated for this individual pursuant to our defined contribution plan. |
(7)
| (7) | Represents the amountamounts Majestic paid himallocated to such person for the services he performed on our behalf. See note 3 above“Executive Compensation – Compensation Program” and “Certain Relationships and Related Transactions.” |
TABLE OF CONTENTS
| (8)
| Includes a contribution of $41,250$42,750 to our defined contribution plan and perquisites of $9,079,$8,071, representing an automobile allowance and related expenses. Approximately $770,000$1,236,000 has accumulated for this individual pursuant to our defined contribution plan. |
27
| (9) | Represents the amount Majestic paid him for the services he performed on our behalf. See note 3 above and “Certain Relationships and Related Transactions.” |
| (10) | See note 3 above and “Certain Relationships and Related Transactions.” |
GRANTTABLE OF PLAN BASED AWARDS DURING 2018CONTENTS
Grant Of Plan Based Awards During 2020 The following table summarizes information regarding awards of restricted stock
granted in 2020 pursuant to our 2019 Incentive Plan and RSUs granted in
20182020 pursuant to our
20162019 Incentive Plan:
Name | Grant Date | Grant Type | Estimated Future Payouts under Equity Incentive Plan Awards: Maximum(#)(1) | All Other Stock Awards: Number of Shares of Stocks or Units (#)(2) | Grant Date Fair Value of Stock Awards ($)(3) |
Patrick J. Callan, Jr. | 1/18/2018 | RS | | — | | | 20,250 | | | 512,528 | |
| 7/1/2018 | RSU-TSR(4) | | 6,875 | | | — | | | 63,044 | |
| 7/1/2018 | RSU-ROC(5) | | 6,875 | | | — | | | 141,822 | |
David W. Kalish | 1/18/2018 | RS | | — | | | 9,950 | | | 251,835 | |
| 7/1/2018 | RSU-TSR(4) | | 2,275 | | | — | | | 20,862 | |
| 7/1/2018 | RSU-ROC(5) | | 2,275 | | | — | | | 46,931 | |
Lawrence G. Ricketts, Jr. | 1/18/2018 | RS | | — | | | 16,100 | | | 407,491 | |
| 7/1/2018 | RSU-TSR(4) | | 5,500 | | | — | | | 50,435 | |
| 7/1/2018 | RSU-ROC(5) | | 5,500 | | | — | | | 113,457 | |
Matthew J. Gould | 1/18/2018 | RS | | — | | | 9,950 | | | 251,835 | |
| 7/1/2018 | RSU-TSR(4) | | 2,375 | | | — | | | 21,779 | |
| 7/1/2018 | RSU-ROC(5) | | 2,375 | | | — | | | 48,991 | |
Fredric H. Gould | 1/18/2018 | RS | | — | | | 9,950 | | | 251,835 | |
| 7/1/2018 | RSU-TSR(4) | | 2,375 | | | — | | | 21,779 | |
| 7/1/2018 | RSU-ROC(5) | | 2,375 | | | — | | | 48,991 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
‘
Patrick J. Callan, Jr. | | | 1/17/2020 | | | RS | | | — | | | 21,750 | | | 611,175 |
| | | 8/3/2020 | | | RSU-TSR(4) | | | 6,875 | | | — | | | 57,338 |
| | | 8/3/2020 | | | RSU-ROC(5) | | | 6,875 | | | — | | | 100,467 |
David W. Kalish | | | 1/17/2020 | | | RS | | | — | | | 10,670 | | | 299,827 |
| | | 8/3/2020 | | | RSU-TSR(4) | | | 2,275 | | | — | | | 18,974 |
| | | 8/3/2020 | | | RSU-ROC(5) | | | 2,275 | | | — | | | 33,253 |
Lawrence G. Ricketts, Jr. | | | 1/17/2020 | | | RS | | | — | | | 17,100 | | | 480,510 |
| | | 8/3/2020 | | | RSU-TSR(4) | | | 5,500 | | | — | | | 45,870 |
| | | 8/3/2020 | | | RSU-ROC(5) | | | 5,500 | | | — | | | 80,370 |
Matthew J. Gould | | | 1/17/2020 | | | RS | | | — | | | 10,670 | | | 299,827 |
| | | 8/3/2020 | | | RSU-TSR(4) | | | 2,375 | | | — | | | 19,808 |
| | | 8/3/2020 | | | RSU-ROC(5) | | | 2,375 | | | — | | | 34,707 |
Fredric H. Gould | | | 1/17/2020 | | | RS | | | — | | | 10,670 | | | 299,827 |
| | | 8/3/2020 | | | RSU-TSR(4) | | | 2,375 | | | — | | | 19,808 |
| | | 8/3/2020 | | | RSU-ROC(5) | | | 2,375 | | | — | | | 34,707 |
| (1)
| Represents the maximum number of shares underlying RSUs that will be issued if all the applicable market and performance conditions are met. |
| (2)
| Reflects restricted stock awards. These shares generally vest, on a cliff vesting basis, five years from the grant date, subject to such persons continued relationship with us. Dividends are paid on restricted stock unless such shares are forfeited prior to vesting due to the termination, with certain exceptions, of the relationship between us and the executive. In the event the shares are forfeited, the recipient is (i) entitled to retain the dividends paid prior to the forfeiture, and (ii) is not entitled to any dividends paid after the forfeiture of such shares. |
| (3)
| The grant date fair value of the restricted stock, RSU – TSR and RSU – ROC awards are $25.31, $9.17$28.10, $8.34 and $26.41,$17.31, respectively, per share. These amounts do not correspond to the actual values that will be realized by the executives. The aggregate grant date fair value for the RSU-ROC awards gives effect to management’s assessment of the probable outcome as to whether, and the extent to which, the RSU-ROCs will vest. |
(4)
| (4) | Represents shares underlying RSUs that vest on June 30, 20212023 if, and to the extent, a market condition (i.e., average of annual total stockholder return) is satisfied. If the average of our annual total stockholder return (including dividends) on our common stock from July 1, 20182020 through June 30, 2021,2023, equals or exceeds 12.75%, all the shares underlying such RSUs vest; equals or is less than 7%, no shares vest; and is more than 7% and less than 12.75%, a pro rata portion of the shares underlying such RSUs vest. There are no dividends or voting rights associated with these RSUs. |
TABLE OF CONTENTS
vest; and is more than 7% and less than 12.75%, a pro rata portion of the shares underlying such RSUs vest. There are no dividends or voting rights associated with these RSUs.
