AGREE REALTY CORP
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Securities Exchange Act of 1934
(Amendment No. )
Filed by the registrant ☒
Filed by a party other than the registrant ☐
Check the appropriate box:
☐
Preliminary proxy statement
☐
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☒
Definitive Proxy Statement
☐
Definitive Additional Materials
☐
Soliciting Material Under §240.14a-12
(Name of registrant as specified in its charter)
(Name of person(s) filing proxy statement, if other than the registrant)
Payment of Filing Fee (Check all boxes that apply):
☒
No fee required
☐
Fee paid previously with preliminary materials
☐
Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11
![[MISSING IMAGE: lg_agreereality-pn.gif]](lg_agreereality-pn.gif)
AGREE REALTY CORPORATION
70 E. Long Lake Road
Bloomfield Hills, MI 48304
Bloomfield Hills, MI 48304
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on May 11, 2023
To be Held on May 11, 2023
NOTICE IS HEREBY GIVEN that the 2023 Annual Meeting of stockholders (the “2023 Annual Meeting”) of AGREE REALTY CORPORATION, a Maryland corporation, will be held virtually at 10:00 a.m. Eastern Time on May 11, 2023, for the following purposes:
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•
To elect three directors to serve until the annual meeting of stockholders in 2026;
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•
To ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm for 2023;
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•
To approve (on an advisory basis), by non-binding vote, executive compensation; and
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•
To approve (on an advisory basis) whether an advisory vote on the compensation of our named executive officers should occur every one, two or three years.
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In addition, stockholders will consider and vote on such other business as may properly come before the meeting or any adjournment or postponement thereof.
Stockholders of record at the close of business on March 17, 2023 will be entitled to notice of and to vote at the 2023 Annual Meeting or at any adjournment or postponement thereof. Stockholders are cordially invited to attend the meeting virtually via the internet. To attend the Annual Meeting, visit www.virtualshareholdermeeting.com/ADC2023 and enter the 16-digit control number included on your notice or proxy card (if you received a printed copy of the proxy materials). Stockholders may vote and submit questions while attending the 2023 Annual Meeting virtually via the internet.
Pursuant to rules promulgated by the Securities and Exchange Commission, we are providing access to our proxy materials over the internet. On or about March 31, 2023, we expect to mail our stockholders either (i) the Notice of Internet Availability of Proxy Materials (the “Notice”) only or (ii) a copy of this Notice of Annual Meeting, the proxy statement, the accompanying proxy card, and our annual report (if a stockholder previously requested paper delivery of proxy materials), each in connection with the solicitation of proxies by our board of directors for use at the 2023 Annual Meeting and any adjournments or postponements thereof. The Notice contains instructions related to this process, including how to access our Notice of Annual Meeting, proxy statement and annual report over the internet, how to authorize your proxy to vote online and how to request a paper copy of the Notice of Annual Meeting, proxy statement and annual report.
It is important that your shares be voted. You may authorize your proxy to vote your shares over the internet as described in the Notice. Alternatively, if you received a paper copy of the proxy card by mail, please complete, date, sign and promptly return the proxy card in the self-addressed stamped envelope provided. You also may vote by telephone as described in your proxy card. If you attend the 2023 Annual Meeting, you may revoke your proxy in accordance with procedures set forth in the proxy statement and vote electronically via the internet.
| | | | | By Order of the Board of Directors | |
| | | | |
Peter Coughenour
Chief Financial Officer and Secretary |
|
| | March 31, 2023 | | | ||
| | Bloomfield Hills, Michigan | | | ||
TABLE OF CONTENTS
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ii
AGREE REALTY CORPORATION
70 E. Long Lake Road
Bloomfield Hills, MI 48304
Bloomfield Hills, MI 48304
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
ANNUAL MEETING OF STOCKHOLDERS
May 11, 2023
ABOUT THE ANNUAL MEETING
This proxy statement is furnished by our board of directors (the “Board”) in connection with the Board’s solicitation of proxies to be voted at the 2023 Annual Meeting of stockholders (the “2023 Annual Meeting”) of Agree Realty Corporation (the “Company”) to be held virtually at 10:00 a.m. Eastern Time on May 11, 2023, at www.virtualshareholdermeeting.com/ADC2023, and at any adjournment or postponement thereof.
On or about March 31, 2023, we are mailing either (i) a copy of the Notice of Annual Meeting, this proxy statement, the accompanying proxy card, our annual report and the Notice of Internet Availability of Proxy Materials (the “Notice”) (if a stockholder previously requested paper delivery of proxy materials), or (ii) the Notice only, to our stockholders of record on March 17, 2023 (the “Record Date”). The Notice and this proxy statement summarize the information you need to know to vote at the 2023 Annual Meeting. You do not need to attend the 2023 Annual Meeting virtually via the internet in order to vote.
W
hat is the purpose of the
2023 A
nnual
M
eeting
?
At the 2023 Annual Meeting, holders of our common stock will be voting on the matters set forth below:
•
To elect three directors to serve until the annual meeting of stockholders in 2026;
•
To ratify the appointment of Grant Thornton LLP (“Grant Thornton”) as our independent registered public accounting firm for 2023;
•
To approve (on an advisory basis), by non-binding vote, executive compensation; and
•
To approve (on an advisory basis) whether an advisory vote on the compensation of our named executive officers should occur every one, two or three years.
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![[MISSING IMAGE: ic_checkcircle-pn.jpg]](ic_checkcircle-pn.jpg)
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The Board recommends that you vote
FOR
the director nominees,
FOR
the ratification of the appointment of Grant Thornton,
FOR
executive compensation, and
EVERY YEAR
on the frequency of executive compensation votes.
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In addition, management will report on our performance and will respond to appropriate questions from stockholders. A representative of Grant Thornton will be present at the 2023 Annual Meeting and will be available to respond to appropriate questions. Such representative will also have an opportunity to make a statement.
1
H
ow can
I A
ttend the
M
eeting
?
