The Compensation Committee is responsible for the Company’s
executive compensation philosophy and policies, as well as the annual executive compensation program that flows from them. This section
of this Amendment contains a detailed explanation of the compensation arrangements for our named executive officers (“NEOs”)
for 2021.
Compensation Discussion and Analysis Table
of Contents
Executive Summary
Our long-term success depends on our ability
to attract, motivate, focus and retain highly talented individuals who are committed to our vision and strategy. A key objective of our
executive compensation program is to create an ownership culture that aligns pay to performance and overall stockholder value creation.
We believe that the amount of compensation for each of our NEOs reflects their extensive management experience and continued high performance
and incentivizes exceptional service to CyrusOne. We also believe that our compensation strategies have been effective in attracting
executive talent and promoting performance and the creation of stockholder value.
Stockholder Engagement
Last year, our Say-on-Pay proposal received the
support of 91.9% of votes cast. While we were encouraged by the significant level of support, we have continued our robust stockholder
outreach efforts to solicit feedback on our compensation program and structure, as well as other matters, including those relating to
environmental, social and corporate governance.
Informed by feedback from our stockholders, we
made several significant changes to our compensation program in recent years, including the following:
COMPONENT |
|
|
MODIFICATIONS |
|
|
|
|
|
|
Annual Incentive Bonus |
|
• |
Replaced
NFFO metric with NFFO per share (30% weighting) |
|
|
|
• |
Added sustainability metric (10% weighting) |
|
|
|
• |
Added customer sales bookings metric (10% weighting), which we believe to be a key indicator of the underlying strength of our business |
|
|
|
• |
Retained revenue and individual performance metrics (30% and 20% weighting, respectively) |
|
|
|
|
|
|
LTI Awards |
|
• |
Eliminated the interim
annual accelerated vesting feature from our performance-based awards, so that the awards cliff-vest at the end of the three-year performance
period |
|
|
|
• |
Added a second TSR metric to our performance-based awards, which measures our TSR performance against a real estate technology peer group |
|
|
|
• |
Increased portion of 2021 awards that are subject to performance-vesting conditions to 70% of total grant value, applicable to all NEOs
at the time of grant |
|
|
|
• |
Added performance- and time-based LTIP units as alternatives to PRSUs and RSUs, respectively; LTIP units are profits interests with respect
to our operating partnership, which remain subject to the same performance- and time-based vesting conditions of stock awards and which
only provide value to our NEOs if the value of our business increases |
|
|
|
|
|
Our sustainability metric in particular is intended
to supplement, and drive progress towards, our sustainability initiatives and projects, which have themselves been an important area
of interest for our stockholders. Achievement against this metric was measured based on, among other things, our progress against our
goals of having zero carbon footprint by 2040 and furthering our “net positive water” initiative, by reducing our water usage
in high stress regions and establishing low water use model facilities and related policies.
Alignment of Pay with Performance
Our executive compensation program provides significant
alignment between pay and performance by linking a meaningful portion of our NEOs’ compensation to the achievement of pre-established
financial and strategic goals under our annual incentive bonus program and the Company’s relative TSR under our long-term incentive
grants. Variable pay, consisting of annual cash bonuses and LTI equity awards, constitutes the vast majority of our executive compensation.
CEO Total Target Direct Compensation
Set forth below is a summary of the total target
direct compensation for David H. Ferdman, who was named Interim President & CEO in July 2021, excluding Mr. Ferdman’s
deal retention bonus, which had a grant value of $4 million and was granted in connection with the Merger.
CEO Annual
Cash | | |
CEO Equity | |
CEO Annual Total |
|
| | |
| | |
Time-Based | |
Total Target Direct |
|
Salary | | |
Target Bonus | | |
LTI Award | |
Compensation |
|
$ | 850,000 | | |
$ | 1,000,000 | * | |
$ |
2,400,000 | ** |
$ |
4,250,000 |
|
| * | Mr. Ferdman’s target bonus amount
is in respect of a six-month period, beginning on July 29, 2021, the date he was named
Interim President & CEO, and ending on January 29, 2022. |
| ** | Mr. Ferdman’s LTI award was valued,
and the number of shares of restricted stock subject to the award determined, based on our
closing stock price on July 29, 2021 ($71.73), the date he was named Interim President &
CEO. However, the award was granted on August 15, 2021, and therefore the grant date
fair value differs from the value that the Board used for purposes of determining Mr. Ferdman’s
total target direct compensation. |
Total Target Direct Compensation—Other NEOs
| |
Annual Cash | | |
Annual Equity | | |
Annual Total | |
| |
Salary | | |
Target
Bonus | | |
Performance-
Based LTI
Target Award | | |
Time-Based
LTI Award | | |
Total Target
Direct Compensation | |
Ms. Motlagh* | |
$ | 500,000 | | |
$ | 500,000 | | |
$ | 700,000 | | |
$ | 300,000 | | |
$ | 2,000,000 | |
Mr. Hatem* | |
$ | 450,000 | | |
$ | 450,000 | | |
$ | 770,000 | | |
$ | 330,000 | | |
$ | 2,000,000 | |
Mr. Jackson* | |
$ | 395,000 | | |
$ | 395,000 | | |
$ | 630,000 | | |
$ | 270,000 | | |
$ | 1,690,000 | |
| * | Excludes deal retention bonuses granted in
connection with the Merger as these are not a component of our annual compensation program. |
Compensation Objectives and Governance Highlights
Our fundamental objective is to be outstanding
stewards of our stockholders’ capital by creating value on a consistent, long-term basis. Our compensation philosophy is to incentivize
thoughtful capital allocation and value creation for our stockholders by attracting and retaining talented executives with competitive
pay packages intended to cultivate an ownership culture, to align the compensation for our executive officers with sustainable, consistent,
balanced growth and to achieve specific short- and long-term goals set by the Compensation Committee. We use a combination of compensation
programs to incentivize our executive officers to achieve growth and value creation over the short- and long-term. We supplement our
pay for performance program with a number of compensation polices intended to encourage an ownership culture, align the interests of
management with those of our stockholders and discourage excessive risk taking. These include:
DESIGN PRINCIPLES |
WHAT
WE DO: |
|
WHAT
WE DON'T DO: |
✔ |
|
We
link pay to performance; we reward our NEOs based upon the value they create |
|
✘ |
|
We
do not target pay based on the market median, but rather use it as an initial reference point |
✔ |
|
The
vast majority of annual NEO pay is variable, based on performance |
|
✘ |
|
We
set performance goals with a view to discouraging unnecessary or excessive risk-taking, and our policies reinforce this view |
✔ |
|
We
set rigorous and measurable performance goals at the beginning of the performance period across our annual incentive and long-term
incentive plans, placing significant emphasis on multi-year, total stockholder return performance |
|
✘ |
|
Other
than limited exceptions for new hires, we do not guarantee incentive compensation under our annual cash bonus or long-term incentive
plan |
✔ |
|
We
employ metrics for annual and long-term incentives that do not overlap and support both short- and long-term strategies and stockholder
interests |
|
✘ |
|
We
do not use positive discretion in determining Company performance for purposes of our annual cash bonus or long-term incentive plan
payouts |
✔ |
|
Beginning
in 2021, we added a sustainability goal to our annual cash bonus plan, to ensure that our performance is achieved in a way that aligns
with our values |
|
✘ |
|
We
do not include “single-trigger” change-in-control vesting provisions in equity award or severance agreements |
✔ |
|
We
compensate fairly and competitively, but not excessively |
|
✘ |
|
We
do not have uncapped bonus amounts under our incentive plans |
GOVERNANCE
PRACTICES |
WHAT
WE DO: |
|
WHAT
WE DON'T DO: |
✔ |
|
We
have robust stock ownership guidelines for our executive officers (6x base salary for our CEO and 1.5x base salary for our other
executive officers) and directors (5x cash retainer) |
|
✘ |
|
We
do not provide NEOs with tax gross-ups on executive or severance benefits, including upon a change in control |
✔ |
|
We
maintain a clawback policy, whereby we can recoup incentive compensation in the event of certain financial restatements |
|
✘ |
|
We
do not re-price outstanding stock options, whether vested or unvested |
✔ |
|
We
prohibit pledging and hedging of our common stock |
|
✘ |
|
We
do not pay dividends on unvested performance awards; rather, such amounts are paid only if and to the extent that the applicable
performance targets are in fact met (other than distributions equal to 1/10th of our dividend to allow for the payment of taxes in
connection with our LTIP units) |
✔ |
|
The
Compensation Committee retains an independent compensation consultant |
|
✘ |
|
We
do not provide separate benefit plans for our NEOs; our NEOs participate in the same benefit plans available to salaried employees |
✔ |
|
We
perform an annual compensation risk assessment |
|
✘ |
|
We
do not provide pension benefits or supplemental retirement plans |
✔ |
|
We
engage with our stockholders on compensation and governance matters |
|
✘ |
|
We
do not provide excessive perquisites to our NEOs |
How We Make Compensation Decisions
Role of the Compensation Committee
All compensation for the NEOs (including the
CEO) is set by the Compensation Committee annually. The Compensation Committee also sets performance measures and targets and determines
performance and payouts under our annual and long-term incentive plans. Individual base salaries, along with annual and long-term incentive
targets, are determined by the Compensation Committee after taking into consideration a number of internal and external factors, including
the external marketplace and peer group data, the executive’s position and responsibility, the demand for executive talent in the
marketplace, the Company’s performance and the individual’s performance and future potential. The Compensation Committee
also considers the CEO’s self-performance evaluation when setting the CEO’s compensation, and when setting each of the other
NEOs’ compensation, the CEO’s recommendations based on his assessment of their individual performance.
Use of Judgment
The Compensation Committee believes that the
application of its collective experiences and judgment is as important a resource to setting executive compensation as the use of data
and formulae. While market data provides an important tool for analysis and decision-making, the Compensation Committee believes that
over-reliance on data can give a false illusion of precision. Consequently, the Compensation Committee also gives consideration and emphasis
to an individual’s personal contributions to the organization, as well as his or her skill set, qualifications and experience.
The Compensation Committee also values and seeks to reward performance that develops talent within the Company, embraces the sense of
urgency that we believe distinguishes the Company and demonstrates the qualities of imagination and drive that enables a Company executive
to resolve long-term challenges and address important new issues. The Compensation Committee believes these and similar qualities and
attributes are not easily correlated to typical compensation data, but also deserve consideration and weight in reaching compensation
decisions.