(5)
| (5) | Represents shares underlying RSUs that vest on June 30, 20212023 if, and to the extent, a performance condition (i.e., average annual return on capital) is satisfied. If the average of our annual return on capital (as explained below) from July 1, 20182020 through June 30, 20212023 exceeds 9.75%, all the shares underlying such RSUs vests; equals or is less than 7%, no shares vest; and exceeds 7% but is less than 9.75%, a pro rataportion of the shares underlying such RSUs vest. Return on capital means adjusted funds from operations, as described below, divided by average capital, as described below. Adjusted funds from operations is determined by using funds from operations as determined in accordance with the NAREIT definition, adjusted for straight-line rent accruals and amortization of lease intangibles, and adding and deducting gains and losses (as determined pursuant to the applicable award), respectively, on sales of properties. Average capital is stockholders’ equity, plus depreciation and amortization, adjusted for intangibles, as measured over the applicable periods. There are no dividend or voting rights associated with these RSUs. |
TABLE OF CONTENTS
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR ENDOutstanding Equity Awards At Fiscal Year End
The following table provides information as of December 31,
20182020 about the outstanding equity awards held by our named executive officers:
| Stock Awards |
Name | Number of Shares of Restricted Stock That Have Not Vested (#) | Market Value of Shares of Restricted Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Shares Subject to RSUs That Have Not Vested (#)(2) | Equity Incentive Plan Awards: Market or Payout Value of Shares Subject to RSUs That Have Not Vested ($)(1)(2)(3) |
Patrick J. Callan, Jr. | | 90,750 | (4) | | 2,197,965 | | | 27,500 | | | 660,050 | |
David W. Kalish | | 45,950 | (5) | | 1,112,909 | | | 9,100 | | | 220,402 | |
Lawrence G. Ricketts, Jr. | | 73,600 | (6) | | 1,782,592 | | | 22,000 | | | 532,840 | |
Matthew J. Gould | | 45,950 | (5) | | 1,112,909 | | | 9,500 | | | 230,090 | |
Fredric H. Gould | | 45,950 | (5) | | 1,112,909 | | | 9,550 | | | 230,090 | |
Patrick J. Callan, Jr. | | | 101,250(4) | | | 2,032,088 | | | 41,250 | | | 827,888 |
David W. Kalish | | | 49,750(5) | | | 998,483 | | | 13,650 | | | 273,956 |
Lawrence G. Ricketts, Jr. | | | 80,800(6) | | | 1,621,656 | | | 33,000 | | | 662,310 |
Matthew J. Gould | | | 49,750(5) | | | 998,483 | | | 14,250 | | | 285,998 |
Fredric H. Gould | | | 49,750(5) | | | 998,483 | | | 14,250 | | | 285,998 |
| (1)
| The market value represents the product of the closing price of our common stock as of December 31, 2018,2020, which was $24.22,$20.07, multiplied by the number of shares subject to or underlying such award. |
| (2)
| Assumes that all of the RSUs vest. |
(3)
| (3) | If the measurement and vesting dates were December 31, 2018, and giving effect to related adjustments,2020, only 35.9%55.0% of the RSUs would have vested and the balance of the RSUs would have been forfeited (i.e., 5.9%33.5% of the RSU-TSR would have vested and 66%76.5% of the RSU-ROC would have vested). |
| (4)
| With respect to this individual, 14,500 shares vest in January 2019, 18,000 shares vest in January 2020, 18,500 shares vest in January 2021, 19,500 shares vest in January 2022, and 20,250 shares vest in January 2023.2023, and 21,250 shares vest in January 2024 and 21,750 shares vest in January 2025. |
| (5)
| With respect to this individual, 8,600 shares vest in each of January 2019 and 2020, 9,200 shares vest in January 2021, 9,600 shares vest in January 2022, and 9,950 shares vest in January 2023.2023, and 10,330 shares vest in January 2024, and 10,670 shares vest in January 2025. |
| (6)
| With respect to this individual, 11,500 shares vest in January 2019, 15,000 shares vest in January 2020, 15,500 shares vest in each of January 2021 and 2022, and 16,100 shares vest in January 2023.2023 and 16,600 shares vest in January 2024 and 17,100 shares vest in January 2025. |
None of the named executive officers hold any stock options and none were granted to any of the named executive officers during the year.
Option Exercises And Stock Vested TABLE OF CONTENTS
OPTION EXERCISES AND STOCK VESTED
The following table sets forth information regarding the shares of restricted stock and shares underlying RSUs that vested in 2018:
| Stock Awards |
Name | Number of Shares Acquired on Vesting (#)(1) | Value Realized on Vesting ($)(1) |
Patrick J. Callan, Jr. | | 12,500 | | | 317,500 | |
David W. Kalish | | 8,600 | | | 218,440 | |
Lawrence G. Ricketts, Jr. | | 10,000 | | | 254,000 | |
Matthew J. Gould | | 8,600 | | | 218,440 | |
Fredric H. Gould | | 8,600 | | | 218,440 | |
2020:
Patrick J. Callan, Jr. | | | 22,390 | | | 574,152 |
David W. Kalish | | | 10,053 | | | 262,962 |
Lawrence G. Ricketts, Jr. | | | 18,512 | | | 475,881 |
Matthew J. Gould | | | 10,116 | | | 264,072 |
Fredric H. Gould | | | 10,116 | | | 264,072 |
(1)
| (1)Includes 4,390, 1,453, 3,512, 1,516 and 1,516 shares underlying RSUs for Messrs. Callan, Kalish, Ricketts, M. Gould and F. Gould, respectively, that vested upon achieving a certain level of total stockholder return. |
(2)
| Reflects the aggregate market value of the shares that vested as of the applicable vesting date. The closing market priceprices of a share of our common stock on the vesting date of the restricted stock awards (i.e., January 12, 2018)14, 2020) and restricted stock units (i.e., June 30, 2020) was $25.40.$27.60 and $17.62, respectively. |
COMPENSATION COMMITTEE REPORT
The compensation committee of the board of directors has reviewed the Compensation Discussion and Analysis set forth herein, and discussed it with management, and based on such review and discussions, recommends to the board of directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
Respectfully submitted,
Eugene I. Zuriff, Chair
Charles Biederman
J. Robert Lovejoy
TABLE OF CONTENTS
As required by and in accordance with the Dodd-Frank Act and the regulations promulgated thereunder, we provide below a reasonable estimate of the relationship of the annual total compensation of Mr. Patrick J. Callan, Jr., our Chief Executive Officer and President, to the median annual total compensation of our employees (other than the CEO). For 2020:
the annual total compensation of our CEO, as reported in the Summary Compensation Table, was $1,831,000;
the median annual total compensation of all our employees (other than our CEO) was $256,000; and
our CEO’s annual total compensation was 7.2 times that of the median of the annual total compensation of all our employees (other than our CEO).
In calculating this estimate, we included as our employees as of the December 31, 2020 measurement date, all those individuals to whom we are required by the Internal Revenue Code of 1986, as amended, to issue a W-2. We identified our median employee by calculating our employees’ total annual compensation in the same manner that the CEO’s total annual compensation is calculated for the Summary Compensation Table.
SEC rules allow companies to adopt a variety of methodologies and apply various assumptions in presenting this ratio. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio we report.
TABLE OF CONTENTS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 20172019 and 2018,2020,
Matthew J. Gould, Chairman of our Board of Directors, served as a Senior Vice President and director of BRT Apartments Corp., a NYSE listed real estate investment trust focused on the ownership, operation and development of multi-family properties, and listed on the New York Stock Exchange, as Chairman of the Board and Chief Executive Officer of the managing general partner of Gould Investors (which owns approximately 9.2%9.1% of our outstanding shares of common stock), and as a Vice President of Majestic;
Fredric H. Gould, Vice Chairman of our Board of Directors, served as a director of BRT Apartments, as Chairman of the Board of Directors and sole stockholder of Majestic and as a director and sole stockholder of Georgetown Partners, the corporate managing general partner of Gould Investors; and
Jeffrey A. Gould, a Director and Senior Vice President of our company, served as a Director, President and Chief Executive Officer of BRT Apartments, as a Senior Vice President and Director of the corporate managing general partner of Gould Investors and as a Vice President of Majestic.
Matthew J. Gould and Jeffrey A. Gould are brothers and the sons of Fredric H. Gould. In addition, David W. Kalish, Mark H. Lundy, Israel Rosenzweig and Isaac Kalish, each of whom is an executive officer of our company, are officers of BRT Apartments and of the corporate managing general partner of Gould Investors. Isaac Kalish is David Kalish’s son and Steven Rosenzweig and Alon Rosenzweig, sons of Israel Rosenzweig, are employed by our affiliates.
Related Party Transactions
Pursuant to the compensation and services agreement, Majestic provides us
with the
services of affiliated executive, administrative, legal, accounting, clerical and property management personnel, as well as property acquisition, sale and lease consulting and brokerage services, consulting services in respect to mortgage financings and construction supervisory services.Services. In accordance with the compensation and services agreement, we paid Majestic
$2,673,000$2,826,000 and
$2,745,000$3,011,000 in
20172019 and
2018,2020, respectively, which included
$1,154,000$1,307,000 and
$1,226,000$1,265,000 for property management services, respectively. In
2019,2021, we will pay Majestic
$1,519,000$1,746,000 and in addition, for its property management services, will pay 1.5% and 2.0% of the rental payments (including tenant reimbursements) actually received by us from net lease tenants and operating lease tenants, respectively. We will not pay Majestic property management fees with respect to properties managed by third parties. Based on our property portfolio at December 31,
2018,2020, we estimate that the property management fee in
20192021 will be approximately
$1,200,000.$1.4 million. Majestic may earn a profit from payments made to it under such agreement. In addition, under this agreement, we also paid Majestic $216,000 and $275,000 in 2019 and 2020, respectively, and will pay $295,000 in 2021, as reimbursement for our share of direct office expenses, including rent, telephone, postage, computer services, internet usage and supplies. Majestic is wholly owned by the vice chairman of our board, and certain of our part-time officers, including our part-time named executive officers, are officers of, and receive compensation from, Majestic.