You can attend the 2023 Annual Meeting virtually via the internet or by proxy.
Attending and Participating Online
. The 2023 Annual Meeting will take place virtually via the internet at www.virtualshareholdermeeting.com/ADC2023. Stockholders may vote and submit questions while attending the 2023 Annual Meeting virtually via the internet. You will need the 16-digit control number included on your Notice or proxy card (if you received a paper delivery of proxy materials), to enter the 2023 Annual Meeting via the internet. Instructions on how to attend and participate virtually via the internet, including how to demonstrate proof of share ownership, are available at www.virtualshareholdermeeting.com/
ADC2023. Participants will be able to log in 15 minutes prior to the start of the Annual Meeting. We encourage you to access the Annual Meeting in advance of the designated start time to ensure that you do not experience any technical difficulties.
Attending by Proxy
. Please see “Can I vote my shares without attending the 2023 Annual Meeting?” below.
W
hy are you
H
olding a
V
irtual
A
nnual
M
eeting
?
We believe that hosting a virtual meeting will enable more of our stockholders to attend and participate in the 2023 Annual Meeting since our stockholders can participate from any location around the world with internet access. We have designed our virtual format to enhance, rather than constrain, stockholder access, participation, and communication. For example, the virtual format allows stockholders to communicate with us during the 2023 Annual Meeting so they can ask questions of the Board or management. During the live Q&A session of the meeting, we may answer questions as they come in, to the extent relevant to the business of the meeting, as time permits.
W
ho is
E
ntitled to
V
ote
?
All stockholders of record at the close of business on the Record Date will be entitled to vote. Each share of common stock entitles the holder thereof to one vote on each of the matters to be voted upon at the 2023 Annual Meeting. As of the Record Date, 90,253,104 shares of our common stock, $.0001 par value per share, were outstanding.
W
hat
C
onstitutes a
Q
uorum
?
The presence at the 2023 Annual Meeting, virtually via the internet or by proxy, of stockholders entitled to cast a majority of all the votes entitled to be cast at the meeting will constitute a quorum for all purposes. Proxies marked with abstentions or instructions to withhold votes will be counted as present in determining whether or not there is a quorum.
However, if a quorum is not present at the 2023 Annual Meeting, the stockholders, present virtually via the internet or represented by proxy, have the power to adjourn the meeting until a quorum is present or represented. Regardless of whether a quorum is present, our Amended and Restated Bylaws (as amended, our “Bylaws”) provide that the chairman of the meeting may recess or adjourn the meeting.
W
hat is the
D
ifference
B
etween
H
olding
S
hares as a
S
tockholder of
R
ecord and a
B
eneficial
O
wner
?
Stockholders of Record
. If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., you are considered the stockholder of record with respect to those shares, the Notice and, if applicable, our proxy materials (including the Notice of Annual Meeting, the proxy statement, the accompanying proxy card and our annual report) are being sent to you by us. As the stockholder of record, you have the right to grant your voting proxy directly to us over the internet or by telephone as described in the Notice, or through an accompanying proxy card or to vote virtually via the internet at the 2023 Annual Meeting.
Beneficial Owners
. Many of our stockholders hold their shares through a broker, bank or other nominee rather than directly in their own name. If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of those shares, and the Notice and, if
2
applicable, our proxy materials (including the Notice of Annual Meeting, the proxy statement, the accompanying proxy card, our annual report and the Notice) are being forwarded to you by your broker, bank or nominee who is considered the stockholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker, bank or nominee on how to vote and are also invited to attend the 2023 Annual Meeting. However, since you are not the stockholder of record, you may not vote these shares virtually via the internet at the 2023 Annual Meeting unless you request and obtain a proxy from your broker, bank or nominee. Your broker, bank or nominee has enclosed a voting instruction card for you to use in directing the broker, bank or nominee on how to vote your shares.
M
ay
I V
ote my
S
hares at the
2023 A
nnual
M
eeting
?
Even if you plan to virtually attend the 2023 Annual Meeting, we encourage you to vote your shares prior to the meeting.
Stockholders of Record
. If you are a stockholder of record and attend the 2023 Annual Meeting virtually via the internet, you may deliver your completed proxy card as discussed below or vote during the meeting by electronic ballot in accordance with the instructions on how to participate virtually via the internet, which are available at www.virtualshareholdermeeting.com/ADC2023.
Beneficial Owners
. If you hold your shares through a broker, bank or other nominee and want to vote such shares virtually via the internet at the 2023 Annual Meeting, you must obtain a proxy from your broker, bank or other nominee giving you the power to vote such shares.
C
an
I V
ote my
S
hares
W
ithout
A
ttending the
2023 A
nnual
M
eeting
?
If you received a paper copy of the proxy card by mail, please complete, date, sign and promptly return the proxy card in the self-addressed stamped envelope provided or vote by telephone or internet as indicated on your proxy card. Voting your shares over the internet, by mailing a proxy card or by telephone, will not limit your right to attend the 2023 Annual Meeting and vote your shares virtually via the internet. If you attend the 2023 Annual Meeting, you may revoke your proxy in accordance with the procedures set forth in this proxy statement.
If you have shares held by a broker, you may instruct your broker to vote your shares by following the instructions that the broker provides to you. Most brokers allow you to authorize your proxy by mail, telephone and on the internet.
C
an
I C
hange my
V
ote
A
fter
I
have
V
oted
?
Yes. Proxies properly submitted over the internet, by mail or by telephone do not preclude a stockholder from voting virtually via the internet at the meeting. A stockholder may revoke a proxy at any time prior to its exercise by filing with our Secretary a duly executed revocation of proxy, by properly submitting, either by internet, mail or telephone, a proxy to our Secretary bearing a later date or by attending the meeting and voting virtually via the internet. Attendance at the meeting will not by itself constitute revocation of a proxy. If you hold your shares through a bank, broker or other nominee, you should contact such person prior to the time such voting instructions are exercised.