Role of Compensation Consultant
Since 2017, the Compensation Committee has engaged
FPL Associates, L.P. (“FPL”) to assist in the performance of its duties and to make recommendations to the Compensation
Committee with respect to NEO and director compensation. FPL assisted the Compensation Committee in development of the peer group framework
for 2021 and advised the Committee on the 2021 base salaries, target bonuses and long-term incentive (“LTI”) awards for our
NEOs, including in connection with Mr. Ferdman’s appointment as Interim President & CEO. The Compensation Committee
also worked with FPL to conduct a competitive market assessment of the compensation elements for each of our executive officers and the
design of our annual incentive plan and long-term incentive awards, compared to our peer groups. FPL did not perform any other work for
the Company in 2021.
In connection with the engagement of FPL, the
Compensation Committee conducts an annual evaluation of the independence of FPL and its individual consultants, which includes reviewing
information from FPL and the Company’s directors and executive officers addressing any potential conflicts of interest. For 2021,
as with prior years, the Compensation Committee concluded that FPL and its individual consultants are independent and that their work
did not raise any conflicts of interest.
Peer Groups and Use of Data
The Compensation Committee believes that data
plays an important role in the design and implementation of optimal compensation programs and considers a number of types of internal
and external data in making both individual and plan-level compensation decisions. In particular, the Compensation Committee uses peer
groups to maintain an awareness of market data and pay practices, but does not target any element of compensation at a particular percentile
or percentile range of the peer group data. The Compensation Committee uses the median (50th percentile) of the peer group data
as the starting reference point and indicator of competitive market trends when assessing and determining pay for our executive officers.
We believe this use of peer group data is consistent with how stockholders and proxy advisory firms use such data.
The Compensation Committee evaluates the members
of our peer group and the use of peer data each year to ensure that they continue to be appropriate. In the second half of 2017, after
soliciting and receiving feedback from our stockholders, the Compensation Committee, with the assistance of FPL, determined it was necessary
and appropriate to revise our compensation peer groups to take into account our size and our complex business model as other REITs, both
in the data center sector and in other sectors, are not always comparable to us because of differences in underlying business fundamentals
and operations. Based on a review of market data, with the assistance of FPL, the Compensation Committee determined to use two peer groups
for reference points in evaluating and determining compensation, an approach the Compensation Committee continued to use in 2021:
| • | a size-based peer group, comprised of
high growth REITs of similar size (generally 0.5x to 2x of our total capitalization) and
asset focus (such as data center/industrial or specialty); and |
| • | a technology real estate peer group. |
The table below identifies the companies in each
of these peer groups:
SIZE-BASED REIT
PEER GROUP |
• Alexandria
Real Estate Equities, Inc. |
|
• Iron
Mountain Incorporated |
• American
Campus Communities, Inc. |
|
• JBG
SMITH Properties |
• Americold
Realty Trust |
|
• Medical
Properties Trust, Inc. |
• CoreSite
Realty Corporation |
|
• MGM
Growth Properties LLC |
• CubeSmart |
|
• Regency
Centers Corporation |
• EPR
Properties |
|
• STORE
Capital Corporation |
• Healthcare
Trust of America, Inc. |
|
• Sun
Communities, Inc. |
• Invitation
Homes Inc. |
|
|
TECHNOLOGY REAL
ESTATE PEER GROUP |
• American
Tower Corporation |
|
• QTS
Realty Trust, Inc. |
• CoreSite
Realty Corporation |
|
• SBA
Communications Corporation |
• Crown
Castle International Corp. |
|
• Switch, Inc. |
• Digital
Realty Trust, Inc. |
|
• Uniti
Group Inc. |
• Equinix, Inc. |
|
• Zayo
Group Holdings, Inc. |
There were no changes to either peer group for 2021.
2021 Executive Compensation Components
|
|
Component |
|
Objective |
|
Key
features |
Fixed Compensation |
|
Base Salary |
|
To provide salary levels sufficient to attract and
retain high-performing executives. |
|
• Fixed
cash salary that is both market-derived and market-driven.
• Adjustments
considered as appropriate based on performance, market data and other factors described below; we do not provide guaranteed salary
increases. |
Variable
Compensation |
|
Annual Incentive Bonus |
|
To encourage executives to pursue annual goals that
will benefit the Company and stockholders in both the short- and long-term. |
|
• 70%
of our annual cash bonus awards are tied to achievement of financial goals—for 2021, 30%
was tied to revenue, 30% was tied to Normalized FFO per share and 10% was tied to sales bookings.
• 10%
of our annual cash bonus awards are tied to sustainability goals.
• 20%
of our annual cash bonus awards are tied to individual performance. |
|
Long-Term Incentive |
|
To promote executive retention and the achievement
of long-term stockholder value and to create an ownership culture that closely aligns the compensation of our executives with the
returns realized by our stockholders. |
|
• 70%
of the target LTI award for our NEOs (other than for our interim CEO) consists of performance-based
awards, which cliff vests following a three-year performance period, contingent upon achievement
of relative TSR goals.
• 30%
of the target LTI award for our NEOs (other than for our interim CEO) consists of time-based awards, which vest ratably over three
years. |
Base Salary
Policy
and Process. Base salary, which under our compensation program is market-derived and market-driven, represents the fixed
component of our executive officer compensation program, which is paid in cash. The main purpose of base salary compensation is to provide
cash compensation levels sufficient to attract and retain high-performing executive officers. Because one of the primary objectives of
our executive compensation program is to align our NEOs’ compensation with the interests of our long-term investors by awarding
a significant portion of total compensation in the form of equity-based awards with multi-year performance periods, base salary is targeted
to be approximately 10% to 25% of total target annual compensation opportunity for each of the NEOs.
The percentage of actual pay will vary from year
to year based on each NEO’s performance, as well as the Company’s performance, within that year, and payouts under our incentive
plans. On a regular basis, and otherwise as appropriate, the Compensation Committee reviews the base salary of each of the executives
and considers adjustments to executive officer base salaries based primarily on the individual's performance, but also takes into account
the base salary paid to similarly situated executives of the peer group companies and other factors, such as Company performance.
2021
Base Salaries. The table below summarizes the base salaries approved for each of our NEOs for 2021. Other than Mr. Ferdman,
who did not earn a base salary in 2020, none of our NEOs received a base salary increase in 2021.
| |
2021
Base Salary ($) | | |
2020
Base Salary ($) | | |
2021 vs.
2020 Change (%) | |
Mr. Ferdman | |
| 850,000 | | |
| — | | |
| — | |
Ms. Motlagh | |
| 500,000 | | |
| 500,000 | | |
| — | |
Mr. Hatem | |
| 450,000 | | |
| 450,000 | | |
| — | |
Mr. Jackson | |
| 395,000 | | |
| 395,000 | | |
| — | |
Mr. Duncan | |
| 850,000 | | |
| 850,000 | | |
| — | |
Annual Incentive Bonus Opportunity
Policy
and Process. Our annual incentive bonuses are designed to encourage our executive officers to pursue annual goals that
will inure to the benefit of our Company and stockholders in both the short-and long-term. Annual incentive bonus opportunities are intended
to reward NEOs whose contributions improve the operational performance of our existing portfolio and the Company, enhance short-term
strategic goals and generate new business opportunities and investments, all of which are intended to create stockholder value over the
long-term. The Compensation Committee reviewed the bonus targets as a percentage of base salary in February 2021 as part of its
annual compensation review and determined no adjustments were necessary for our NEOs serving at that time.
In the case of Mr. Ferdman, who became our
Interim President & CEO halfway through 2021, the Compensation Committee determined that he should receive a bonus with a target
value of $1 million for the six-month period during which he was initially expected to serve in this role. It was also determined that
Mr. Ferdman’s actual bonus would be based on the same Company goals (i.e., financial and sustainability goals) as applied
to the other executive officers, but that his individual performance goals would be measured through the end of his expected six-month
term.
In the case of Mr. Duncan, he remained eligible
to receive a prorated annual bonus pursuant to the terms of his separation agreement, as discussed in more detail below.
The table below depicts the annual incentive
bonus opportunity for each NEO for 2021:
Name | |
Threshold
(25% of Target) ($) | | |
Target
($) | | |
Maximum
(200% of Target) ($) | |
Mr. Ferdman | |
| 250,000 | | |
| 1,000,000 | | |
| 2,000,000 | |
Ms. Motlagh | |
| 125,000 | | |
| 500,000 | | |
| 1,000,000 | |
Mr. Hatem | |
| 112,500 | | |
| 450,000 | | |
| 900,000 | |
Mr. Jackson | |
| 98,750 | | |
| 395,000 | | |
| 790,000 | |
Mr. Duncan(1) | |
| 183,391 | | |
| 733,562 | | |
| 1,467,124 | |
| (1) | Mr. Duncan remained eligible to receive
a prorated annual bonus pursuant to the terms of his separation agreement, as discussed in
more detail below. |
Financial Goals (weighted 70%).
Revenue:
The Compensation Committee considers revenue to be an important indicator of financial performance. It also is a metric typically
evaluated by investors and analysts and is used by many of our peers to evaluate performance. The revenue target established for 2021
was approximately 8.7% higher than the actual revenue results for 2020 ($1,123.6M vs. $1,033.5M). Actual revenue for 2020 was $1,033.5 million.
Normalized
FFO per Share: The Compensation Committee considers Normalized Funds From Operations (“Normalized FFO” or
“NFFO”) to be an important indicator of the Company’s overall financial performance. It also is a metric typically
used by investors and analysts, as well as many of our peers, to evaluate performance. For 2021, the Compensation Committee determined
that the NFFO metric for the annual bonus program should be measured on a per share basis so that it was more directly aligned with the
interests of our stockholders. The Normalized FFO per share target established for 2021 was set at the midpoint of our guidance of fiscal
year 2021 ($3.95). Actual Normalized FFO per share for 2021 was $3.99. Normalized FFO per share is a non-GAAP financial measure calculated
from the Company’s financial statements as set forth in Appendix A.