Pursuant
Our part-time officers also receive compensation from other companies affiliated with us for services unrelated to the compensation and services agreement, we also paid us.
Majestic
$216,000 in each of 2017 and 2018 (and will pay $216,000 in 2019) as reimbursement for our share of direct office expenses, including rent, telephone, postage, computer services, internet usage and supplies.Majestic paidallocated an aggregate of $1,332,000$1,170,000 and $1,248,000$1,511,000 to the following officers (some of whom are also officers of Majestic and other affiliated companies) for the services they performed on our behalf in 20172019 and 2018,2020, respectively: Matthew J. Gould, $355,000$309,000 and $332,000;$398,000; David W. Kalish, $190,000$165,000 and $177,000;$211,000; Jeffrey A. Gould, $355,000$309,000 and $332,000;$398,000; Mark H. Lundy, $254,000$207,000 and $228,000;$260,000; Israel Rosenzweig, $67,000$49,000 and $56,000;$61,000; Isaac Kalish, $75,000$80,000 and $77,000;$112,000; and Steven Rosenzweig, $36,000$51,000 and $46,000.$71,000. The allocated amounts do not represent the amounts paid to such individuals which may be greater or less than the allocated amounts. These individuals also received compensation in 20172019 and 20182020 from our other affiliates, including BRT Apartments and Gould Investors, as well as other entities wholly owned by Fredric H. Gould, none of which provided services to us in 20172019 or 2018.
2020.
We obtain our property insurance in conjunction with Gould Investors and its affiliates and in
20172019 and
2018,2020, we reimbursed Gould
$790,000$1,025,000 and
$912,000,$1,168,000, respectively, for our proportionate share of the insurance premiums.
We believe that we secure more favorable rates by obtaining property insurance on such basis.TABLE OF CONTENTS
During 20172019 and 2018, $1,539,0002020, $1,973,000 and $1,765,000$2,349,000, respectively, of non-cash compensation expense relating to the restricted stock and RSUs held by our part-time executive officers and employees (who may also be
TABLE OF CONTENTS
compensated by Majestic or its affiliates), was charged to our operations. See “
Executive Compensation-Compensation Discussion and Analysis-BackgroundProgram – Background”. The grant date fair value of the shares of restricted stock and RSUs awarded in
20172019 and
20182020 to persons performing services for us pursuant to the compensation and services agreement is
$2,143,000$2,278,000 and
$2,326,000,$2,437,000, respectively. The grant date fair value of such awards in
20172019 and
2018,2020, respectively, to these individuals is as follows: Jeffrey A. Gould,
$299,000$322,000 and
$323,000;$354,000; Mark H. Lundy,
$299,000$319,000 and
$323,000;$352,000; Israel Rosenzweig,
$164,000$163,000 and
$175,000;$123,000; Isaac Kalish,
$161,000$163,000 and
$172,000;$179,000; and Steven Rosenzweig,
$86,000$99,000 and
$109,000.Policies and Procedures
Any transaction with affiliated entities raises the potential that we may not receive terms as favorable as those that we would receive if the transactions were entered into with unaffiliated entities or that our officers might otherwise seek benefits for affiliated entities at our expense. Our code of business conduct and ethics contains specific requirements with respect to the approval of these transactions. Generally, a contract or transaction with an affiliated entity must be approved by our audit committee and a majority of our independent directors after consideration of all relevant factors.
$116,000.
TABLE OF CONTENTS
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The audit committee and the board of directors is seeking ratification of the appointment of
Ernst & Young LLPE&Y as our independent registered public accounting firm for
2019.2021. A representative of
Ernst & Young LLPE&Y is expected to be present at our annual meeting and will have the opportunity to make a statement if he or she desires to do so and will be available to respond to appropriate questions.
We are not required to have our stockholders ratify the selection of
Ernst & Young LLPE&Y as our independent registered public accounting firm. We are doing so because we believe it is good corporate practice. If the stockholders do not ratify the selection, the audit committee will reconsider whether or not to retain
Ernst & Young LLP,E&Y, but may, in its discretion, decide to retain such independent registered public accounting firm. Even if the selection is ratified, the audit committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would be in our and our stockholders’ interests.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
FOR RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2019.2021.
The following table presents
Ernst & Young LLP’sE&Y’s fees for the services and years indicated:
| 2018 | 2017 |
Audit fees(1) | $ | 936,000 | | $ | 959,000 | |
Audit-related fees | | — | | | — | |
Tax fees(2) | | 15,000 | | | 15,000 | |
All other fees | | — | | | — | |
Total fees | $ | 951,000 | | $ | 974,000 | |
Audit fees(1) | | | $936,308 | | | $1,026,185 |
Audit-related fees | | | — | | | — |
Tax fees(2) | | | 16,480 | | | 16,000 |
All other fees | | | — | | | — |
Total fees | | | $952,788 | | | $1,042,185 |
| (1)
| Includes fees for audit services and related expenses associated with the annual audit of our consolidated financial statements, including the audit of internal control over financial reporting, reviews of our quarterly reports, comfort letters, consents, and review of documents filed with the SEC.SEC and, for 2019, the audit of internal control over financial reporting. |
| (2)
| Tax fees consist of fees for certain tax compliance services and tax advice. |
The audit committee has concluded that the provision of non-audit services listed above is compatible with maintaining the independence of Ernst & Young LLP.
E&Y.
Pre-Approval Policy for Audit and Non-Audit Services
The audit committee must pre-approve all audit and non-audit services involving our independent registered public accounting firm.
In addition to the audit work necessary for us to file required reports under the
Securities Exchange Act
of 1934, as amended (
i.e., quarterly reports on Form 10-Q and annual reports on Form 10-K), our independent registered public accounting firm may perform non-audit services, other than those prohibited by the Sarbanes-Oxley Act of 2002, provided they are approved in advance by the audit committee. The audit committee approved all audit and non-audit services performed by our independent registered public accounting firm in
20182020 and
2017.Approval Process
Annually, the audit committee reviews the audit plan and fees for that year, including the proposed audit fee associated with the audit services in connection with our compliance with Section 404 of the Sarbanes-Oxley Act of 2002. The audit committee may, at the time it reviews the proposed audit fees or
2019.
TABLE OF CONTENTS
subsequently thereafter, approve the provision of tax and other non-audit related services and the maximum expenditure which may be incurred for such services for such year. Any fees for the audit in excess of those approved and any fees for non-audit related services in excess of the maximum established by the audit committee must receive the approval of the audit committee.
Proposals for any other non-audit services to be performed by the independent registered public accounting firm must be approved by the audit committee.
The audit committee of the board of directors is comprised of three independent directors and operates under a written charter adopted by the board of directors. The audit committee reviews the charter on an annual basis. The board of directors, in its business judgment, has determined that each member of the audit committee is independent as required by the New York Stock Exchange listing standards and the applicable rules of the Securities and Exchange Commission, during his service on the committee.
REPORT OF THE AUDIT COMMITTEE The role of the audit committee is to select and engage our independent registered public accounting firm and to oversee and monitor, among other things, our financial reporting process
and the independence and performance of the independent registered public accounting
firm and the functioning of our internal controls.firm. It is the responsibility of management to prepare financial statements in accordance with generally accepted accounting principles and of the independent registered public accounting firm to perform an independent audit of the financial statements and to express an opinion on the conformity of those financial statements with generally accepted accounting principles.