W
hat
D
oes it
M
ean if
I R
eceive
M
ore
T
han
O
ne
N
otice or
P
roxy
C
ard or
V
oting
I
nstruction
C
ard
?
If you receive more than one Notice or proxy card or voting instruction card, it means that you have multiple accounts with banks, trustees, brokers, other nominees and/or our transfer agent. If you receive more than one Notice, please submit all of your proxies over the internet, by mail or by telephone, following the instructions provided in the Notice, to ensure that all of your shares are voted. If you receive more than one proxy card or voting instruction card, please sign and deliver each proxy card and voting instruction card that you receive. We recommend that you contact your nominee and/or our transfer agent, as appropriate, to consolidate as many accounts as possible under the same name and address.
H
ow
M
any
C
opies
S
hould
I R
eceive if
I S
hare an
A
ddress
W
ith
A
nother
S
tockholder
?
The Securities and Exchange Commission (“SEC”) has adopted rules that permit companies and intermediaries, such as a broker, bank or other agent, to implement a delivery procedure called
3
“householding.” Under this procedure, multiple stockholders who reside at the same address may receive a single copy of the Notice, and, if applicable, our proxy materials, unless the affected stockholder has provided us with contrary instructions. This procedure provides extra convenience for stockholders and cost savings for companies.
The Company and brokers, banks or other agents may be householding the Notice and our proxy materials. A single Notice and, if applicable, a single set of our proxy materials, including the Notice of Annual Meeting, the proxy statement, the accompanying proxy card, our annual report and the Notice, will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker, bank or other agent that it will be householding communications to your address, householding will continue until you are notified otherwise or until you revoke your consent. If you did not respond that you did not want to participate in householding, you were deemed to have consented to the process. Stockholders may revoke their consent at any time by contacting Broadridge ICS, either by calling toll-free (800) 542-1061 or by writing to Broadridge ICS, Householding Department, 51 Mercedes Way, Edgewood, New York, 11717.
Upon written or oral request, we will promptly deliver a separate copy of the Notice and, if applicable, a set of our proxy materials, to any stockholder at a shared address to which a single copy of any of those documents was delivered. To receive a separate copy of the Notice or a separate set of our proxy materials now or in the future, you may contact Agree Realty Corporation, either by calling (248) 737-4190 or by writing to 70 E. Long Lake Road, Bloomfield Hills, MI 48304, Attention: Secretary. In addition, if you are receiving multiple copies of the Notice and, if applicable, our proxy materials, you can request householding by contacting our Secretary in the same manner.
W
hat if
I
do not
V
ote for
S
ome of the
I
tems
L
isted on my
P
roxy
C
ard or
V
oting
I
nstruction
card
?
Stockholders of Record
. Proxies properly submitted via the internet, mail or telephone will be voted at the 2023 Annual Meeting in accordance with your directions. If the properly submitted proxy does not provide voting instructions on a proposal, the proxy will be voted in accordance with the recommendations of the Board on such matters. With respect to any matter not set forth on the proxy card that properly comes before the 2023 Annual Meeting, the proxy holders named therein will vote as the Board recommends or, if the Board gives no recommendation, in their own discretion.
Beneficial Owners
. Proxies properly submitted via the internet mail or telephone or pursuant to your voting instruction card will be voted at the 2023 Annual Meeting in accordance with your directions. If you do not indicate a choice or return the voting instruction card, the broker, bank or other nominee will determine if it has the discretionary authority to vote on each matter. Under applicable law and New York Stock Exchange (“NYSE”) rules and regulations, brokers have the discretion to vote on routine matters, including the ratification of the appointment of our independent registered public accounting firm.
However, your broker does not have discretionary authority to vote on the election of directors, the advisory vote approving our executive compensation, or the advisory vote on the frequency of executive compensation votes, in which case a “broker non-vote” will occur and your shares will not be voted on these matters.
W
hat
V
ote is
R
equired to
A
pprove
E
ach
I
tem
?
Proposal 1
—
Election of Directors.
The three nominees receiving the highest number of “for” votes at the 2023 Annual Meeting will be elected as directors. Any nominee who receives a greater number of votes “withheld” from his or her election than votes “for” such election must tender his or her resignation for consideration by the Nominating and Governance Committee. The Nominating and Governance Committee will recommend to the Board the action to be taken with respect to the resignation. The Board will publicly disclose its decision within 90 days of the certification of the election results. The slate of nominees discussed in this proxy statement consists of three directors, Merrie Frankel, John Rakolta, Jr., and Jerome Rossi, whose terms are expiring. Abstentions and broker non-votes will have no effect on the outcome of this proposal. Our stockholders do not have the right to cumulate their votes for directors.
4
Proposal 2
—
Ratification of Appointment of Independent Registered Public Accounting Firm.
The affirmative vote of a majority of votes cast at the 2023 Annual Meeting is necessary to ratify the Audit Committee’s appointment of Grant Thornton as our independent registered public accounting firm for 2023. Abstentions are not treated as votes cast under Maryland law and, therefore, they have no effect on the outcome of this proposal. Although stockholder ratification of the appointment is not required and is not binding on us, the Board considers the selection of the independent registered public accounting firm to be an important matter of stockholder concern and the Audit Committee will take your vote on this proposal into consideration when appointing our independent registered public accounting firm in the future. Even if the stockholders ratify the appointment of Grant Thornton, the Audit Committee, in its sole discretion, may terminate the engagement of Grant Thornton and engage another independent auditor at any time during the year.
Proposal 3
—
Advisory (Non-Binding) Vote Approving Executive Compensation.
The affirmative vote of a majority of votes cast at the 2023 Annual Meeting is necessary to approve our executive compensation. Abstentions and broker non-votes are not treated as votes cast under Maryland law and, therefore, they have no effect on the outcome of this proposal.
Proposal 4
—
Advisory (Non-Binding) Vote on the Frequency of Executive Compensation Votes.