Customer
Sales Bookings: In 2021, the Compensation Committee added a new financial goal based on customer sales bookings, measured
in terms of annualized revenue, which we consider to be a key indicator of the underlying strength of our business. It is also a metric
that incentivizes a focus on long-term performance and building a foundation for future revenue. As a result of a very strong performance
in 2021, actual achievement for this metric was 254.5% of target ($394.5M vs. $155.0M), which resulted in a capped payout of 200% for
this metric.
In determining payouts, the following sliding
scale is applied to the financial performance targets, with data between points interpolated on a straight-line basis.
Performance Percentage of Target | | |
Payout Percentage | |
| <80 | % | |
| 0 | % |
| 80 | % | |
| 25 | % |
| 90 | % | |
| 50 | % |
| 100 | % | |
| 100 | % |
| 115 | % | |
| 200 | % |
Based on this, the Company’s performance
relative to the financial goals resulted in a weighted payout of 141.0% of target on the financial component, which accounts for 70% of
each NEO’s bonus.
Sustainability
Goals (weighted 10%). For 2021, the Compensation Committee added sustainability metrics to the annual bonus program, with such
metrics determining 10% of each NEO’s annual bonus. The metrics chosen were intended to supplement, and drive progress towards,
our 2021 sustainability initiatives and projects, which have themselves been an important area of interest for our stockholders. Achievement
was measured based on our progress against our goal of having zero carbon footprint by 2040, furthering our “net positive water”
initiative and furthering our reputation as a leader in our industry on ESG matters in general, and sustainability in particular.
After evaluating our achievements against our
goals for 2021, including significant improvements in our results in ESG surveys, the publication of our 2021 Sustainability Report, improving
our facility designs with standard low flow water fixtures, implementing water efficiency upgrades to existing facilities and improving
our carbon usage at existing facilities and implementing new facility designs that will reduce our carbon footprint, the Compensation
Committee determined that the sustainability payout percentage should be set at 145.8%.
Individual
Performance (weighted 20%). The remaining 20% of each NEO’s annual bonus is based on individual performance. For
2021, based on the achievements of the executive team in 2021, including entering into the Merger Agreement, which will provide significant
value to stockholders’, the Compensation Committee determined to pay the individual component at 200% of target for all current
executives. In the case of Mr. Duncan, the Compensation Committee determined to pay the individual component at the target level.
2021
Annual Incentive Bonus Payouts. As described below under “280G Mitigation Actions”, in order to mitigate certain
potential adverse tax consequences to the NEOs’ and to the Company, the Compensation Committee determined that a portion of 2021
annual bonuses should be paid to the current NEOs in December 2021. The Compensation Committee, after considering the actual performance
of the Company through November 2021 and estimated performance for December 2021, as well as the expected payouts on the sustainability
and individual performance metrics, determined that it was reasonably expected that actual bonus payouts would be in excess of 120% of
target. Therefore, the Compensation Committee approved payouts of 120% of 2021 annual target bonuses to the current NEOs in December 2021,
subject to a clawback in favor of the Company, whereby the NEO would be required to reimburse the Company if it was subsequently determined
that the amounts accelerated were not earned. The Compensation Committee then approved a true-up in early 2022 based on the actual payout
of 153% of target for each current NEO.
The following table sets forth the award earned
by each NEO under the 2021 annual incentive bonus plan (and, for reference, under the 2020 annual incentive bonus plan):
|
|
2021 |
|
|
2020 |
|
Name |
|
($) |
|
|
% of
Target |
|
|
($) |
|
|
% of
Target |
|
Mr. Ferdman |
|
|
1,528,000 |
|
|
|
153 |
% |
|
|
— |
|
|
|
— |
|
Ms. Motlagh(1) |
|
|
764,000 |
|
|
|
153 |
% |
|
|
400,000 |
|
|
|
— |
|
Mr. Hatem(1) |
|
|
687,600 |
|
|
|
153 |
% |
|
|
111,021 |
|
|
|
103.5 |
% |
Mr. Jackson |
|
|
603,560 |
|
|
|
153 |
% |
|
|
450,000 |
|
|
|
112.4 |
% |
Mr. Duncan(2) |
|
|
974,170 |
|
|
|
133 |
% |
|
|
634,190 |
|
|
|
103.5 |
% |
| (1) | For 2020, as a result of joining the Company near the end of the annual bonus cycle, Ms. Motlagh
received a fixed 2020 bonus amount of $400,000 and Mr. Hatem’s bonus was prorated for the number of days Mr. Hatem was
employed with us. |
| (2) | The separation agreement with Mr. Duncan provided for a prorated 2021 bonus based on actual achievement.
For 2020, per his employment agreement, Mr. Duncan’s 2020 bonus was prorated for the number of days Mr. Duncan was employed
with us. |
Long-Term Incentives
Policy
and Purpose. The third component of NEO compensation is targeted toward providing rewards for long-term stockholder value
creation. We believe that outstanding long-term performance is achieved through an executive compensation program that awards a significant
portion of total compensation in the form of equity-based awards with multi-year performance periods, which encourages a focus on long-term
stockholder value creation. Accordingly, at the target level, long-term incentive awards constitute the highest percentage each of our
NEOs' annual target compensation.
Annual
2021 LTI Awards. The annual LTI awards granted to our NEOs in February 2021 consisted of a performance-based component
(70%), which cliff vests based upon achievement of specified TSR goals described below over a three-year performance period (2021-2023),
and a time-based component (30%), which vests ratably over three years. For the 2021 grants, the NEOs were permitted to elect to receive
their LTI awards in the form of either restricted stock units (“RSUs”) or LTIP units, which are profits interests with respect
to our operating partnership. All NEOs who received the February 2021 grant elected to receive LTIP units.
As with our 2020 LTI awards, the performance-based
component of the 2021 LTI awards are subject to two TSR metrics, with 75% of the awards vesting based on the Company’s TSR performance
compared to that of the MSCI US REIT Index and the remaining 25% of the awards vesting based on the Company’s TSR performance compared
to that of our Real Estate Technology Peer Group (as set forth above). The Compensation Committee believes that the use of these two metrics
provides an appropriate balance of incentives. The MSCI US REIT Index component rewards our executives for performance and returns to
stockholders compared to other companies with whom we compete for investors and the Real Estate Technology Peer Group component rewards
our executives for performance and returns to stockholders compared to our industry and other companies with whom we compete for customers
and key talent. The Compensation Committee also believes that TSR is widely accepted by investors and results in a strong alignment between
executive pay and performance.
The performance-based component also provides
for an absolute TSR outperformance component if our TSR exceeds 30%, to reward our executives for exceptional performance against the
market and our peer group and where strong absolute returns are provided to stockholders. Conversely, the awards provide that the payout
will be reduced when our TSR is negative, even where we have outperformed our peers.
The
chart below summarizes the vesting terms for our 2021 LTI awards:
In determining 2021 LTI award values, the Compensation
Committee considered the market and peer data provided by FPL, individual and Company performance in 2020 and the value of the other components
that make up each NEO’s target total direct compensation. In the case of Mr. Ferdman, in connection with his appointment as
Interim President & CEO, and taking into consideration that such appointment was expected to last six months, the Compensation
Committee granted Mr. Ferdman an award of time-vesting restricted shares, vesting five-sixths five months after such appointment
and one-sixth six months after such appointment. Mr. Ferdman did not receive a 2021 annual LTI award, but Mr. Ferdman did receive
the annual equity award granted to non-employee directors since, at the time of such grant, Mr. Ferdman was serving as a non-employee
director. Details of such grant are described below under “Board Compensation for 2021”.
The grant date fair value of the annual LTI awards
to our NEOs made in 2021, as determined in accordance with FASB ASC 718, was:
| |
Performance
LTIP Units (at target) ($)(1) | | |
Time-Based Restricted Stock or LTIP Units ($) | |
Mr. Ferdman(2) | |
| — | | |
| 2,525,820 | |
Ms. Motlagh | |
| 957,657 | | |
| 278,468 | |
Mr. Hatem | |
| 1,053,328 | | |
| 306,276 | |
Mr. Jackson | |
| 861,796 | | |
| 250,596 | |
Mr. Duncan(3) | |
| 4,668,174 | | |
| 1,357,307 | |
| (1) | Reflects FASB ASC 718 value. For the actual number of units granted, see “Executive Compensation
Tables—2021 Grants of Plan-Based Awards Table”. |
| (2) | In connection with his appointment, Mr. Ferdman received a grant of time-vesting restricted stock.
Mr. Ferdman did not receive a 2021 annual LTI award, but did receive the standard grant to non-employee directors, with a grant date
value of $150,005, since Mr. Ferdman was serving as such at the time of grant (which is not reflected in the table above). |
| (3) | In connection with his separation on July 29, 2021, Mr. Duncan’s 2021 LTI awards were
subject to pro-rata vesting based on his separation date, with his performance-based LTI awards remaining subject to the applicable performance
conditions. |
LTI Payout Determinations.
In January 2022, the Compensation Committee
certified the performance results under outstanding performance awards granted in 2019, which consisted of performance-based RSUs (“PRSUs”),
based upon the performance period ending December 31, 2021. Our performance awards granted prior to 2020 vest over a three-year period
contingent upon TSR achievement relative to the MSCI US REIT Index for the applicable one-, two- and three-year performance period(s).
Up to one-third of the total target award could be earned after each of the first year and first two years of the performance period,
if actual performance over such periods met or exceeded the target performance for that period. Actual TSR for the 2019 awards for the
three-year performance period ending December 31, 2021 was 22.0%, which exceeded the maximum performance threshold, resulting in
achievement at 200%. Mr. Jackson was the only NEO who held 2019 PRSUs, and the actual shares that vested for Mr. Jackson as
a result of 2021 performance were 15,252.
As described below under “280G Mitigation
Actions”, in order to mitigate certain potential adverse tax consequences to the NEOs’ and to the Company, in December 2021,
the Compensation Committee determined, after considering the actual performance of the Company, that it was reasonable to conclude that
the 2019 PRSUs would vest at 200% of target. Therefore, the Compensation Committee approved vesting of Mr. Jackson’s 2019 PRSUs
at 200% of target in December 2021, subject to a clawback in favor of the Company, whereby Mr. Jackson would be required to
reimburse the Company if it was subsequently determined that any portion of the 2019 PRSUs would not have vested, including as a result
of failure to meet the requisite level of performance.