In performing its duties, the audit committee:
metreviewed and held discussionsdiscussed the Company’s audited consolidated financial statements for the year ended December 31, 2020 (the “Audited Financial Statements”) with management and the independent registered public accounting firm and the accounting firm performing the internal control audit function on our behalf;
firm;
discussed with the independent registered public accounting firm the overall plan for its 2018 audit and other activities and reviewed with the accounting firm performing the internal control function its work plan and the scope of its activities;
reviewed and discussed the year end consolidated financial statements, report of internal controls over financial reporting and the Annual Report on Form 10-K with management and the independent registered public accounting firm;
reviewed prior to issuance or release, the (i) unaudited quarterly financial statements prior to filing each Form 10-Q with the Securities and Exchange Commission and (ii) quarterly earnings press releases;
discussed our internal control procedures and their evaluation of our internal controls (including compliance with COSO 2013 principles), with management, the independent registered public accounting firm and the accounting firm performing the internal control audit function;
reviewed with management the process used for the certifications under the Sarbanes-Oxley Act of 2002 of our filings with the Securities and Exchange Commission;
discussed with the independent registered public accounting firm matters required to be discussed by applicable requirements of the Public Company Accounting Oversight Board (the “PCAOB”) Auditing Standard (“AS”) No. 1301 (formerly AS 16), Communications with Audit Committees;
;
received from the independent registered public accounting firmE&Y the written disclosures and the letter from E&Y regarding the auditorsE&Y’s independence required by the applicable requirements of the PCAOB, Ethics and Independence Rule 3526, Communications with Audit Committees Governing Independence, and discussed with such firm its independence; and
reviewed and approved the independent registered public accounting firm’s fees, both for performing audit and non-audit services, and considered whether the provision of non-audit services by the independent registered public accounting firm was compatible with maintaining the independent registered public accounting firm’s independence and concluded that it was compatible.
TABLE OF CONTENTS
Prior to and in conjunction with the filing of the quarterly and annual financial statements, the audit committee meets with the independent registered public accounting firm and the accounting firm performing the internal control audit function, with and without management present, to discuss the results of their review or audit, as applicable, their evaluations of the internal controls, and the overall quality and acceptability of our financial reporting.
Basedbased on the reviews and discussions referred to above, the audit committee recommended that the audited financial statements for 2018Audited Financial Statements be included in our Annual Report on Form 10-K for the year ended December 31, 20182020 for filing with the Securities and Exchange Commission.
The committee believes that as a result of Ernst & Young’s knowledge of the Company, the quality of Ernst & Young’s performance in 2018, Ernst & Young’s independence from us and management, and Ernst & Young’s extensive experience with REITs, that it is in the best interests of the Company and its stockholders to retain the services of Ernst & Young. Accordingly, the audit committee approved the retention of Ernst & Young LLP as independent registered public accounting firm for 2019.
SEC.
Respectfully submitted,
Leor Siri, Chair
Joseph
J. Robert Lovejoy
Karen A.
DeLucaEugene I. ZuriffPAY RATIO
As required by and in accordance with, Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder, we provide below a reasonable estimate of the relationship of the annual total compensation of Mr. Patrick J. Callan, Jr., our Chief Executive Officer and President, to the median annual total compensation of our employees (other than the CEO). For 2018:
| • | the annual total compensation of our CEO, as reported in the Summary Compensation Table, was $1,835,000; |
Till
the median annual total compensation of all our employees (other than our CEO) was $286,000; and
our CEO’s annual total compensation was 6.4 times that of the median of the annual total compensation of all our employees (other than our CEO).
In calculating this estimate, we included as our employees as of the December 31, 2018 measurement date, all those individuals to whom we are required by the Internal Revenue Code of 1986, as amended, to issue a W-2. We identified our median employee by calculating our employees’ total annual compensation in the same manner that the CEO’s total annual compensation is calculated for the Summary Compensation Table.
SEC rules allow companies to adopt a variety of methodologies and apply various assumptions in presenting this ratio. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio we report.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires that our executive officers and directors, and persons who beneficially own more than 10% of our issued and outstanding capital stock, file certain reports with the Securities and Exchange Commission. Executive officers, directors and greater than 10% beneficial owners are required by the rules and regulations promulgated by the SEC to furnish us with copies of all Section 16(a) forms they file.
Based on a review of information supplied to us by our executive officers and directors, and public filings made by any 10% beneficial owners, we believe that in 2018, all Section 16(a) filing requirements applicable to our executive officers, directors and 10% beneficial owners were met on a timely basis.
TABLE OF CONTENTS
DELINQUENT SECTION 16(a) REPORTS On two occasions in 2020, we paid a portion of our dividend in stock. Stockholders were entitled to elect to receive their dividend in stock or cash though the extent to which they received stock or cash depended on the elections made by other stockholders. Accordingly, the number of shares of stock a stockholder received was not determinable in advance. Due primarily to delays in receiving information from their Agents as to the number of shares of stock they received as part of such dividend payments, the following did not file on a timely basis their reports required by Section 16(a) of the Exchange Act: Mr. Biederman, who filed two reports late with respect to three transactions; Ms. Block, who filed two reports late with respect to two transactions; Mr. Callan, who filed one report late with respect to one transaction; Mr. DeLuca, who filed three reports late with respect to three transactions; Mr. Figueroa, who filed one report late with respect to one transaction; Mr. F. Gould, who filed one report late with respect to five transactions; Mr. J. Gould, who filed one report late with respect to three transactions; Mr. D. Kalish, who filed one report late with respect to five transactions; Mr. I. Kalish, who filed one report late with respect to five transactions; Mr. Lovejoy, who filed two reports late with respect to four transactions; Mr. Lundy, who filed two reports late with respect to two transactions; Mr. Rosenzweig, who filed one report late with respect to four transactions; and Mr. Zuriff, who filed three reports late with respect to six transactions.
ADDITIONAL INFORMATION AND NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS
As of the date of this proxy statement, we do not know of any business that
willmay properly be presented for consideration at the meeting other than the items referred to in the Notice of the Meeting. Subject to applicable law, if any other matter is properly brought before the meeting for action by stockholders, the holders of the proxies will vote and act with respect to the business in accordance with their best judgment and discretionary authority to do so is conferred by the enclosed proxy.
Our corporate governance guidelines, code of business conduct and ethics and the charter for each of our audit, compensation and nominating committees are available at the corporate governance section of our website at: www.onelibertyproperties.com/corporate_governance. https://1liberty.com/investor-relations/corporate-governance.
Copies of such documents may be obtained without charge by writing to us at 60 Cutter Mill Road, Suite 303, Great Neck, NY 11021, Attn:
Office of the Corporate Secretary.
This proxy statement (including the notice of meeting), the proxy card and our 20182020 annual report to stockholders are available at http://1liberty.com/annualmeetingmaterials.pdf.
Great Neck, NY
April 23, 2019 | | | By order of the Board of Directors |
April 26, 2021 | | | |
| | | |
| | | S. Asher Gaffney, Vice President and
Mark H. Lundy, Corporate Secretary |
TABLE OF CONTENTS
Annex A
ONE LIBERTY PROPERTIES, INC.2019 INCENTIVE PLANSECTION 1
EFFECTIVE DATE AND PURPOSE
1.1 Effective Date. This Plan (as defined) shall become effective upon approval by the stockholders of the Company (as defined), as and to the extent required by the listing requirements of the New York Stock Exchange.
1.2 Purpose of the Plan. The Plan is designed to motivate, retain and attract Participants (as defined) of experience and ability and to further the financial success of the Company by aligning the interests of Participants through the ownership of Shares (as defined) with the interests of the Company’s stockholders.
SECTION 2
DEFINITIONS
The following terms shall have the following meanings (whether used in the singular or plural) unless a different meaning is plainly required by the context:
“1934 Act” means the Securities Exchange Act of 1934, as amended. Reference to a specific section of the 1934 Act or a regulation thereunder shall include any regulation promulgated under such section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such section or regulation.