The affirmative vote of a majority of votes cast at the 2023 Annual Meeting is required to approve the frequency of future votes on our name executive officers’ compensation. Abstentions and broker non-votes are not treated as votes cast under Maryland law and, therefore, they have no effect on the outcome of this proposal. The Board expects to be guided by the alternative that receives the greatest number of votes, even if not a majority.
Other Matters
—
If any other matter is properly submitted to the stockholders at the 2023 Annual Meeting, its adoption will require the affirmative vote of a majority of votes cast at the meeting. The Board does not propose to conduct any business at the 2023 Annual Meeting other than as stated above.
W
ill
A
nyone
C
ontact me
R
egarding
T
his
V
ote
?
No arrangements or contracts have been made with any solicitors as of the date of this proxy statement, although we reserve the right to engage solicitors if we deem them necessary. Such solicitations may be made by mail, telephone, facsimile, e-mail or personal interviews. In addition, our directors and officers may solicit proxies by mail, telephone, e-mail, telecopy or in person.
H
ow do
I F
ind
O
ut the
V
oting
R
esults
?
Voting results will be announced at the 2023 Annual Meeting and will be published in a Current Report on Form 8-K to be filed with the SEC within four business days after the close of the meeting.
5
PROXY SUMMARY
B
oard
R
esponsiveness in
2022
Prior to 2022, at least 95% of votes cast on our say-on-pay proposal approved executive compensation in each of the past 10 years. In 2022, while there were few changes to the Company’s compensation practices compared to prior years, the recommendation of the proxy advisory firm Institutional Shareholder Services (“ISS”) changed, and the percentage of votes that were cast in support of executive compensation declined to 77%. To better understand stockholder concerns, the Company engaged with stockholders and revisited the Company’s compensation practices considering the feedback received. In 2022, we reached out to stockholders representing more than 77% of outstanding shares and communicated with approximately 65% of outstanding shares. The table below summarizes the feedback received from those conversations and the actions taken in response:
|
Stockholder Feedback
|
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Response
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| The Company does not have a cap on payouts if absolute total shareholder return (“TSR”) is negative | | | The Company introduced a payout cap on performance units at 100% if absolute TSR is negative, starting with 2023 awards | |
| The Company does not disclose metrics and actual results for management business objectives (“MBOs”) | | | In additional definitive materials filed in April 2022, the Company disclosed MBO metrics and actual results for 2021, and has continued that practice in this proxy statement, disclosing MBO metrics and actual results for 2022 | |
| The Company does not disclose the “net lease peer group” which is weighted 50% for TSR measurements for performance units | | | The Company disclosed its net lease peer group in the additional definitive materials filed in April 2022, and continued that practice in this proxy statement | |
| With respect to performance units previously disclosed, the Company does not disclose its performance results for prior periods | | | The Company historically disclosed performance results for prior periods in its annual report on Form 10-K, and has now incorporated that disclosure into this proxy statement | |
| Long-term incentive (“LTI”) awards are 50% performance-based and 50% time-based, and stockholders would like to see a heavier weighting towards performance-based awards | | | The Compensation Committed decided to change LTI awards to be 55% performance-based and 45% time-based for all Named Executive Officers (“NEOs”) for 2023 | |
The Company expects to remain engaged on compensation and governance issues with its stockholders. Our dedication to stockholder engagement has been demonstrated in recent years by our appointment of a Lead Independent Director, adoption and enhancement of stock ownership guidelines, adoption of an anti-pledging and anti-hedging policy, and adoption of an executive compensation claw-back policy. We will continue to be responsive to stockholder concerns and align our compensation practices with the long-term interests of our stockholders.
6
O
ur
B
usiness
We are a fully integrated real estate investment trust (“REIT”) primarily focused on the ownership, acquisition, development, and management of retail properties net leased to industry-leading retailers. As of December 31, 2022, our portfolio consisted of 1,839 properties located in 48 states and totaling approximately 38.1 million square feet of Gross Leasable Area (“GLA”). As of that date, the portfolio was approximately 99.7% leased and had a weighted average remaining lease term of approximately 8.8 years. A significant majority of our properties are leased to national tenants and at year end approximately 67.8% of our annualized base rent was derived from tenants, or parent entities thereof, with an investment grade credit rating from S&P Global Ratings, Moody’s Investors Service, Fitch Ratings or the National Association of Insurance Commissioners. Substantially all our tenants are subject to net lease agreements. A net lease typically requires the tenant to be responsible for minimum monthly rent and property operating expenses including property taxes, insurance, and maintenance.
2022 Business & Performance Highlights
The Company achieved several notable milestones during the past year, including:
✓
Invested or committed a record $1.71 billion in 465 retail net lease properties
✓
Commenced a record 28 development and Partner Capital Solutions (“PCS”) projects for total committed capital of approximately $110 million
✓
Net Income per share attributable to common stockholders increased 2.4% to $1.83
✓
Core Funds From Operations (“Core FFO”) per share increased 8.1% to $3.87
✓
Adjusted Funds From Operations (“AFFO”) per share increased 9.2% to $3.83
✓
Declared dividends of $2.805 per share, a 7.7% year-over-year increase
✓
Raised approximately $1.3 billion of gross equity proceeds through two overnight offerings and the Company’s at-the-market equity (“ATM”) program
✓
Achieved an upgraded investment grade credit rating of Baa1 from Moody’s Investors Service
✓
Completed a public bond offering of $300 million of 4.80% senior unsecured notes due 2032 with an effective all-in rate of 3.76% inclusive of prior hedging activity
✓
Ended the year with approximately $1.5 billion of total liquidity including availability on our revolving credit facility, outstanding forward equity, and cash on hand
✓
Maintained a conservative balance sheet with proforma net debt to recurring EBITDA of 3.1x at year end
7
2022 marked the second consecutive year that we grew AFFO per share by more than 9%, with two-year stacked growth approaching 19%. This consistent and reliable earnings growth continues to support a growing and well-covered dividend. We declared dividends of $2.805 per common share in 2022, a 7.7% year-over-year increase and a two-year stacked increase of approximately 16%. The dividends represent a payout ratio of approximately 73% of AFFO per share, below the low end of the Company’s targeted range of 75% to 85% of AFFO per share.