2019 Awards Performance:
Performance Measure | |
Target | |
Maximum | |
Actual Cumulative Performance(1) | |
Payout% | |
TSR(2) | |
≥ Index | |
> 2.0% above Index | |
> 2.0% above Index | |
| 200 | % |
| (1) | 2021 is the third year for this performance award, in which up to 200% of the total target award may be
earned (less any portion previously earned). TSR payout was based on the three-year performance period of January 1, 2019 through
December 31, 2021. |
| (2) | For purposes of the 2019 PRSUs, TSR is generally defined as (i) the trailing one-month average adjusted
closing stock price at the end of the performance period minus the trailing one-month average adjusted closing stock price at the beginning
of the performance period, divided by (ii) the trailing one-month average adjusted closing stock price at the beginning of the performance
period. |
2020 and 2021 LTI Performance Awards
As described above, performance-based awards granted
in 2020 and 2021 cliff vest upon the third anniversary of the applicable grant date, subject to achievement of specified TSR goals over
a three-year performance period. Since the Compensation Committee eliminated the annual vesting feature of these awards, the Compensation
Committee did not certify the performance results for them as the performance goals are cumulative and only need to be certified at the
end of the three-year performance period. For purposes of the 2020 and 2021 LTI awards, TSR is generally defined as (i) the trailing
60-day average closing stock price at the end of the performance period minus the trailing 60-day average closing stock price at the beginning
of the performance period, divided by (ii) the trailing 60-day average closing stock price at the beginning of the performance period,
with all stock prices adjusted for the reinvestment of dividends and stock splits.
The maximum number of shares that may be earned
by the NEOs under the 2020 performance awards are disclosed in the Outstanding Equity Awards at 2021 Fiscal Year End table. The target
and maximum number of shares that may be earned by the NEOs under the 2021 performance awards are disclosed in the Grants of Plan-Based
Awards Table for 2021.
Other Elements of Compensation
Retirement and Other Benefits
Benefits are established based upon a determination
of what is needed to aid in attracting and retaining a talented and motivated work force. The Compensation Committee does not view benefits
and perquisites for our NEOs as a key component of our executive compensation program. Our NEOs participate in benefit plans on the same
terms as our other participating employees, and their total value remains a negligible percentage of each executive officer’s total
compensation package.
We do not provide perquisites or other personal
benefits to our NEOs that are not available to all employees of the Company, other than offering an annual physical to certain of our
executives and their spouses. We provide the following benefits to all employees of the Company: medical, dental, vision and disability
insurance, parking at our corporate offices or public transportation credit, 401(k) employer match and group life insurance premiums.
We do not maintain any defined benefit or supplemental retirement plans.
The Compensation Committee periodically reviews
the levels of perquisites and other personal benefits provided to our NEOs and may revise, amend or add to any such benefits and perquisites
in the future as it deems advisable.
Severance Benefits
In order to achieve our compensation objective
of attracting, retaining and motivating qualified executives, we believe that we need to provide the NEOs with severance protections provided
in an employment agreement or severance agreement. Each NEO is entitled to certain severance benefits based on the nature of their termination.
See “Employment Agreements and Severance Agreements” and “Executive Compensation Tables—Potential Payments Upon
Termination of Employment or Change in Control” below for complete details of severance benefits payable to our NEOs who are current
executive officers upon certain terminations of employment and those provided to Mr. Duncan.
Deal Retention Bonuses
The Compensation Committee recognized that the
Merger would lead to unique retention and incentive challenges, including due to the significant amount of work associated with closing
the Merger and the uncertainty associated with working at a company in the process of undertaking a fundamental change. Taking into consideration
these factors, on December 29, 2021, the Compensation Committee approved a deal retention bonus program to provide targeted incentives
to certain employees, including the current NEOs, to support the closing of the Merger, the continued focus on the delivery of strong
operating results and the retention of key employees. Each of the current NEOs was granted a deal retention bonus in the following amounts:
Mr. Ferdman - $4 million; Ms. Motlagh - $500,000; Mr. Hatem - $1 million; and Mr. Jackson - $1 million. On February 14,
2022, the Compensation Committee, taking into considering Ms. Motlagh’s work in connection with the financing related to the
Merger, approved an increase to Ms. Motlagh’s deal retention bonus of $500,000, for an aggregate amount of $1 million. The
deal retention bonuses will be payable 50% on closing the Merger and 50% 90 days following such closing.
Other Compensation-Related Policies
Stock
Ownership Guidelines. The Company’s corporate governance guidelines specify that the CEO is expected to hold
shares worth at least six times his or her annual base pay, and each other NEO is expected to hold shares worth at least one and a half
times his or her annual base pay. All individuals who are subject to the guidelines has five years from the time he or she first becomes
subject to the guidelines in order to meet the ownership requirement. As of December 31, 2021, each of our NEOs has met the minimum
requirements for stock ownership or has not yet been subject to the guidelines for five years.
Hedging
and Pledging. The Company has a written policy prohibiting the purchase or sale of puts, calls, options or other derivative
securities based on the Company’s securities by directors, officers or employees, including Company securities granted to a director,
officer or employee by the Company as part of the compensation of such individual or held directly or indirectly by the director, officer
or employee. This prohibition also includes hedging or monetization transactions, such as exchange funds, equity swaps, collars and prepaid
variable forward contracts, in which the stockholder continues to own the underlying Company security without all the risks or rewards
of ownership. Directors and officers of the Company are also prohibited from pledging Company securities or from holding Company securities
in a margin account, absent specific preapproval. This same prohibition applies to any employee as set out in the Company’s policy
on insider trading, and any exceptions to this prohibition must be authorized in advance in accordance with the pre-clearance requirements
of such policy. No such pre-approvals have been requested or provided.
Clawback. The
Company has a written clawback policy, allowing it to recover incentive payments and equity award value realized by our NEOs in the preceding
three years in the event of a material restatement of the Company’s financial statements, if the incentive payments or amount of
equity awards received would have been lower if calculated based on the restated financials, and the executive engaged in actual fraud
or willful unlawful misconduct that materially contributed to the need for the restatement. To the extent that the SEC adopts final rules for
clawback policies that require changes to our policy, we will revise our policy accordingly.
Repricing
Prohibition. The Company maintains prohibitions on the re-pricing of underwater stock options, and cash buyouts of underwater
stock options.
Employment Agreements
The Company has entered into a written employment
agreement with each of Messrs. Ferdman and Jackson, which govern their terms of employment and provide for pre-determined severance
benefits in the event of certain terminations of employment. The Company has also entered into other letters with each of Ms. Motlagh
and Mr. Hatem that set forth the compensation and benefits each will receive in connection with their employment, as well as written
severance agreements that provide for pre-determined severance benefits in the event of certain terminations of employment. Employment
agreements and severance agreements allow the Company the flexibility to make changes in key positions with or without cause, and minimize
the potential for disagreements or litigation by establishing separation terms in advance, including arbitration provisions and the execution
of appropriate releases, and perpetuation of important confidentiality and non-competition restrictions. The benefits specified in the
employment agreements or severance agreements, including the severance and change in control payments, are important provisions designed
to ensure the recruitment and retention of quality executive talent.
Information regarding the severance payable to
our NEOs pursuant to their employment agreements, severance agreements and, in the case of Mr. Duncan, his separation agreement,
including the treatment of outstanding equity awards, can be found in “Executive Compensation Tables—Potential Payments Upon
Termination of Employment or Change in Control”.
280G Mitigation Actions
None of our NEOs is entitled to a gross-up or
other make-whole payment in connection with any golden parachute excise taxes imposed due to Section 280G of the Code (the “280G
Excise Tax”). Instead, in the event that the 280G Excise Tax would be applicable to an NEO, he or she will either receive all the
payments and benefits subject to the 280G Excise Tax in full or such payments and benefits will be reduced to the greatest amount that
does not trigger the 280G Excise Tax, whichever results in the greater after-tax amount for the NEO (a “280G best-net cutback”).
Based on a preliminary analysis conducted after entering into the Merger Agreement, Messrs. Ferdman, Hatem and Jackson and Ms. Motlagh
would each potentially trigger, absent any mitigating actions, the adverse tax consequences imposed by Section 280G of the Code in
connection with the Merger, which consist of the 280G Excise Tax and the possibility that the Company may lose the benefit of a tax deduction
with respect to the payments and benefits subject to the 280G Excise Tax. Therefore, to mitigate the expected impact of such adverse tax
consequences, and to preserve the retentive value of the NEOs’ equity and other compensation, as well as the ability of the Company
to potentially claim a tax deduction in respect of such payments, the following actions were approved by the Compensation Committee on
December 20, 2021, in order to increase each NEO’s threshold for triggering Section 280G of the Code and its adverse tax
consequences:
| ● | accelerating the payment of a portion of each NEO’s 2021 annual bonus equal to 120% of the target
amount, based on the Compensation Committee’s review of performance to-date (and subject to a true-up in January 2022 based
on actual performance); |
| ● | accelerating the payment of certain time-vesting restricted stock and RSU awards for all NEOs other than
Mr. Hatem (who does not hold any such awards), which were either scheduled to vest in approximately two months of such action or
represent a small portion of future equity vestings; and |
| ● | for Mr. Jackson only, accelerating the payment of 2019 PRSUs scheduled to vest in February 2022,
based on the Compensation Committee’s review of performance to-date. |
All the foregoing actions were made subject to
a clawback in favor of the Company, whereby the NEO will be required to reimburse the Company if it is subsequently determined that the
amounts accelerated would not have been earned (i.e., due to the failure to satisfy any service- or, if applicable, performance-based
vesting criteria).
Compensation Committee Analysis of Risk
The Compensation Committee engaged FPL to perform
an annual assessment to determine whether the Company's compensation practices, plans and policies encourage unnecessary risk taking or
create risks that are reasonably likely to have a material adverse effect on the Company. These assessments reviewed the material elements
of executive and non-executive employee compensation. Based on these assessments, the Compensation Committee concluded these policies
and practices do not encourage unnecessary risk taking or create risk that is reasonably likely to have a material adverse effect on CyrusOne.