“Affiliate” or “Affiliates” has the meaning ascribed to such term by Rule 501 promulgated under the Securities Act of 1933, as amended.
“Award” means, individually or collectively, a grant under the Plan of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock, Restricted Stock Units, Dividend Equivalent Rights and Performance Share Awards.
“Award Agreement” means either (1) the written agreement setting forth the terms and provisions applicable to each Award granted under the Plan or (2) a statement (including an electronic communication) issued by the Company to a Participant describing the terms and provisions of such Award.
“Board” or “Board of Directors” means the Board of Directors of the Company, or any analogous governing body of any successor to the Company.
“Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations thereunder.
“Committee” means the Compensation Committee of the Board or the committee of the Board appointed to administer the Plan.
“Company” means One Liberty Properties, Inc., a Maryland corporation.
“Company Voting Stock” has the meaning ascribed to such terms by Section 12.1(a).
“Dividend Equivalent Right” means an Award granted pursuant to Section 9, entitling the Participant to receive an amount of cash equal to the cash distributions that would have been paid on the Shares specified in the Award to which such Dividend Equivalent Right relates, as if such Shares had been issued to and held by the Participant holding such Dividend Equivalent Right during the period beginning with the grant date (or if otherwise determined by the Committee, the beginning of the Performance Cycle) of the Award to which the Dividend Equivalent Right relates through the vesting date of such award (or if otherwise determined by the Committee, the conclusion of such Performance Cycle).
“Disability” or “Disabled” means the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.
TABLE OF CONTENTS
“Exercise Price” means the price at which a Share may be purchased by a Participant pursuant to the exercise of an Option.
“Fair Market Value” means, as of any given date: (i) the closing sales price of the Shares on any national securities exchange on which the Shares are listed; (ii) the closing sales price if the Shares are listed on the OTCBB or other over the counter market; or (iii) if there is no regular public trading market for such Shares, the fair market value of the Shares as determined by the Committee.
“Grant Date” means, with respect to an Award, the effective date that such Award is granted to a Participant.
“Incentive Stock Option” means an Option to purchase Shares which is designated as an Incentive Stock Option and is intended to meet the requirements of Section 422 of the Code.
“Incumbent Board” has the meaning ascribed to such term by Section 12.1(b).
“Non-management director” means a director who, in the applicable calendar year, was not compensated, directly or indirectly, by the Company, any Subsidiary or any of their Affiliates, other than compensation for service as a director or as a member of any committee of the Board.
“Non-qualified Stock Option” means an Option to purchase Shares which is not an Incentive Stock Option.
“Option” means an Incentive Stock Option or a Nonqualified Stock Option.
“Participant” means an officer, employee, director or consultant of the Company or any of its Subsidiaries.
“Performance Criteria” shall mean any, a combination of, or all of the following: (i) pre-tax income, (ii) after-tax income, (iii) net income (meaning net income as reflected in the Company’s financial reports for the applicable period), (iv) operating income (including net operating income), (v) cash flow, cash flow from operations, free cash flow and any one or more of the foregoing, (vi) return on any one or more of equity, capital, invested capital and assets, (vii) funds available for distribution, (viii) occupancy rate at any one or more of the Company’s or its Subsidiaries’ properties, (ix) total stockholder return, (x) funds from operations (“FFO”), as computed in accordance with standards established by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”), (xi) adjusted FFO (i.e., adjusting FFO to give effect to any one or more of the following: straight-line rent, amortization of lease intangibles, lease termination fee income, amortization of restricted stock or other non-cash compensation expense, amortization and/or write-off of deferred financing costs, deferred mortgage costs and debt prepayment costs),(xii) stock appreciation (meaning an increase in the price or value of the Shares after the date of grant of an award and during the applicable period), (xiii) revenues, (xiv) assets, (xv) earnings before any one or more of the following items: interest, taxes, impairment charges, depreciation or amortization for the applicable period, as reflected in the Company’s financial reports for the applicable period, (xvi) reduction in expense levels, (xvii) operating cost management and employee productivity, (xviii) strategic business criteria consisting of one or more objectives based on meeting specified revenue, market share, market penetration, geographic business expansion goals, objectively identified project milestones, cost targets and goals relating to acquisition or divestitures; (xix) achievement of business or operational goals such as market share and/or business development, and (xx) such other metrics or criteria as the Committee may establish or select. Performance Criteria need not be the same with respect to all Participants and may be established on an aggregate or per share basis (diluted or undiluted), may be based on performance compared to performance by businesses or indices specified by the Committee, may be compared to any prior period, may be based on a company-wide basis or in respect of any one or more business units, may be measured on an absolute or relative basis, may be adjusted for non-controlling interests, and any one or more of the foregoing. All calculations and financial accounting matters relevant to this Plan shall be determined in accordance with GAAP, except as otherwise directed by the Committee.
TABLE OF CONTENTS
“Performance-Based Award” means an Award granted pursuant to Section 8 of the Plan.
“Performance Cycle” means one or more periods of time which may be of varying and overlapping durations, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participants right to and the payment of a Restricted Stock Award, Restricted Stock Unit, Option or Performance Share Award.
“Performance Goals” means for a Performance Cycle, the applicable Performance Criteria.
“Period of Restriction” means the period during which an Award granted hereunder is subject to a substantial risk of forfeiture. Such restrictions may be based on the passage of time, the achievement of Performance Goals or the occurrence of other events as determined by the Committee.
“Plan” means the One Liberty Properties, Inc. 2019 Incentive Plan, as set forth in this instrument, and as hereafter amended from time to time.
“Restricted Stock” means an Award of Shares, the grant, issuance, retention and/or vesting of which is subject to such conditions as are expressed in the Award Agreement and as contemplated herein.
“Restricted Stock Unit” or “RSU” means an Award of a right to receive one Share, the grant, issuance, retention and/or vesting of which is subject to such conditions as are expressed in the Award Agreement and as contemplated herein.
“Retirement” means (i) a director who has attained the age of 65 years who resigns or retires from the Board or does not stand for re-election to the Board and has served continuously as a director of the Company for not less than six consecutive years, and (ii) an officer or employee of, or consultant to, the Company or one of its Subsidiaries who has attained the age of 65 years who resigns or retires from the Company or one of its Subsidiaries and has served in any such capacity with the Company or one of its Subsidiaries for not less than ten consecutive years at the time of retirement or resignation.
“Shares” means the shares of common stock, $1.00 par value, of the Company, or any other security of the Company determined by the Committee pursuant to Section 5.3.
“Subsidiary” means (i) a corporation, association or other business entity of which 50% or more of the total combined voting power of all classes of capital stock is owned, directly or indirectly, by the Company or by one or more Subsidiaries of the Company or by the Company and one or more Subsidiaries of the Company, (ii) any partnership or limited liability company of which 50% or more of the capital and profit interests is owned, directly or indirectly, by the Company or by one or more Subsidiaries of the Company or by the Company and one or more Subsidiaries of the Company, or (iii) any other entity not described in clauses (i) or (ii) above of which 50% or more of the ownership and the power, pursuant to a written contract or agreement, to direct the policies and management or the financial and the other affairs thereof, are owned or controlled by the Company or by one or more Subsidiaries of the Company or by the Company and one or more Subsidiaries of the Company.
SECTION 3ELIGIBILITY3.1 Participants. Awards may be granted in the discretion of the Committee to officers, employees, directors and consultants of the Company or its Subsidiaries.
3.2 Non-Uniformity. Awards granted hereunder need not be uniform among eligible Participants and may reflect distinctions based on title, compensation, responsibility or any other factor the Committee deems appropriate.
SECTION 4
ADMINISTRATION
4.1 The Committee. The Plan will be administered by the Committee, which, to the extent deemed necessary by the Board, will consist of two or more persons who satisfy the requirements for a “non-employee director” under Rule 16b-3 promulgated under the 1934 Act. The members of the Committee shall be appointed from time to time by, and shall serve at the pleasure of, the Board of Directors. In the absence of such appointment, the Board of Directors shall serve as the Committee and shall have all of the responsibilities, duties, and authority of the Committee set forth herein.