![[MISSING IMAGE: bc_affodiv-pn.gif]](bc_affodiv-pn.gif)
Our strong earnings growth, well-covered dividend, high-quality portfolio, and conservative balance sheet management continue to drive strong total shareholder returns. The Company has outperformed our Net Lease Peer Group and the MSCI U.S. REIT Index on a one-year, three-year, and five-year basis.
![[MISSING IMAGE: bc_totalreturn-pn.gif]](bc_totalreturn-pn.gif)
(1)
The Net Lease Peer Group includes the following companies: EPR Properties, Essential Properties Realty Trust, Inc., Four Corners Property Trust, Inc., Getty Realty Corp., National Retail Properties, Inc., Realty Income Corporation, Spirit Realty Capital, Inc. and W.P. Carey, Inc.
8
E
xecutive
C
ompensation
H
ighlights
Our compensation program for our named executive officers consists of base salary, annual incentive awards, long-term share-based and unit-based incentive awards and certain other benefits. We also provide severance arrangements for certain of our named executive officers. This program is designed to attract and retain key executives while encouraging high performance and aligning executives’ interests with the interests of our stockholders.
The following summarizes the key principles and objectives of our approach to executive compensation:
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Do
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✔
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| |
provide compensation that is aligned with performance by linking the achievement of pre-established short and long-term goals
|
| |
✔
|
| |
allow for claw-backs of cash and equity awards
|
|
| |
✔
|
| |
provide total compensation that is both fair and competitive
|
| |
✔
|
| |
require executives to own and retain shares of our common stock to further align their interests with those of our stockholders
|
|
| |
✔
|
| |
attract, retain and motivate key executives who are critical to our operations
|
| |
✔
|
| |
engage a third-party consultant to advise the Compensation Committee on executive compensation matters
|
|
| |
✔
|
| |
reward superior individual and company performance on both a short-term and long-term basis
|
| |
✔
|
| |
have a Compensation Committee comprised entirely of independent directors
|
|
| |
Do Not
|
| |||||||||
| |
![[MISSING IMAGE: ic_xmark-4c.gif]](ic_xmark-4c.gif)
|
| |
provide total compensation that is not linked to short and long-term company goals
|
| |
![[MISSING IMAGE: ic_xmark-4c.jpg]](ic_xmark-4c.jpg)
|
| |
overweight compensation that is not “at-risk” for executives
|
|
| |
|
| |
provide incentives for executives to take excessive risk to reach short term targets
|
| |
|
| |
provide uncapped award opportunities to our executives
|
|
| |
|
| |
provide executives with excessive perquisites or other personal benefits
|
| |
|
| |
guarantee annual base salary increases but instead consider increases if warranted
|
|
| |
|
| |
permit executives to engage in derivative or hedging transactions in our securities
|
| |
|
| |
provide for excise tax gross-up payments in connection with a change in control
|
|
Our compensation philosophy supports our commitment to pay-for-performance by rewarding executives for achieving our strategic goals on a short and long-term basis. The following chart demonstrates our focus on variable at-risk pay for our CEO in 2022.
![[MISSING IMAGE: pc_22ceocompensat-pn.gif]](pc_22ceocompensat-pn.gif)
9
C
orporate
G
overnance
H
ighlights
Our Board is responsible for oversight of the Company, including the strategy, objectives, and risk management practices. They are focused on sound corporate governance practices that are designed to promote the long-term interests of our stakeholders. Highlights of our corporate governance practices include:
✓
All directors are independent with the exception of the CEO and Executive Chairman
✓
We maintain a Lead Independent Director position to further promote independence
✓
All members of the Audit, Nominating & Governance and Compensation committees are independent
✓
Independent directors meet quarterly, without the presence of officers or team members
✓
Appointed five new independent directors since 2018
✓
Independent directors have a median tenure of three years
✓
The Board and certain committees complete annual self-assessments
✓
The Company has no stockholder rights plan (“poison pill”)
✓
The Board annually reviews all corporate governance policies and recently adopted several new policies
E
nvironmental
, S
ocial and
G
overnance
(“ESG”)
As part of our commitment to continuously improving our understanding of and performance across material ESG topics, we engaged a third-party consultant in 2022 to help identify opportunities for improvement across our programs, policies, and disclosures to meet the expectations of our stakeholders and uncover opportunities for value creation. This process resulted in a three-year action plan and roadmap for the Company to enhance its ESG program through oversight structures, risk management, policies, data collection, reporting, and stakeholder engagement.
E
nvironmental
S
ustainability
We understand that environmental sustainability is an ongoing endeavor and embrace the responsibility to be a steward of the environment, use natural resources carefully, and work with our retail partners on shared sustainability initiatives. We remain committed to using our time, talents, resources, and relationships to grow in a manner that makes the world and the environment better for future generations.
Our focus on industry-leading, national and super-regional retailers provides for long-term relationships with many environmentally conscientious retailers. This is particularly meaningful because the Company’s portfolio is primarily comprised of properties that are leased to tenants under long-term net leases where the tenant is generally responsible for maintaining the property and implementing environmentally responsible practices.
In 2022, we enhanced our engagement with our retail partners on shared sustainability initiatives at our properties, such as installing electric vehicle (EV) chargers, introducing green lease language into our standard lease forms, and executing several green leases with tenants. We also worked closely with our consultant to conduct a greenhouse gas emissions inventory, and we will report this data in our 2022 ESG Report.