Compensation Committee Report
The Compensation Committee has the overall responsibility
of evaluating the performance and determining the compensation of the Chief Executive Officer and approving the compensation structure
for the Company's other NEOs. The Compensation Committee has reviewed the “Compensation Discussion and Analysis” required
by Item 402(b) (the “CD&A”) and has been provided an opportunity to discuss the CD&A with management, both on
an individual basis and as a full Committee. Based on its review of the CD&A and the various discussions between the Compensation
Committee and management throughout 2021 and 2022 to-date regarding the subject matter described in the CD&A, the Compensation Committee
determined that further discussions were not necessary, and the Compensation Committee recommended to the Board of Directors that the
CD&A be included in this Amendment for filing with the SEC.
|
|
Compensation Committee: |
|
|
|
|
|
T. Tod Nielsen (Chair)
Denise Olsen Alex Shumate |
Executive Compensation Tables
2021 Summary Compensation Table
The following table sets forth the compensation paid to or earned by
the Company’s NEOs for the years indicated.
Name and Principal Position | |
Year | | |
Salary ($)(1) | | |
Bonus ($)(2) | | |
Stock Awards ($)(3) | | |
Option Awards ($)(4) | | |
Non-Equity Incentive Plan Compensation ($)(5) | | |
All Other Compensation ($)(6) | | |
Total($) | |
David H. Ferdman(7) | |
| 2021 | | |
| 487,308 | | |
| — | | |
| 2,675,825 | | |
| — | | |
| 1,528,000 | | |
| 17,671 | | |
| 4,708,804 | |
President and Chief | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Executive Officer | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Katherine Motlagh(8) | |
| 2021 | | |
| 500,000 | | |
| — | | |
| 1,236,125 | | |
| — | | |
| 764,000 | | |
| 21,474 | | |
| 2,521,599 | |
Executive Vice President | |
| 2020 | | |
| 78,846 | | |
| 400,000 | | |
| 1,250,047 | | |
| — | | |
| — | | |
| 13,300 | | |
| 1,742,193 | |
and Chief Financial Officer | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
John P. Hatem(8) | |
| 2021 | | |
| 450,000 | | |
| — | | |
| 1,359,604 | | |
| — | | |
| 687,000 | | |
| 9,088 | | |
| 2,505,692 | |
Executive Vice President | |
| 2020 | | |
| 107,308 | | |
| 111,021 | | |
| — | | |
| — | | |
| — | | |
| 14,736 | | |
| 233,065 | |
and Chief Operating Officer | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Robert M. Jackson | |
| 2021 | | |
| 395,000 | | |
| — | | |
| 1,112,392 | | |
| — | | |
| 603,560 | | |
| 13,023 | | |
| 2,123,975 | |
Executive Vice President, | |
| 2020 | | |
| 400,269 | | |
| — | | |
| 1,057,391 | | |
| — | | |
| 450,000 | | |
| 21,255 | | |
| 1,928,915 | |
General Counsel and Secretary | |
| 2019 | | |
| 352,000 | | |
| — | | |
| 699,547 | | |
| — | | |
| 581,504 | | |
| 22,713 | | |
| 1,655,764 | |
Bruce W. Duncan(9) | |
| 2021 | | |
| 503,462 | | |
| — | | |
| 6,025,481 | | |
| — | | |
| 974,170 | | |
| 4,331,467 | | |
| 11,834,580 | |
former President and | |
| 2020 | | |
| 408,654 | | |
| 612,981 | | |
| 13,493,003 | | |
| — | | |
| 21,209 | | |
| 37,498 | | |
| 14,573,345 | |
Chief Executive Officer | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| (1) | In the case of Mr. Ferdman, also includes cash fees paid to him in respect of his non-employee director service prior to his
appointment as Interim President & CEO, which cash fees totaled $68,750. |
| (2) | Reflects any amounts paid to each NEO that are considered “bonuses” pursuant to SEC guidance. These amounts represent
agreed upon minimum bonus amounts for the applicable NEO for his or her year of hire and an additional amount for Mr. Hatem that
was awarded to him based on his individual performance for the year of hire. |
| (3) | Reflects the aggregate grant date fair value of restricted stock and RSU awards granted in 2019, 2020 and, to Mr. Ferdman only,
2021 and LTIP units granted to all NEOs other than Mr. Ferdman in 2021, in each case, determined in accordance with FASB ASC Topic 718.
The assumptions used in the calculation of the grant date fair values of these awards are set forth in Note 16 to the financial statements
in the Original Filing. In the case of Mr. Ferdman, his value also includes the value of the restricted stock award he received as
a non-employee director prior to his appointment as President & CEO on an interim basis, which grant had a value of $150,005. |
The amounts shown consist of time-based and performance-based
awards at target (excluding, for Mr. Ferdman, any awards granted in fiscal 2019 and 2020 in his capacity as a non-employee director):
| |
Grant Date Fair Value—Performance-Based Awards ($) | | |
Grant Date Fair Value—Time-Based Restricted Stock Units ($) | |
| |
Fiscal 2021 | | |
Fiscal 2020 | | |
Fiscal 2019 | | |
Fiscal 2021 | | |
Fiscal 2020 | | |
Fiscal 2019 | |
Mr. Ferdman | |
| — | | |
| — | | |
| — | | |
| 2,675,825 | | |
| — | | |
| — | |
Ms. Motlagh | |
| 957,657 | | |
| — | | |
| — | | |
| 278,468 | | |
| 1,250,047 | | |
| — | |
Mr. Hatem | |
| 1,053,328 | | |
| — | | |
| — | | |
| 306,276 | | |
| — | | |
| — | |
Mr. Jackson | |
| 861,796 | | |
| 737,366 | | |
| 499,517 | | |
| 250,596 | | |
| 320,024 | | |
| 176,045 | |
Mr. Duncan | |
| 4,668,174 | | |
| 7,030,462 | | |
| — | | |
| 1,357,307 | | |
| 6,462,541 | | |
| — | |
Assuming performance at maximum levels, the performance-based
awards valued at the closing stock price on the grant date are shown below (300% of target for awards granted in 2021 and 2020 and 200%
of target for awards granted in 2019):
| |
Value of Performance-Based Awards Assuming Maximum Performance ($) | |
| |
Fiscal 2021 | | |
Fiscal 2020 | | |
Fiscal 2019 | |
Mr. Ferdman | |
| — | | |
| — | | |
| — | |
Ms. Motlagh | |
| 2,872,970 | | |
| — | | |
| — | |
Mr. Hatem | |
| 3,159,923 | | |
| — | | |
| — | |
Mr. Jackson | |
| 2,585,388 | | |
| 1,440,109 | | |
| 1,200,075 | |
Mr. Duncan | |
| 14,004,521 | | |
| 10,237,586 | | |
| — | |
| (4) | No option awards were granted in 2019, 2020 or 2021. |
| (5) | Reflects annual incentive plan awards earned for the year indicated. For a detailed discussion regarding
our annual incentive plan, see “Executive Compensation—2021 Executive Compensation Components—Annual Incentive Bonus
Opportunity”. As noted above, for fiscal year 2021, a portion of these awards were paid in December 2021, subject to a clawback
if such portion would not have been earned, in order to mitigate the 280G Excise Tax. |
| (6) | The components of the “All Other Compensation” column for 2021 include the following: |
| |
401(k)
Match ($) | | |
Insurance ($)(a) | | |
Perquisites ($)(b) | | |
Severance Payments ($)(c) | | |
Total | |
Mr. Ferdman | |
| 7,033 | | |
| 238 | | |
| 10,400 | | |
| — | | |
| 17,671 | |
Ms. Motlagh | |
| 8,700 | | |
| 428 | | |
| 12,346 | | |
| — | | |
| 21,474 | |
Mr. Hatem | |
| 8,700 | | |
| 388 | | |
| — | | |
| — | | |
| 9,088 | |
Mr. Jackson | |
| 1,823 | | |
| 818 | | |
| 10,382 | | |
| — | | |
| 13,023 | |
Mr. Duncan | |
| 6,712 | | |
| 279 | | |
| 10,608 | | |
| 4,313,868 | | |
| 4,331,467 | |
| (a) | Reflects employer-paid life and accidental death and dismemberment insurance. |
| (b) | Consists of (i) for Mr. Ferdman, a $10,000 payment for reimbursement of attorney’s fees,
employer-paid parking benefits equal to $400, (ii) for Ms. Motlagh, a $11,386 payment for an annual physical, which includes
her spouse, and employer-paid parking benefits equal to $960, (iii) for Mr. Jackson, a $9,422 payment for an annual physical,
which includes his spouse, and employer-paid parking benefits equal to $960 and (iv) for Mr. Duncan, $10,048 in relocation benefits
and employer-paid parking benefits equal to $560. |
| (c) | Reflects severance payments made to Mr. Duncan. See “Separation Agreement—Mr. Duncan”
on page 30 of this Amendment. |
| (7) | Mr. Ferdman was appointed Interim President & CEO on July 29, 2021. Mr. Ferdman
had previously served as a non-employee director, and continued to serve as a member of the Board following such appointment. |
| (8) | Ms. Motlagh was appointed EVP and Chief Financial Officer effective October 30, 2020. Mr. Hatem
was appointed EVP and Chief Operating Officer effective October 5, 2020. |
| (9) | Mr. Duncan was appointed President & CEO and as a member of the Board on July 6, 2020
and continued in such positions until July 29, 2021. |
Grants of Plan-Based Awards
The following table presents information concerning plan-based awards
granted to each of the NEOs during 2021.