TABLE OF CONTENTS
4.2 Authority of the Committee. Subject to applicable law, the Committee shall have the exclusive authority to administer and construe the Plan in accordance with its provisions. The Committee’s authority shall include, without limitation, the power to (a) determine persons eligible for Awards, (b) prescribe the terms and conditions of the Awards, (c) construe and interpret the Plan, the Awards and any Award Agreement, (d) adopt rules for the administration, interpretation and application of the Plan as are consistent therewith and (e) establish, interpret, amend or revoke any such rules. The Committee, in its sole discretion and on such terms and conditions as it may provide, may delegate all or any part of its authority and powers under the Plan to one or more officers of the Company to the extent permitted by law.
4.3 Decisions Binding. All determinations and decisions made by the Committee and any of its delegatees pursuant to Section 4.2 shall be final, conclusive and binding on all persons, and shall be given the maximum deference permitted by law.
4.4 Limitation on Awards Granted to Non-management directors. The maximum number of Shares issuable pursuant to Awards that may be granted to a Non-management director in any calendar year shall not exceed 10,000 Shares.
SECTION 5
SHARES SUBJECT TO THE PLAN
5.1 Number of Shares. Subject to adjustment as provided in Section 5.3, the total number of Shares available for grant under the Plan shall not exceed 750,000 Shares. The Shares available for issuance under the Plan shall be authorized but unissued Shares of the Company.
5.2 Lapsed Awards. Unless determined otherwise by the Committee, Shares related to Awards that are forfeited, cancelled, terminated or expire unexercised, shall be available for grant under the Plan. Shares that are tendered by a Participant to the Company in connection with the exercise of an Award, withheld from issuance in connection with a Participant’s payment of tax withholding liability, or settled in such other manner so that a portion or all of the Shares included in an Award are not issued to a Participant shall not be available for grant under the Plan.
5.3 Adjustments in Awards and Authorized Shares. In the event of a stock dividend or stock split, the number of Shares subject to the Plan, outstanding Awards and the numerical amounts set forth in Sections 5, 6, 7 and 8 shall automatically be adjusted proportionally to prevent the dilution or diminution of such Awards, except to the extent directed otherwise by the Committee. In the event of a merger, reorganization, consolidation, recapitalization, separation, liquidation, combination or other similar change in the structure of the Company affecting the Shares, the Committee shall adjust the number and class of Shares which may be delivered under the Plan, the number, class and price of Shares subject to outstanding Awards, and the numerical limits of Sections 5, 6, 7 and 8 in such manner as the Committee shall determine to be advisable or appropriate to prevent the dilution or diminution of such Awards. Any such numerical limitations shall be subject to adjustment under this Section only to the extent such adjustment will not affect the ability to grant or the qualification of Incentive Stock Options under the Plan or subject the Participant to taxes, penalties and interest imposed under section 409A(a)(1) of the Code.
5.4 Restrictions on Transferability. The Committee may impose such restrictions on any Award, Award of Shares or Shares acquired pursuant to an Award as it deems advisable or appropriate, including, but not limited to, restrictions related to applicable Federal securities laws, the requirements of any national securities exchange or system upon which Shares are then listed or traded, and any blue sky or state securities laws.
SECTION 6
STOCK OPTIONS
6.1 Grant of Options. Subject to the terms and provisions of the Plan, Options may be granted to Participants at any time and from time to time as determined by the Committee. The Committee shall determine the number of Shares subject to each Option. The Committee may grant Incentive Stock Options, Nonqualified Stock Options, or any combination thereof. The maximum aggregate number of Shares underlying Options granted in any one calendar year to an individual Participant is 50,000.
6.2 Award Agreement. Each Option shall be evidenced by an Award Agreement that shall specify the Exercise Price, the expiration date of the Option, the number of Shares to which the Option pertains, whether
TABLE OF CONTENTS
the Option is intended to be an Incentive Stock Option or a Nonqualified Stock Option, any conditions on exercise of the Option and such other terms and conditions as the Committee shall determine, including terms regarding forfeiture of Awards or continued exercisability of Awards in the event of termination of employment by the Participant.
6.3 Exercise Price. The Exercise Price for each Option shall be determined by the Committee and shall be provided in each Award Agreement; provided, however, the Exercise Price for each Option may not be less than one hundred percent (100%) of the Fair Market Value of a Share on the Grant Date. In the case of an Incentive Stock Option, the Exercise Price shall be not less than one hundred ten percent (110%) of the Fair Market Value of a Share if the Participant (together with persons whose stock ownership is attributed to the Participant pursuant to section 424(d) of the Code) owns on the Grant Date stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any of its Subsidiaries.
6.4 Expiration of Options. Except as provided in Section 6.7(c) regarding Incentive Stock Options, each Option shall terminate upon the earliest to occur of (i) the date(s) for termination of the Option set forth in the Award Agreement or (ii) the expiration of ten (10) years from the Grant Date. Subject to such limits, the Committee shall provide in each Award Agreement when each Option expires and becomes un-exercisable. Except as set forth in an Award Agreement or as provided by the Committee, upon Retirement of a Participant, an Option may be exercised by such Participant to the extent it was exercisable on the effective date of the Retirement and shall be exercisable for a period of six months from the effective date of such Retirement, but not later than the expiration of the maximum term such Option. The Committee may not, after an Option is granted, extend the maximum term of the Option.
6.5 Exercisability of Options. Options granted under the Plan shall be exercisable, in whole or in part, at such times and be subject to such restrictions and conditions as the Committee shall determine. After an Option is granted, the Committee may accelerate or waive any condition constituting a substantial risk of forfeiture applicable to the Option.
6.6 Payment. Options shall be exercised by a Participant’s delivery of a written notice of exercise to the Secretary of the Company (or his or her designee), setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares. Upon the exercise of an Option, the Exercise Price shall be payable to the Company in full in cash or its equivalent. The Committee may permit exercise (a) by the Participant tendering previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the total Exercise Price, (b) the Participant tendering a combination of cash and previously acquired Shares equal to total Exercise Price (the Shares tendered being valued at Fair Market Value at the time of exercise), or (c) by any other means which the Committee determines to provide legal consideration for the Shares, and to be consistent with the purposes of the Plan. As soon as practicable after receipt of a written notification of exercise and full payment for the Shares purchased, the Company shall deliver, or cause to be delivered, to the Participant, evidence of such Participant’s ownership of such Shares. No right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Shares as to which the Option has been exercised until the records of the Company or its transfer agent reflect the issuance of such Shares. No adjustment will be made for a dividend or other rights for which a record date is established prior to the date the records of the Company or its transfer agent reflect the issuance of the Shares upon exercise of the Options.
6.7 Certain Additional Provisions for Incentive Stock Options.
(a) Exercisability. The aggregate Fair Market Value (determined on the Grant Date(s)) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under all plans of the Company, any parent and its Subsidiaries) shall not exceed $100,000. The portion of the Option which is in excess of the $100,000 limitation shall be treated as a Non-Qualified Option pursuant to Section 422(d)(1) of the Code.
(b) Company and Subsidiaries Only. Incentive Stock Options may be granted only to Participants who are officers or employees of the Company or a Subsidiary on the Grant Date.
(c) Expiration. No Incentive Stock Option may be exercised after the expiration of ten (10) years from the Grant Date. In the case of an Incentive Stock Option that is granted to a Participant who (together with persons whose stock ownership is attributed to the Participant pursuant to Section 424(d)
TABLE OF CONTENTS
of the Code) owns on the Grant Date stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any of its Subsidiaries, the term of such Incentive Stock Option shall be no more than five years from the Grant Date.
6.8 Restriction on Transfer. Except as otherwise determined by the Committee or as set forth in the Award Agreement, no Option may be transferred, gifted, pledged, assigned, or otherwise alienated or hypothecated, voluntarily or involuntarily. Upon the death or Disability of a Participant, an Option may be exercised by the duly appointed personal representative of the deceased Participant or in the event of a Disability by the Participant or the duly appointed attorney-in-fact, guardian or custodian of the Disabled Participant to the extent the Option was exercisable on the date of death or the date of Disability and shall be exercisable for a period of six months from the date of death or the date of Disability.