S
ocial
R
esponsibility
At Agree, our employees are the foundation of our success, and we endeavor to make sure they have a welcoming and inclusive work environment and that we support their needs. The Company offers numerous benefits, including competitive compensation plans, health and disability insurance, and physical and financial wellness support. Our benefits include the following:
10
•
Compensation: includes base salaries, annual cash bonuses, long-term equity compensation and ongoing access to financial planning resources
•
Insurance: 100% employer paid premiums for medical benefit plans for full-time team members, their spouse, and dependents and 100% employer paid premiums for Short-Term and Long-Term disability to help cover a team member’s financial losses
•
Retirement: Simple IRA with a Company match of up to 3% of annual earnings
•
Training and Education: provides development opportunities through ADC University, the ADC Rotational Program and lunch & learns on a variety of topics
•
Agree Wellness Program: focuses on physical and financial wellness to enhance team members’ well-being
Agree Realty values and supports an inclusive and diverse community for colleagues, stakeholders, vendors, and the broader communities which we conduct business in. We make it our mission on a daily basis to ensure that we operate in an environment free of discrimination, which includes freedom from harassment.
Company culture is a key factor to our performance. We have a Culture Committee comprising team members from different departments. The Committee’s mission is to create community through camaraderie. The Committee plans multiple events throughout the year including social events, volunteer activities, and opportunities to celebrate the Team’s success. The Company also regularly sponsors local charities, showing our commitment to the communities in which we operate.
C
orporate
G
overnance
We are committed to managing the Company for the benefit of our stockholders and are focused on maintaining good corporate governance. Our Board is ultimately responsible for ESG Oversight. The Nominating & Governance Committee of the Board oversees our management-level ESG Steering Committee, which sets our ESG strategy and ensures our strategy is implemented throughout our operations.
Our Board has nine directors, seven of whom are independent. Five new independent directors have been added since 2018. Independent directors meet quarterly, without the presence of officers or team members. A Lead Independent Director was appointed in 2019. The Board has adopted an insider trading policy that applies to all directors, officers and team members.
The Company does not have a poison pill and maintains stock ownership guidelines for directors and named executive officers requiring specified levels of stock ownership. Time-vested stock grants to officers and team members provide long-term alignment, while performance-based stock grants to named executive officers utilize total shareholder return, with the amount of the grants intended to increase as total returns to stockholders increase, further enhancing alignment. Our Board has established a succession plan for the Chief Executive Officer to cover emergencies and other occurrences.
We are committed to maintaining the highest standards for ethics and integrity. Directors, officers, and team members are responsible for promoting honest and ethical conduct. The Board has adopted a Code of Business Conduct and Ethics and Corporate Governance Guidelines that apply to all Directors, officers and team members of the Company. Officers and team members are required to certify their compliance on an annual basis.
11
P
roposal
S
ummary and
R
ecommendations
|
Proposal
No. |
| |
Description
|
| |
Board’s
Recommendation |
| |
Page
|
|
| 1 | | | The election of three directors nominated by our Board of Directors and named in the accompanying Proxy Statement to hold office until the 2026 Annual Meeting | | |
For
|
| |
49
|
|
| 2 | | | Ratification of the appointment of Grant Thornton as our independent registered public accounting firm for the year 2023 | | |
For
|
| |
53
|
|
| 3 | | | A non-binding vote to approve executive compensation of our named executive officers as described in the accompanying Proxy Statement. | | |
For
|
| |
54
|
|
| 4 | | | A non-binding vote on whether an advisory vote on the compensation of our named executive officers should occur every one, two or three years | | |
Every Year
|
| |
55
|
|
12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
S
ecurity
O
wnership of
M
anagement
The following table sets forth information regarding the beneficial ownership of our common stock (our only outstanding class of voting securities) as of March 17, 2023, with respect to each director and named executive officer, and all of our directors and executive officers as a group. As of March 17, 2023, there were 90,253,104 shares of our common stock outstanding. Unless otherwise indicated, each person has sole voting and investment power with respect to the shares listed below and none of the named executive officers or directors has pledged his or her shares of common stock as collateral. Unless otherwise indicated, the business address for each of the identified stockholders is 70 E. Long Lake Road, Bloomfield Hills, Michigan 48304.
|
Name of Beneficial Owner
|
| |
Amount and Nature of
Beneficial Ownership (1) |
| |
Percent of
Class (2) |
| ||||||
| Richard Agree | | | | | 578,806 (3) | | | | | | * | | |
| Joel Agree | | | | | 514,303 (4) | | | | | | * | | |
| Peter Coughenour | | | | | 5,543 | | | | | | * | | |
| Craig Erlich | | | | | 31,351 (5) | | | | | | * | | |
| Danielle Spehar | | | | | 11,431 | | | | | | * | | |
| Nicole Witteveen | | | | | 8,394 | | | | | | * | | |
| Karen Dearing | | | | | 6,922 | | | | | | * | | |
| Merrie S. Frankel | | | | | 7,088 | | | | | | * | | |
| Michael Hollman | | | | | 4,019 | | | | | | * | | |
| Michael Judlowe | | | | | 6,173 (6) | | | | | | * | | |
| Gregory Lehmkuhl | | | | | 15,782 | | | | | | * | | |
| John Rakolta, Jr. | | | | | 271,486 (7) | | | | | | * | | |
| Jerome Rossi | | | | | 6,613 | | | | | | * | | |
|
All directors and executive officers as a group (14 persons,
excluding former officers) |
| | | | 1,473,615 (8) | | | | | | 1.6 % | | |
*
Less than 1%
(1)
The amount of common stock beneficially owned is reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Amounts include the following number of unvested shares of restricted stock as of March 17, 2023: Mr. Richard Agree: 19,113 shares, Mr. Joel Agree: 108,128 shares, Mr. Coughenour: 4,306 shares, Mr. Erlich: 11,355 shares, Ms. Spehar: 8,182 shares, Ms. Witteveen: 7,137 shares, Ms. Dearing: 2,661 shares, Ms. Frankel: 1,501 shares, Mr. Hollman: 1,501 shares, Mr. Judlowe: 2,457 shares, Mr. Lehmkuhl: 2,457 shares, Mr. Rakolta: 2,457 shares, Mr. Rossi: 1,501 shares; and all executive officers and directors as a group, 169,835 shares.