2021 Grants of Plan-Based Awards Table
| |
| |
| |
| |
Estimated
Possible Payouts Under Non-Equity Incentive Plan Awards(1) | | |
Estimated
Future Payouts Under Equity Incentive Plan Awards(2) | | |
All
Other Stock/Unit Awards: Number of Shares of | | |
Grant
Date Fair Value of Stock/Unit | |
Name | |
Award
Type | |
Grant
Date | |
Approval
Date | |
Threshold
($) | | |
Target
($) | | |
Maximum
($) | | |
Threshold
(#) | | |
Target
(#) | | |
Maximum
(#) | | |
Stock/Units
(#) | | |
Awards
($)(3) | |
Mr. Ferdman | |
AIP | |
7/29/2021 | |
8/15/2021 | |
| 250,000 | | |
| 1,000,000 | | |
| 2,000,000 | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
RES | |
5/18/2021 | |
5/18/2021 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 2,037 | | |
| 150,005 | |
| |
RES | |
8/15/2021 | |
8/15/2021 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 33,459 | | |
| 2,525,820 | |
Ms. Motlagh | |
AIP | |
2/15/2021 | |
2/15/2021 | |
| 125,000 | | |
| 500,000 | | |
| 1,000,000 | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
LTIP
Units | |
2/18/2021 | |
2/15/2021 | |
| | | |
| | | |
| | | |
| 5,035 | | |
| 10,070 | | |
| 30,210 | | |
| | | |
| 957,657 | |
| |
LTIP
Units | |
2/18/2021 | |
2/15/2021 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 4,316 | | |
| 278,468 | |
Mr. Hatem | |
AIP | |
2/15/2021 | |
2/15/2021 | |
| 112,500 | | |
| 450,000 | | |
| 900,000 | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
LTIP
Units | |
2/18/2021 | |
2/15/2021 | |
| | | |
| | | |
| | | |
| 5,538 | | |
| 11,076 | | |
| 33,228 | | |
| | | |
| 1,053,328 | |
| |
LTIP
Units | |
2/18/2021 | |
2/15/2021 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 4,747 | | |
| 306,276 | |
Mr. Jackson | |
AIP | |
2/15/2021 | |
2/15/2021 | |
| 98,750 | | |
| 395,000 | | |
| 790,000 | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
LTIP
Units | |
2/18/2021 | |
2/15/2021 | |
| | | |
| | | |
| | | |
| 4,531 | | |
| 9,062 | | |
| 27,186 | | |
| | | |
| 861,796 | |
| |
LTIP
Units | |
2/18/2021 | |
2/15/2021 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 3,884 | | |
| 250,596 | |
Mr. Duncan | |
AIP | |
2/15/2021 | |
2/15/2021 | |
| 318,750 | | |
| 1,275,000 | | |
| 2,550,000 | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
LTIP
Units | |
2/18/2021 | |
2/15/2021 | |
| | | |
| | | |
| | | |
| 24,544 | | |
| 49,087 | | |
| 147,261 | | |
| | | |
| 4,688,174 | |
| |
LTIP
Units | |
2/18/2021 | |
2/15/2021 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 21,037 | | |
| 1,357,707 | |
| (1) | Reflects each NEO's threshold, target and maximum incentive
opportunity under our annual incentive plan (“AIP”) for 2021. In connection with his separation, Mr. Duncan’s
annual bonus award was prorated, which is not reflected in the table. |
| (2) | Reflects performance-based LTIP units granted in 2021. In
connection with his separation, Mr. Duncan’s performance-based LTIP units were prorated, which is not reflected in the table. |
| (3) | Reflects the grant date fair value of time-based restricted
shares (“RES”), time-based LTIP units and performance-based LTIP units at target (the most probable outcome as of the grant
date), computed in accordance with FASB ASC 718 without regard to estimated forfeitures. The assumptions used in the calculation of the
grant date fair values of the awards are set forth in Note 16 to the financial statements in the Original Filing. |
Outstanding Equity Awards at Fiscal Year End
The following table presents information concerning
outstanding equity awards held by the NEOs as of December 31, 2021.
Outstanding Equity Awards at 2021 Fiscal Year
End
| |
| |
| Stock/Unit Awards | |
Name(1) | |
Grant Date | |
| Number of Shares or Units of Stock That Have Not Vested (#) | | |
| Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | | |
| Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | |
| Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(2) | |
Ms. Motlagh | |
| |
| | | |
| | | |
| | | |
| | |
2021 LTI—LTIP Units(4) | |
2/18/2021 | |
| 4,316 | | |
| 387,232 | | |
| 30,210 | | |
| 2,710,441 | |
Mr. Hatem | |
| |
| | | |
| | | |
| | | |
| | |
2021 LTI—RES(4) | |
2/18/2021 | |
| 4,747 | | |
| 425,901 | | |
| 33,228 | | |
| 2,981,216 | |
Mr. Jackson | |
| |
| | | |
| | | |
| | | |
| | |
2020 LTI—PSUs(3) | |
2/21/2019 | |
| — | | |
| — | | |
| 21,708 | | |
| 1,947,642 | |
2021 LTI—LTIP Units(4) | |
2/18/2021 | |
| 3,884 | | |
| 348,472 | | |
| 27,186 | | |
| 2,439,128 | |
Mr. Duncan | |
| |
| | | |
| | | |
| | | |
| | |
2020 LTI—PSUs(3) | |
7/6/2020 | |
| — | | |
| — | | |
| 58,083 | | |
| 5,211,207 | |
2021 LTI—LTIP Units(4) | |
2/18/2021 | |
| — | | |
| — | | |
| 28,242 | | |
| 2,533,872 | |
(1) | Mr. Ferdman did not hold any equity awards on December 31, 2021 as a result of the actions taken
to mitigate the 280G Excise Tax, as described above under “Compensation Discussion & Analysis – 2021 Executive Compensation
Components – Other Elements of Compensation – 280G Mitigation Actions”. |
(2) | Based on the closing price of the Company’s common stock on December 31, 2021 of $89.72. |
(3) | Reflects time-based and performance-based restricted stock unit awards, granted on February 25, 2020
(Mr. Jackson) or July 6, 2020 (Mr. Duncan), that have not vested, based on the maximum level of achievement, i.e., 300%
of the target number of shares subject to the award. The performance-based restricted stock units will vest on February 28, 2023
based on the achievement of certain relative TSR goals, as set forth in the award agreement, during the 2020-2022 performance period,
subject to earlier vesting in connection with the Merger, as described below. These amounts reflect the proration of Mr. Duncan’s
award in connection with his separation on July 29, 2021. |
(4) | Reflects time-based and performance-based LTIP unit awards, granted on February 18, 2021, that have
not vested, based on the maximum level of achievement, i.e., 300% of the target number of units subject to the award. The performance-based
LTIP units will vest on February 18, 2024 based on the achievement of certain relative TSR goals, as set forth in the award agreement,
during the 2021-2023 performance period, subject to earlier vesting in connection with the Merger, as described below. These amounts reflect
the proration of Mr. Duncan’s award in connection with his separation on July 29, 2021. The time-based restricted stock
units vest ratably over three years on the anniversary date of the grant, subject generally to the executive’s continued employment
on such vesting date, subject to earlier vesting in connection with the Merger, as described below. |
Option Exercises and Stock Vested
The following table presents information concerning
amounts realized by our NEOs upon the vesting of stock awards and the exercise of stock options in 2021. The value realized on vesting
or exercise represents the number of shares that vested or options that were exercised in 2021 and the aggregate value of such shares
based upon the closing price of our common stock on the applicable vesting date.
| |
Stock Awards | | |
Stock Options | |
Name | |
Number of Shares Acquired on Vesting (#) | | |
Value Realized on Vesting ($) | | |
Number of Shares Acquired on Vesting (#) | | |
Value Realized on Vesting ($) | |
Mr. Ferdman | |
| 37,635 | | |
| 3,333,030 | | |
| — | | |
| — | |
Ms. Motlagh | |
| 17,584 | | |
| 1,537,893 | | |
| — | | |
| — | |
Mr. Hatem | |
| — | | |
| — | | |
| — | | |
| — | |
Mr. Jackson | |
| 48,752 | | |
| 3,584,838 | | |
| — | | |
| — | |
Mr. Duncan | |
| 91,553 | | |
| 6,554,497 | | |
| — | | |
| — | |
No Pension Benefits
In the year ended December 31, 2021, our
NEOs received no pension benefits and had no accumulated pension benefits.
No Nonqualified Deferred Compensation
In the year ended December 31, 2021, our
NEOs received no nonqualified deferred compensation and had no nonqualified deferred compensation balances.
Potential Payments Upon Termination of Employment or Change in
Control
Each of the employment agreements and severance
agreements with our NEOs who are current executive officers specify the payments and benefits to which such executives are entitled upon
a termination of employment for specified reasons, as described below. In addition, certain of our award agreements under our long-term
incentive plan and the deal retention bonus agreements entered into in connection with the Merger provide for certain treatment of outstanding
equity awards and deal retention bonuses, as applicable, upon a termination of employment for specified reasons, as described below. The
section below also describes the separation agreement entered into with Mr. Duncan.
Employment Agreements
Without
Cause or for Good Reason. Under the employment agreement with Mr. Ferdman, as in effect on December 31, 2021,
if (1) the Company terminates his employment for any reason other than for cause or due to death or disability or (2) he resigns
for good reason (each, as defined below), whether prior to, on or after a change in control, then, in addition to Mr. Ferdman’s
right to receive accrued obligations, he would have been entitled to, generally subject to the execution and non-revocation of a release
of claims and Mr. Ferdman providing transition services to the Company through January 29, 2022, (i) the base salary Mr. Ferdman
would have earned through July 29, 2022 and (ii) the annual bonus Mr. Ferdman would have received if he had remained employed
through January 29, 2022.
Under the employment agreement with Mr. Jackson
and the severance agreements and equity award agreements with Ms. Motlagh and Mr. Hatem, in each case, as in effect on December 31,
2021, if (1) the Company terminates the executive’s employment for any reason other than for cause or due to death or disability
or (2) the executive resigns for good reason (each, as defined below), in each case, prior to a change in control, then, in addition
to the executive's right to receive accrued obligations, the executive will be entitled to, generally subject to the execution and non-revocation
of a release of claims:
| ● | a lump sum cash severance payment equal to (1) in the case of Ms. Motlagh and Mr. Hatem,
her or his then-current base salary or (2) in the case of Mr. Jackson, the sum of his (i) then-current annual base salary,
and (ii) annual incentive bonus target and, in each case, with such amount increased by the interest that would have been earned
on such amount over a 60-day period at an annual rate of interest of 3.5%; |
| ● | annual bonus for the year of termination, pro-rated to reflect the number of days worked during the year
of termination, and based on target performance; |
| ● | vesting of outstanding time-vesting equity awards as follows: |
| o | in the case of Ms. Motlagh and Mr. Hatem, in accordance with the terms of our standard executive
award agreements, immediate pro-rata vesting of any outstanding time-based equity award held by the applicable NEO; |
| o | in the case of Mr. Jackson, immediate vesting of any outstanding time-based equity award held by
him that would otherwise have vested on or prior to the end of the one-year period beginning at the time of Mr. Jackson’s termination; |
| ● | remain eligible for pro-rata vesting of outstanding performance-vesting equity awards, based on actual
performance: |
| ● | solely in the case of Mr. Jackson, if applicable, any unvested benefits under any qualified 401(k) plan
which would have accrued for him under any qualified defined benefit pension plan if the term of his employment had not been terminated
prior to the end of the first anniversary of his termination date; and |
| ● | continued medical, dental and vision coverage under the Company’s group health plan if the executive
timely elects and remains eligible for COBRA, as well as continued Company group life insurance coverage through the first anniversary
of the termination date. |
For purposes of the employment agreements and
severance agreements, “cause” generally means an act of fraud, misappropriation, embezzlement or misconduct constituting serious
criminal activity on the part of the executive or, in the case of Mr. Ferdman only, willful and material violations of material Company
policies that result, or are reasonably likely to result, in material financial or reputational damage to the Company.