6.9 Repricing of Options. Without stockholder approval, (i) the Company will not reprice, replace or regrant an outstanding Option either in connection with the cancellation of such Option or by amending an Award Agreement to lower the exercise price of such Option, and (ii) the Company will not cancel outstanding Options in exchange for cash or other Awards.
6.10 Voting Rights. A Participant shall have no voting rights with respect to any Options granted hereunder.
SECTION 7
RESTRICTED STOCK AND RESTRICTED STOCK UNITS
7.1 Grant of Restricted Stock and Restricted Stock Units. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock and/or RSUs to Participants in such amounts as the Committee shall determine. The Committee shall determine the number of Shares of Restricted Stock and/or RSUs to be granted to each Participant and the time when each Award shall be granted. No more than 100,000 Shares of each of Restricted Stock and Shares underlying RSUs may be granted to any individual Participant in any one calendar year.
7.2 Restricted Stock and RSU Agreements. Each Award of Restricted Stock and RSUs shall be evidenced by an Award Agreement that shall specify the Period of Restriction, the number of Shares of Restricted Stock granted, the number of Shares subject to an RSU, any applicable Performance Goals and Performance Cycle, and such other terms and conditions as the Committee shall determine, including terms regarding forfeiture of Awards in the event of termination of employment by the Participant or termination of the Participant’s relationship with the Company as a director, officer or consultant.
7.3 Transferability. Except as otherwise determined by the Committee or as set forth in the Award Agreement, Shares of Restricted Stock and RSUs (including Shares underlying RSUs) may not be sold, transferred, gifted, bequeathed, pledged, assigned, or otherwise alienated or hypothecated, voluntarily or involuntarily, until the end of the applicable Period of Restriction and the satisfaction, in whole or in part, of any applicable Performance Goals within the applicable Performance Cycle. Except as otherwise determined by the Committee or as set forth in the Award Agreement, in the event of the death, Disability or Retirement of a Participant, all unvested Restricted Stock and unvested RSUs shall not vest on the date of death or Disability or the effective date of Retirement. Without stockholder approval, the Company will not, except as otherwise provided for in the Plan, repurchase outstanding unvested Restricted Stock or unvested RSUs in exchange for cash or accelerate the vesting of outstanding unvested Shares of Restricted Stock or RSUs.
7.4 Other Restrictions. The Committee may impose such other restrictions on Shares of Restricted Stock and RSUs (including Shares underlying RSUs) as it may deem advisable or appropriate in accordance with this Section 7.4.
(a) General Restrictions. The Committee may set one or more restrictions based upon (a) the achievement of specific Performance Goals, (b) applicable Federal or state securities laws, (c) time-based restrictions, or (d) any other restrictions determined by the Committee.
(b) Methods of Implementing Restrictions. The Committee may take such action as it, in its sole discretion, deems appropriate to give notice to the Participant of, and implement, the restrictions imposed pursuant to Section 7.
TABLE OF CONTENTS
7.5 Removal of Restrictions. After the end of the Period of Restriction, the Shares(including the Shares underlying the RSUs) shall be freely transferable by the Participant, subject to any other restrictions on transfer (including without limitation, limitations imposed pursuant to the Company’s organizational documents) which may apply to such Shares.
7.6 Voting Rights. Except as otherwise determined by the Committee and set forth in the Award Agreement, Participants holding (a) Shares of Restricted Stock shall have voting rights during the Period of Restriction and (b) RSUs shall not have voting rights during the Period of Restriction.
7.7 Dividends and Other Distributions. Except as otherwise determined by the Committee and set forth in the Award Agreement, Participants holding (a) Shares of Restricted Stock shall be entitled to receive all dividends and other distributions paid with respect to the Shares during the Period of Restriction and (b) except to the extent a Dividend Equivalent Right is granted in tandem with an RSU, RSUs shall not be entitled to receive any dividends or other distributions paid with respect to the underlying Shares during the Period of Restriction.
SECTION 8
PERFORMANCE-BASED AWARDS
8.1 Performance-Based Awards. Participants selected by the Committee may be granted one or more Performance Awards in the form of Options, Restricted Stock, Restricted Stock Units, Dividend Equivalent Rights or Performance Share Awards payable upon the attainment of Performance Goals that are established by the Committee and related to one or more of the Performance Criteria, in each case on a specified date or dates or over a Performance Cycle as determined by the Committee. The Committee shall define the manner of calculating the Performance Criteria it selects to use for any Performance Cycle. Depending on the Performance Criteria used to establish such Performance Goals, the Performance Goals may be expressed in terms of overall Company performance or the performance of an individual. The Committee, in its discretion, may adjust or modify the calculation of Performance Goals for such Performance Cycle in order to prevent the dilution or enlargement of the rights of an individual (i) in the event of, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development, (ii) in recognition of, or in anticipation of, any other unusual or nonrecurring events affecting the Company, or the financial statements of the Company, or (iii) in response to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions; provided, however, that the Committee may not exercise such discretion in a manner that would increase the Performance-Based Award granted to a Participant. Each Performance-Based Award shall comply with the provisions set forth below. Performance Awards, other than Dividend Equivalent Rights, shall be paid in Shares.
8.2 Grant of Performance-Based Awards. With respect to each Performance-Based Award granted to a Participant, the Committee shall select, within the first 180 days of the beginning of a Performance Cycle, the Performance Criteria for such grant, and the Performance Goals with respect to each Performance Criterion (including, if applicable, a threshold level of performance below which no amount will become payable with respect to such Award). Each Performance-Based Award will specify the amount payable, or the formula for determining the amount payable, upon achievement of the various applicable performance targets. The Performance Criteria established by the Committee may be (but need not be) different for each Performance Cycle and different Performance Goals may be applicable to Performance-Based Awards to different Participants.
8.3 Payment of Performance-Based Awards. Following the completion of a Performance Cycle, the Committee shall meet to review and certify in writing whether, and to what extent, the Performance Goals for the Performance Cycle have been achieved and, if so, to calculate and certify in writing the amount of the Performance-Based Awards earned for the Performance Cycle.
8.4 Maximum Award Payable. The maximum Performance-Based Award payable to any one Participant under the Plan for a Performance Cycle is 100,000 Shares (subject to adjustment as provided in Section 5.3 hereof).
TABLE OF CONTENTS
SECTION 9
DIVIDEND EQUIVALENT RIGHTS
9.1 Dividend Equivalent-Rights. A Dividend Equivalent Right may be granted hereunder to any Participant only in tandem with an Award of RSUs or a Performance Based Award (other than an Award of Restricted Stock or Options). The terms and conditions of Dividend Equivalent Rights shall be specified in the Award Agreement which shall provide that such Dividend Equivalent Right, except to the extent otherwise provided in the related Award Agreement, shall (i) not be sold, transferred, gifted, bequeathed, pledged, assigned, or otherwise alienated or hypothecated, voluntarily or involuntarily, until the end of the applicable Period of Restriction and the satisfaction, in whole or in part, of any applicable Performance Goals within the applicable Performance Cycle, and (ii) be settled upon settlement or payment of, or lapse of restrictions on, the Award to which it relates, and such Dividend Equivalent Right shall expire or be forfeited or annulled under the same conditions as such Award.
SECTION 10
AMENDMENT, TERMINATION, AND DURATION
10.1 Amendment, Suspension, or Termination. The Board, in its sole discretion, may amend, suspend or terminate the Plan, or any part thereof, at any time and for any reason; provided, however, that if and to the extent required by law or to maintain the Plan’s compliance with the Code, the rules of any national securities exchange (if applicable), or any other applicable law, any such amendment shall be subject to stockholder approval. The amendment, suspension or termination of the Plan shall not, without the consent of the Participant, alter or impair any rights or obligations under any Award theretofore granted to such Participant. No Award may be granted during any period of suspension or after termination of the Plan.