(2)
Percentages are based on 90,253,104 shares of common stock outstanding as of March 17, 2023. The amount of common stock outstanding used in calculating such percentages assumes that none of the common limited partnership units in Agree Limited Partnership (the “Common OP Units”) are converted to common stock.
(3)
Consists of (i) 413,939 shares owned directly, (ii) 70,512 shares owned by his spouse and (iii) 94,355 shares owned by irrevocable trusts for his children and does not include 347,619 shares of common stock issuable upon conversion of his Common OP Units.
(4)
Consists of 514,253 shares owned directly and 50 shares owned by his children.
(5)
Consists of 30,651 shares owned directly and 700 shares owned by his children.
(6)
Consists of 6,073 shares owned directly and 100 shares owned by his spouse.
(7)
Consists of 271,273 shares owned directly and 213 shares owned by his spouse.
(8)
Does not include 347,619 shares of common stock issuable upon conversion of Common OP Units.
13
S
ecurity
O
wnership of
C
ertain
B
eneficial
O
wners
The following table sets forth information regarding the beneficial ownership of our common stock (our only outstanding class of voting securities) as of March 17, 2023, to our knowledge, for each beneficial owner of more than 5.0% of the outstanding shares of our common stock. As of March 17, 2023, there were 90,253,104 shares of our common stock outstanding.
|
Name of Beneficial Owner
|
| |
Amount and Nature of
Beneficial Ownership (1) |
| |
Percent of
Class (2) |
| ||||||
| BlackRock, Inc. | | | | | 17,163,492 (3) | | | | | | 19.0 % | | |
| The Vanguard Group | | | | | 13,970,181 (4) | | | | | | 15.5 % | | |
| State Street Corporation | | | | | 5,331,244 (5) | | | | | | 5.9 % | | |
(1)
The amount of common stock beneficially owned is reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities.
(2)
Percentages are based on 90,253,104 shares of common stock outstanding as of March 17, 2023. The amount of common stock outstanding used in calculating such percentages assumes that none of the Common OP Units are converted to common stock.
(3)
Pursuant to Schedule 13G/A (Amendment No. 1) filed with the SEC on January 26, 2023 by BlackRock, Inc. Represents holdings of various subsidiaries of the holding company and includes ownership of more than 5% of our common stock by Blackrock Fund Advisors, and iShares Core S&P Small-Cap ETF. The business address of such person is 55 East 52
nd
Street, New York, NY 10055. BlackRock, Inc. is deemed to have sole voting power with respect to 16,664,878 shares and sole dispositive power with respect to 17,163,492 shares.
(4)
Pursuant to Schedule 13G/A (Amendment No. 10) filed with the SEC on February 9, 2023 by The Vanguard Group. Represents 13,970,181 shares of common stock beneficially owned by The Vanguard Group and certain of its affiliates. The business address of such person is 100 Vanguard Blvd., Malvern, PA 19355. The Vanguard Group is deemed to have shared voting power with respect to 136,663 shares, sole dispositive power with respect to 13,750,579 shares and shared dispositive power with respect to 219,602 shares.
(5)
Pursuant to Schedule 13G/A filed with the SEC on February 6, 2023 by State Street Corporation Represents 5,331,244 shares of common stock beneficially owned by State Street Corporation and certain of its affiliates. The business address of such person is 1 Lincoln Street, Boston, MA 02111. State Street Corporation is deemed to have shared voting power with respect to 4,141,565 shares and shared disposition power with respect to 5,331,244 shares.
14
BOARD MATTERS
T
he
B
oard of
D
irectors
The Board has general oversight responsibility for our affairs, and the directors, in exercising their duties, represent and act on behalf of the stockholders. Although the Board does not have responsibility for our day-to-day management, it stays regularly informed about our business and provides guidance to management through periodic meetings and other informal communications. The Board is significantly involved in, among other things, the strategic and financial planning process, leadership development and succession planning, as well as other functions carried out through the Board committees as described below.
Board Leadership Structure.
The Board recognizes that one of its key responsibilities is to evaluate and determine its optimal leadership structure so as to provide independent oversight of management. The Board understands that there is no single, generally accepted approach to providing board leadership and the right board leadership structure may vary as circumstances warrant.
Richard Agree served as our Chairman of the Board and Chief Executive Officer from December 1993 to January 2013 and has served as our Executive Chairman of the Board since January 2013. Joel Agree served as our President and Chief Operating Officer until his promotion to Chief Executive Officer in January 2013 and has served as a director since June 2009. Subject to the direction of the Board, including the Executive Chairman, Joel Agree has general responsibility and ultimate authority for the implementation of our policies. Based on a review of the Board leadership structure in 2019, the Board created the Lead Independent Director position to further promote independence and to demonstrate our commitment to corporate governance. Mr. Lehmkuhl has served as the Lead Independent Director since December 2020.
The Board, which consists of a majority of independent directors, exercises a strong, independent oversight function. This oversight function is enhanced by the fact that the Audit Committee, the Compensation Committee and the Nominating and Governance Committee are comprised entirely of independent directors and by oversight by the Lead Independent Director. Under our Bylaws and Corporate Governance Guidelines, the Board has the ability to change its structure, should that be deemed appropriate and in the best interest of our Company and our stockholders. The Board believes that these factors provide the appropriate balance between the authority of those who oversee our Company and those who manage it on a day-to-day basis.
Risk Management.