For purposes of the employment agreement with
Mr. Ferdman, “good reason” will generally be deemed to have occurred if, without Mr. Ferdman’s consent,
there is (a) a diminution in Mr. Ferdman’s title, duties, position or responsibilities or a requirement that Mr. Ferdman
report to anyone other than directly to the Board, (b) a requirement that Mr. Ferdman be based in any particular location, (c) any
reduction in Mr. Ferdman’s base salary or bonus opportunity or (d) any other material breach of a material provision of
Mr. Ferdman’s employment agreement.
For purposes of the employment agreements and
severance agreements with Ms. Motlagh and Messrs. Hatem and Jackson, “good reason” (referred to as “constructive
termination” in Mr. Jackson's employment agreement) will generally be deemed to have occurred if, without the executive’s
consent, (a) there is a material adverse change in the reporting responsibilities set forth in his or her employment agreement or
there is otherwise a material reduction in his or her authority, reporting relationship or responsibilities, (b) there is a reduction
in his or her base salary or bonus target or (c) the applicable executive’s principal place of employment is changed to a location
that is more than 50 miles from the designated location set forth in his or her employment agreement.
Change
in Control. If, within one year following a change in control, (a) Ms. Motlagh or Messrs. Hatem or Jackson
resigns for good reason (or, in the case of Mr. Jackson, for “constructive termination”) or (b) the Company terminates
any such executive’s employment for any reason other than for cause or due to death or disability, then, in addition to the executive’s
right to receive accrued obligations, the executive will be entitled to, generally subject to the execution and non-revocation of a release
of claims:
| ● | a lump-sum cash severance payment equal to two times the sum of his or her (i) then-current annual
base salary and (ii) annual incentive bonus target, with such amount increased by the interest that would have been earned on such
amount over a 60-day period at an annual rate of interest of 3.5%; |
| ● | an annual bonus for the year of termination, based on target performance and pro-rated based on the applicable
executive’s termination date; |
| ● | immediate vesting of any outstanding equity awards, with any outstanding performance-based criteria being
deemed satisfied at the maximum level; |
| ● | solely in the case of Mr. Jackson, if applicable, any unvested benefits under any qualified 401(k) plan
which would have accrued for him under any qualified defined benefit pension plan if the term of his employment had not been terminated
prior to the first anniversary of his termination date; and |
| ● | continued medical, dental and vision coverage under the Company’s group health plan if the executive
timely elects and remains eligible for COBRA, as well as continued Company group life insurance coverage through the first anniversary
of his or her termination date. |
In the event that Section 280G of the Code
applies to the payments and benefits set forth above (including those for Mr. Ferdman), the executive would be subject to a 280G
best-net cutback. Each executive is fully responsible for his or her own personal income taxes and the Company has no obligation to reimburse
or otherwise provide a tax gross-up to the executive in connection with any change of control payment.
Disability
and Death. In the event of an executive’s death or disability, the Company will pay the executive or his or her
estate, as applicable, his or her accrued compensation (base salary, bonus or otherwise) as of the date of termination and, in the case
of disability, will provide the executive with disability benefits and all other benefits in accordance with the provisions of the applicable
Company disability plans and other applicable plans. For Ms. Motlagh and Messrs. Hatem and Jackson, time-based equity awards
will vest on a pro-rata basis and performance-based equity awards will vest at the target level on a pro-rata basis, in each case, based
on the number of days the executive was employed with the Company from the grant date to the date of death or disability. Mr. Ferdman
would also be entitled to a pro-rata portion of the bonus he would have received if he had remained employed through January 29,
2022.
Voluntary
Resignation. If an executive voluntarily resigns, other than for good reason or constructive termination, then the executive
will be entitled only to accrued compensation, other than Mr. Ferdman, who would be entitled to a pro-rata portion of the bonus he
would have received if he had remained employed through January 29, 2022.
Restrictive
Covenants. Each of the current NEOs is subject to confidentiality and intellectual property covenants during the term
of his or her employment and thereafter. In addition, each of Ms. Motlagh and Messrs. Hatem and Jackson is subject to non-competition,
non-disclosure and non-solicitation covenants during the term of his or her employment and for a period of one year following the cessation
of his or her employment for any reason.
Deal Retention Bonus Agreements; Impact of
the Merger on Equity Awards
The deal retention bonus agreements entered into
with each NEO in connection with the Merger provide that if the applicable executive’s employment is terminated due to his or her
death or, following the closing of the Merger, under circumstances that would entitle the executive to severance, then the retention bonus
will be payable in full within 10 days following such termination. The terms of the Merger also provide that, if the Merger had closed
on December 31, 2021, all equity awards held by the NEOs would have been canceled in exchange for a cash payment per share or LTIP
unit subject to the award equal to the merger consideration ($90.50), with performance criteria being deemed met at the maximum levels.
Separation
Agreement (Mr. Duncan)
Mr. Duncan separated from the Company with
respect to his role as President & CEO on July 29, 2021 (the “Separation Date”). In connection with Mr. Duncan’s
departure, Mr. Duncan entered into a Separation Agreement providing for, in exchange for a release of claims, the compensation and
benefits he was entitled to under his employment agreement with the Company in connection with a termination other than for cause, consisting
of: (a) a lump sum severance payment equal to two times the sum of Mr. Duncan’s annual base salary and annual bonus target
($4,250,000); (b) a prorated bonus for 2021, based on actual performance ($974,170); (c) immediate vesting of Mr. Duncan’s
sign-on equity award and a pro-rata portion, based on the Separation Date, of Mr. Duncan’s other outstanding time-based equity
awards ($4,518,632, based on a price of $71.73, the closing price of our shares on the Separation Date); (d) Mr. Duncan’s
performance-based awards remained outstanding and eligible to vest based on the achievement of the applicable performance criteria, pro-rated
based on the Separation Date ($6,192,093, based on a per-share closing price of $71.73 and assuming maximum performance); (e) a cash
payment in satisfaction of the Company’s obligation to subsidize the cost of Mr. Duncan’s continued group health and
life insurance coverage for one year ($39,416); and (f) a cash payment which represented the amount of interest that would have been
earned on the amount in clause (a) by Mr. Duncan during the sixty (60) day period following the Separation Date had such
amount earned interest for such period at an annual rate of 3.5% ($24,452).
Estimated Payments in Connection with a Termination of Employment
or Change in Control
The table below presents estimates of the amounts
of compensation that would have been payable to the NEOs upon their termination of employment or upon a change in control, in each case
as of December 31, 2021. The amounts in the table exclude: (i) 401(k) retirement plan contributions and distributions that
are generally available to all salaried employees; (ii) payments pursuant to awards that vested on or before such date; and (iii) any
amounts that may be due at the time of payment for accrued and unpaid salary, bonuses or vacation. The actual amounts payable upon such
terminations may be different and will only be determined upon the actual occurrence of any such event.
Given that Mr. Duncan was not an executive
officer of the Company as of December 31, 2021 and that quantitative disclosure of the amounts payable to him in connection with
his separation has been provided above, the Company has not included quantitative disclosure of his payments in the table below.
Name | |
Termination for Cause or Resignation without Good Reason ($) | | |
No Change in Control: Termination without Cause or Resignation For Good Reason ($) | | |
Death or Disability ($) | | |
Change in Control: Termination without Cause or Resignation For Good Reason ($) | | |
Change in Control: (no termination of employment) ($) | |
Mr. Ferdman | |
| | | |
| | | |
| | | |
| | | |
| | |
Cash Severance(1) | |
| 1,287,174 | | |
| 1,595,535 | | |
| 1,287,174 | | |
| 1,595,535 | | |
| — | |
Unvested Time-Based Equity Awards(2) | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Unvested Performance-Based Equity Awards(2) | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Deal Retention Bonus(3) | |
| — | | |
| — | | |
| 4,000,000 | | |
| 4,000,000 | | |
| 2,000,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Ms. Motlagh | |
| | | |
| | | |
| | | |
| | | |
| | |
Cash Severance(4) | |
| — | | |
| 502,885 | | |
| — | | |
| 2,011,540 | | |
| — | |
Medical Benefit(5) | |
| — | | |
| 20,823 | | |
| — | | |
| 20,823 | | |
| — | |
Life Insurance(5) | |
| — | | |
| 5,280 | | |
| — | | |
| 5,280 | | |
| — | |
Unvested Time-Based Equity Awards(2) | |
| — | | |
| 111,749 | | |
| 111,749 | | |
| 387,232 | | |
| — | |
Unvested Performance-Based Equity Awards(2) | |
| — | | |
| 301,160 | | |
| 301,160 | | |
| 2,710,441 | | |
| — | |
Deal Retention Bonus(3) | |
| — | | |
| — | | |
| 500,000 | | |
| 500,000 | | |
| 250,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Mr. Hatem | |
| | | |
| | | |
| | | |
| | | |
| | |
Cash Severance(4) | |
| — | | |
| 452,597 | | |
| — | | |
| 1,810,386 | | |
| — | |
Medical Benefit(5) | |
| — | | |
| 19,712 | | |
| — | | |
| 19,712 | | |
| — | |
Life Insurance(5) | |
| — | | |
| 4,752 | | |
| — | | |
| 4,752 | | |
| — | |
Unvested Time-Based LTIP Units(2) | |
| — | | |
| 122,908 | | |
| 122,908 | | |
| 425,901 | | |
| — | |
Unvested Performance-Based Equity Awards(2) | |
| — | | |
| 331,246 | | |
| 331,246 | | |
| 2,981,216 | | |
| — | |
Deal Retention Bonus(3) | |
| — | | |
| — | | |
| 1,000,000 | | |
| 1,000,000 | | |
| 500,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Mr. Jackson | |
| | | |
| | | |
| | | |
| | | |
| | |
Cash Severance(4) | |
| — | | |
| 794,558 | | |
| — | | |
| 1,589,117 | | |
| — | |
Medical Benefit(5) | |
| — | | |
| 19,622 | | |
| — | | |
| 19,622 | | |
| — | |
Life Insurance(5) | |
| — | | |
| 6,067 | | |
| — | | |
| 6,067 | | |
| — | |
Unvested Time-Based LTIP Units(2) | |
| — | | |
| 116,187 | | |
| 100,564 | | |
| 348,472 | | |
| — | |
Unvested Performance-Based Equity Awards(2) | |
| — | | |
| 704,021 | | |
| 704,021 | | |
| 4,386,770 | | |
| — | |
Deal Retention Bonus(3) | |
| — | | |
| — | | |
| 1,000,000 | | |
| 1,000,000 | | |
| 500,000 | |
| (1) | Represents, in the case of a termination without good reason or due to Mr. Ferdman’s death
or disability, a pro rata bonus, based on actual performance, and in the case of a termination without cause or for good reason, the base
salary that would have been payable to Mr. Ferdman if he remained employed through January 29, 2022 and his bonus, based on
actual performance. |
| (2) | Based on the closing price of the Company's common stock on December 31, 2021 of $89.72. In the case
of a termination without cause or for good reason following a change of control, all awards vest in full, with performance-based awards
vesting at the maximum performance level (300% of target). In the case of a termination without cause or for good reason absent a change
in control or due to death or disability, all awards held by Ms. Motlagh and Mr. Hatem and performance-based awards held by
Mr. Jackson vest on a pro-rata basis, with performance awards vesting based on actual performance or, in the case of death or disability,
target performance, while, with respect to his time-based awards, Mr. Jackson will receive an additional year of vesting credit.