10.2 Duration of the Plan. The Plan shall become effective in accordance with Section 1.1, and subject to Section 10.1, shall remain in effect until the tenth anniversary of the effective date of the Plan.
SECTION 11
TAX WITHHOLDING
11.1 Withholding Requirements. Prior to the delivery of any Shares pursuant to an Award (or the exercise thereof), the Company shall have the power and the right to deduct or withhold from any amounts due to the Participant from the Company, or require a Participant to remit to the Company, an amount sufficient to satisfy Federal, state and local taxes (including the Participant’s FICA obligation) required or appropriate to be withheld with respect to such Award (or the exercise or vesting thereof).
11.2 Withholding Arrangements. The Company, pursuant to such procedures as it may specify from time to time, may permit a Participant to satisfy such tax withholding obligation, in whole or in part, by (a) electing to have the Company withhold otherwise deliverable Shares, or (b) delivering to the Company, Shares then owned by the Participant. The amount of the withholding requirement shall be deemed to include any amount that the Company agrees may be withheld at the time any such election is made, not to exceed the amount determined by using the maximum federal, state and local marginal income tax rates applicable to the Participant with respect to the Award on the date that the amount of tax to be withheld is to be determined. The Fair Market Value of the Shares to be withheld or delivered shall be determined as of the date that the taxes are required to be withheld.
SECTION 12
CHANGE IN CONTROL
12.1 Change in Control. For purposes of the Plan, a Change in Control means any of the following:
(a) the acquisition (other than from the Company) in one or more transactions by any person (as such term is used in Section 13(d) of the 1934 Act) of the beneficial ownership (within the meaning of Rule 13d-3 under the 1934 Act) of 25% or more of (i) the then outstanding Shares or (ii) the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors (the “Company Voting Stock”); provided, however, the provision of this Section 12.1(a) is not applicable to acquisitions made individually, or as a group, by Fredric H. Gould, Matthew J. Gould and Jeffrey A. Gould, and their respective spouses, lineal descendants and Affiliates;
TABLE OF CONTENTS
(b) individuals who, as of the date of the Award, constitute the Board of Directors (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date of such Award whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Regulation 14A promulgated under the 1934 Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Incumbent Board;
(c) the closing of a sale or other conveyance of all or substantially all of the assets of the Company; or
(d) the effective time of any merger, share exchange, consolidation, or other business combination involving the Company if immediately after such transaction persons who hold a majority of the outstanding voting securities entitled to vote generally in the election of directors of the surviving entity (or the entity owning 100% of such surviving entity) are not persons who, immediately prior to such transaction, held the Company’s voting Shares.
12.2 Effect of Change of Control. On the effective date of any Change in Control, unless the applicable Award Agreement provides otherwise: (i) in the case of an Option, each such outstanding Option shall become exercisable in full in respect of the aggregate number of Shares covered thereby; and (ii) in the case of Restricted Stock, Restricted Stock Units, Dividend Equivalent Rights and Performance Share Awards, the Period of Restriction applicable to each such Award shall be deemed to have expired. Notwithstanding the foregoing, unless otherwise provided in the applicable Award Agreement, the Committee may, in its discretion, determine that any or all outstanding Awards of any or all types granted pursuant to the Plan will not become exercisable on an accelerated basis nor will the Restriction Period expire in connection with a Change of Control if effective provision has been made for the taking of such action which, in the opinion of the Committee, is equitable and appropriate to substitute a new Award for such Award or for the assumption of such Award and to make such new or assumed Award, as nearly as may be practicable, equivalent to the old Award (before giving effect to any acceleration of the exercisability or the expiration of the Restriction Period), taking into account, to the extent applicable, the kind and amount of securities, cash, or other assets into or for which the Shares may be changed, converted, or exchanged in connection with such Change of Control.
SECTION 13
MISCELLANEOUS
13.1 Deferrals. To the extent consistent with the requirements of section 409A of the Code, the Committee may provide in an Award Agreement or another document that a Participant is permitted or required to defer receipt of the delivery of Shares that would otherwise be due to such Participant under an Award, other than an Option, any such deferral shall be subject to such rules and procedures as shall be determined by the Committee.
13.2 Termination for Cause. If a Participant’s employment or relationship with the Company or a Subsidiary shall be terminated for cause by the Company or such Subsidiary during the Restriction Period or prior to the exercise of any Option (for these purposes, cause shall have the meaning ascribed thereto in any employment agreement or Award Agreement to which such Participant is a party or, in the absence thereof, shall include, but not be limited to, insubordination, dishonesty, incompetence, moral turpitude, the refusal to perform his duties and responsibilities for any reason (other than illness or incapacity) and other misconduct of any kind, as determined by the Committee), then, (i) all Options (whether or not then vested and exercisable) shall immediately terminate and (ii) such Participant’s rights to all Restricted Stock, RSUs, Dividend Equivalent Rights and Performance Share Awards shall be forfeited immediately.
13.3 No Effect on Employment or Service. Nothing in the Plan, any Award or any Award Agreement, and no action of the Committee, shall confer or be construed to confer on any Participant any right to continue in the employ or service of the Company or any Subsidiary or shall interfere with or limit in any way the right of
TABLE OF CONTENTS
the Company or any Subsidiary to terminate any Participant’s employment or service at any time, with or without cause. Employment with the Company or any Subsidiary is on an at-will basis only, unless otherwise provided by an applicable employment or service agreement between the Participant and the Company or any Subsidiary, as the case may be.
13.4 Successors. All obligations of the Company under the Plan, with respect to Awards granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect merger, consolidation or otherwise, or the purchase of all or substantially all of the business or assets of the Company.
13.5 No Rights as Stockholder. Except to the limited extent provided in Sections 7.6 and 7.7, no Participant (nor any beneficiary thereof) shall have any of the rights or privileges of a stockholder of the Company with respect to any Shares issuable pursuant to an Award (or the exercise or vesting thereof), unless and until the issuance of such Shares shall have been recorded on the records of the Company or its transfer agents or registrars.
13.6 Uncertificated Shares. Notwithstanding any provision of the Plan to the contrary, the ownership of Shares issued under the Plan may be evidenced in such a manner as the Committee, in its sole discretion, deems appropriate, including by book-entry or direct registration (including transaction advices) or the issuance of one or more share certificates, and to the extent that the Plan, applicable law or the Company’s organizational documents, require or contemplate the imposition of a legend or other notation on one or more certificates evidencing Shares or an Award, the Committee shall have the sole discretion to determine the manner in which such legend or notation is implemented.
13.7 Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, or Awards, or other property shall be issued or paid in lieu of fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated.
13.8 Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
13.9 Requirements of Law; Claw-Back Policies. The grant of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required from time to time, and shall be subject to the applicable provisions of any claw-back policy implemented by the Company, whether implemented prior to or after the grant of such Award, including without limitation, any claw-back policy adopted to comply with the requirements of applicable law (including the requirements of a national securities exchange).
13.10 Securities Law Compliance. To the extent any provision of the Plan, Award Agreement or action by the Committee fails to comply with any applicable federal or state securities law, it shall be deemed null and void, to the extent permitted by law and deemed advisable or appropriate by the Committee.
13.11 Real Estate Investment Trust. No Award shall be granted or awarded and, with respect to any Award granted under the Plan, such Award shall not vest, be exercisable or be settled, to the extent that the grant, vesting, exercise or settlement of such Award could cause the Participant or any other person to be in violation of any restrictions on ownership and transfer of the Company’s securities set forth in its articles of incorporation or other governing instrument or organizational documents, as amended, and in effect from time to time, or if, in the discretion of the Committee, the grant, vesting, exercise or settlement of such award could otherwise impair the Company’s status as a real estate investment trust under the Code.
13.12 Governing Law. The Plan and all Award Agreements shall be construed in accordance with and governed by the laws of the State of Maryland.
13.13 Captions. Captions are provided herein for convenience of reference only, and shall not serve as a basis for interpretation or construction of the Plan.