All outstanding equity awards will vest upon the closing of the Merger, with performance-based awards vesting at the maximum performance
level. |
| (3) | Represents the portion of the NEO’s deal retention bonus that he or she would receive upon the specified
event. Although 50% of the deal retention bonuses will be payable upon the closing of the Merger (with the remaining 50% payable 90 days
after such closing), they would not be payable upon the occurrence of any other change in control event. |
| (4) | Represents an amount equal to, in the case of Ms. Motlagh and Mr. Hatem, his or her base salary
or, in the case of Mr. Jackson one times the sum of (i) base salary and (ii) target bonus, in each case as specified in
the employment agreement of such NEO with such amount increased by the interest that would have been earned on such amount over a 60-day
period at an annual rate of interest of 3.5%. If the termination occurs in connection with a change in control, amounts represent two
times the sum of (i) base salary and (ii) target bonus with such amounts increased by the interest that would have been earned
on such amounts over a 60-day period at an annual rate of interest of 3.5%. All cash payments are payable in a lump sum within 60 days
following the termination, subject to the executive's execution of an irrevocable release. |
| (5) | Represents the cost for continuation of benefits as specified in the applicable agreement for each of
our NEOs. The amounts shown for this item are calculated based upon the Company's current actual costs of providing benefits and are not
discounted for the time value of money. |
CEO Pay Ratio Disclosure
As required by Section 953(b) of the
Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following
information about the relationship of the annual total compensation of our median employee and the annualized compensation of Mr. David
H. Ferdman, our Interim President & CEO on the date on which we determined the median employee. This relationship is referred
to as the “CEO pay ratio.” The CEO pay ratio included in this information is a reasonable estimate calculated in a manner
consistent with Item 402(u) of Regulation S-K.
To identify the median employee, the annual total
compensation of the median employee and to determine the CEO pay ratio, we took the following steps:
| • | We selected December 31, 2021, the last day of our 2021 payroll year, as the date upon which we would
identify the median employee because it enabled us to make such identification in a reasonably efficient and economical manner. |
| • | To identify the median employee from our 2021 employee population, we compared the amount of salary and
wages of our employees as reflected in our payroll records as reported to the Internal Revenue Service on Form W-2 (for 2021) or
European equivalent annual reporting. In making this determination, we annualized the compensation of employees who were hired in 2021
but did not work for us the entire fiscal year. For all European employees, we converted their earnings to USD using the Euro conversion
to USD rate based on the closing price on 12/31/2021. Other than the foregoing, we did not make any assumptions, adjustments or estimates
with respect to our employees’ salary and wages as reflected in our payroll records, and used this consistently applied compensation
measure to identify our median employee. |
| • | Once we identified the median employee, we combined all the elements of the median employee’s compensation
for 2021 in accordance with the requirements of Item 402(c)(2)(x) of regulation S-K, resulting in annual total compensation
of $27,688. |
| • | With respect to the annual total compensation of Mr. Ferdman, we used the amount reported in the
“Total” column of our 2021 Summary Compensation Table included in this Amendment. |
For 2021, our last completed fiscal year:
| • | the annual total compensation of the median employee was $27,688; and |
| • | the annual total compensation of our Interim President & CEO, as reported in the 2021 Summary
Compensation Table, was $4,708,804. |
Based
on this information, for 2021 the ratio of the annual total compensation of our Interim President & CEO to the annual
total compensation of our median employee was 170 to 1.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee has been
an officer or employee of the Company. None of our executive officers serves on the board of directors or compensation committee of a
company that has an executive officer that serves on our Board of Directors or the Compensation Committee.
Board Compensation for 2021
We use a combination of cash and equity compensation
to attract and retain qualified candidates to serve on the Board. The Compensation Committee periodically reviews non-employee director
compensation with the advice of its independent compensation consultant and makes recommendations to the Board for any changes it considers
appropriate. In 2021, consistent with changes made to our executive compensation program, we provided non-employee directors with the
option to elect to receive their annual equity retainer either in the form of a restricted stock award or in the form of LTIP units, which
are profits interests with respect to our operating partnership. In either case, the award is generally subject to a one-year vesting
requirement. In addition, in 2021 we split the duties of Chairperson of the Board and Lead Independent Director between Ms. Wentworth
and Mr. Shumate, and in connection with such change, reduced the retainer for the Chairperson of the Board from $150,000 to $120,000
and established a separate Lead Independent Director retainer of $30,000. There were no other changes to our director compensation program
for 2021.
Non-Employee Director Compensation Program
Compensation Component | |
Amount | |
ANNUAL BOARD RETAINER: | |
| | |
Cash | |
$ | 85,000 | |
Equity (restricted stock or LTIP units with 1-year vesting requirement) | |
$ | 150,000 | |
CHAIRPERSON RETAINERS: | |
| | |
Chairperson of the Board | |
$ | 120,000 | |
Lead Independent Director | |
$ | 30,000 | |
Audit Committee Chair | |
$ | 30,000 | |
Compensation Committee Chair | |
$ | 25,000 | |
Nominating and Corporate Governance Committee & Transaction Committee Chairs | |
$ | 20,000 | |
COMMITTEE MEMBER RETAINERS: | |
| | |
Audit Committee Member | |
$ | 12,500 | |
Compensation Committee Member | |
$ | 12,500 | |
Nominating and Corporate Governance Committee & Transaction Committee Members | |
$ | 10,000 | |
PER-MEETING FEES | |
| — | |
BOARD COMPOSITION: | |
| | |
Number of Board Members | |
| 8 | |
Number of Independent Members | |
| 7 | |
Independent Chairperson of the Board | |
| Yes | |
BOARD STOCK OWNERSHIP POLICIES: | |
| | |
Director Stock Ownership Guidelines |
|
|
5x Annual Cash Retainer |
|
Pledging and Hedging |
|
|
Prohibited |
|
Our non-employee directors have five years from
the time they are elected to meet the minimum stock ownership requirements. As of December 31, 2021, each of our non-employee directors
other than Ms. Olsen has met the minimum requirements for stock ownership. Ms. Olsen was first elected as a non-employee director
on May 18, 2021, and therefore has until May 18, 2026 to satisfy the ownership requirements. Directors are also covered by our
written policy that prohibits hedging and pledging of Company securities, as described under “Other Compensation-Related Policies”
of this Amendment.
The following table summarizes the compensation
that we paid to our non-employee directors in 2021. Individuals serving as President & CEO do not receive compensation for service
as a director, and compensation for service as our President & CEO is disclosed in the Summary Compensation Table.
2021 Director Compensation Table
Name | |
Fees Earned or Paid in Cash ($) | | |
Stock Awards ($)(1) | | |
Total ($) |
Lynn Wentworth |
|
| 171,250 | | |
| 150,005 | | |
321,255 |
Alex Shumate |
|
| 191,250 | | |
| 150,005 | | |
341,255 |
John W. Gamble, Jr. |
|
| 106,250 | | |
| 150,005 | | |
256,255 |
T. Tod Nielsen |
|
| 55,000 | | |
| 270,038 | | |
325,038 |
Denise Olsen |
|
| 55,000 | | |
| 150,005 | | |
205,005 |
William E. Sullivan |
|
| 117,500 | | |
| 150,005 | | |
267,505 |
Michael A. Klayko(2) |
|
| 63,750 | | |
| — | | |
63,750 |
| (1) | Reflects the aggregate grant date fair value of the restricted stock award or LTIP unit awards, as applicable,
granted in 2021, determined in accordance with Financial Accounting Standards Board ASC Topic 718 Stock Compensation (FASB ASC 718). The
assumptions used in the calculation of the grant date fair value are set forth in Note 16 to the financial statements in the Original
Filing. Mr. Nielsen and Ms. Olsen elected to receive LTIP units, while all other directors elected to receive restricted stock
awards. |
| (2) | Mr. Klayko retired from the Board at the 2021 Annual Meeting of Shareholders. |
As of December 31, 2021, each of our non-employee
directors, other than Mr. Nielsen and Ms. Olsen, held 2,037 shares of unvested restricted stock, Mr. Nielsen held 3,667
unvested LTIP units and Ms. Olsen held 2,037 unvested LTIP units. Our non-employee directors did not hold any other equity awards
as of December 31, 2021.