The Board takes an active and informed role in our risk management policies and strategies. Our executive officers, who are responsible for our day-to-day risk management practices, present to the Board on the material risks to our Company, including credit risk, liquidity risk, operational risk, risk related to information technology and cybersecurity. At that time, the management team also reviews with the Board our risk mitigation policies and strategies specific to each risk that is identified. Our Compensation Committee reviews and determines whether any of our compensation policies or practices subject the Company to inappropriate risk. Our Audit Committee role includes assisting the Board in fulfilling its responsibilities related to the oversight of major financial exposures review generally the guidelines and policies governing the process by which management assesses and manages such risk exposures, accounting and reporting processes; our system of internal accounting and financial controls; our technology security policies and internal cybersecurity and privacy controls. Our Audit Committee reviews and determines cybersecurity, privacy, information security and financial risk exposures and the steps our management has taken to monitor and control these exposures. Throughout the year, management monitors our risk profile and updates the Board as new material risks are identified or the aspects of a risk previously presented to the Board materially change.
Meetings.
The Board and its committees meet throughout the year at regularly scheduled meetings, and also hold special meetings and act by written consent as appropriate. The Board met four times during 2022. During 2022, each director attended, virtually or in person, 75% or more in aggregate of (i) the number of meetings of the Board and (ii) the number of meetings held by all committees of the Board on which such director served. It has been and is the policy of the Board that directors attend annual meetings of stockholders except where the failure to attend is due to unavoidable circumstances
15
or conflicts discussed in advance by the director with the Chairman of the Board. Each director serving on the Board at the time of the 2022 annual meeting attended our 2022 annual meeting of stockholders.
Lead Independent Director.
Our independent directors meet in executive sessions quarterly without management. As Lead Independent Director, Mr. Lehmkuhl presides at executive sessions of our independent directors and Board meetings at which the Executive Chairman is not present; serves as liaison between the Executive Chairman and management as needed; reviews and approves Board meeting agendas, topics and schedules; communicates as appropriate with the Executive Chairman and management regarding matters discussed by the independent directors; and performs other duties as the Board may from time to time delegate to assist the Board in fulfilling its responsibilities.
Director Independence.
The NYSE listing standards set forth objective requirements for a director to satisfy, at a minimum, in order to be determined to be independent by the Board. In addition, in order to conclude a director is independent in accordance with the NYSE listing standards, the Board must also consider all relevant facts and circumstances, including commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships. Pursuant to our Corporate Governance Guidelines and the NYSE listing standards, which require that a majority of our directors be independent within the meaning of the NYSE listing standards, the Board undertook a review of the independence of all non-management directors. The Board has affirmatively determined that the following seven of our nine directors are independent under NYSE listing standards and our Corporate Governance Guidelines and do not have a relationship with us that would interfere with such person’s ability to exercise independent judgment as a member of the Board: Ms. Dearing, Ms. Frankel, Mr. Hollman, Mr. Judlowe, Mr. Lehmkuhl, Mr. Rakolta, and Mr. Rossi. In making this determination, the Board has considered the relationships described below under “Related Person Transactions,” and determined they do not affect independence. The Board’s director independence standards outlined in our Corporate Governance Guidelines can be found on our website at www.agreerealty.com in the Corporate Governance FAQ section.
Stock Ownership Requirements.
To further align the interests of certain of our executive officers and directors with the interest of our stockholders, and to promote our commitment to sound corporate governance, the Board has adopted stock ownership guidelines. The stock ownership guidelines apply to the Executive Chairman, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, General Counsel and non-employee directors. A summary of those guidelines is set forth in “Compensation Discussion and Analysis — Stock Ownership Guidelines.”
C
ommittees of the
B
oard
The Board has delegated various responsibilities and authority to four standing committees of the Board. Each committee regularly reports on its activities to the full Board. Each committee, other than the Executive Committee, operates under a written charter approved by the Board, which is reviewed annually by the respective committees of the Board and is available in the Corporate Governance FAQ section of our website at www.agreerealty.com. Each committee may form, and delegate power and authority to, subcommittees of one or more of its members for any purpose that such committee deems appropriate. The Audit Committee, the Compensation Committee and the Nominating and Governance Committee are composed entirely of independent directors. In addition, the Board has determined that each member of the Audit Committee and the Compensation Committee qualifies as independent in accordance with the additional independence rules established by the SEC and NYSE. The table below sets forth the current membership of the four standing committees of the Board and the number of meetings held in 2022 by such committees:
16
|
Name
|
| |
Audit
|
| |
Compensation
|
| |
Nominating and
Governance |
| |
Executive
|
|
| Richard Agree | | | | | | | | | | | |
Chair
|
|
| Joel Agree | | | | | | | | | | | |
✓
|
|
| Karen Dearing | | |
Chair
|
| | | | | | | | | |
| Merrie S. Frankel | | |
✓
|
| | | | |
Chair
|
| | | |
| Michael Hollman | | |
✓
|
| | | | |
✓
|
| | | |
| Michael Judlowe | | | | | |
✓
|
| | | | |
✓
|
|
| Gregory Lehmkuhl | | | | | |
Chair
|
| |
✓
|
| | | |
| John Rakolta, Jr. | | | | | | | | | | | |
✓
|
|
| Jerome Rossi | | | | | |
✓
|
| |
✓
|
| | | |
| Number of Meetings in 2022 | | |
4
|
| |
2
|
| |
2
|
| |
1
|
|
Audit Committee.
The Audit Committee is responsible for providing independent, objective oversight of our auditing, accounting and financial reporting processes, including reviewing the audit results and monitoring the effectiveness of our internal audit function and review and discussing our policies and procedures with respect to cybersecurity risk assessment and risk management. In addition, the Audit Committee engages the independent registered public accounting firm. See “Audit-Related Matters — Report of the Audit Committee,” “Audit-Related Matters — Audit Committee Matters” and the Audit Committee’s charter for additional information on the responsibilities and activities of the Audit Committee.
The Board has determined that each Audit committee member has sufficient knowledge in reading and understanding financial statements to serve thereon and is otherwise financially literate, and that Ms. Dearing, Ms. Frankel and Mr. Hollman qualify as “audit committee financial experts” as that term is defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Board has further determined that Ms. Dearing, Ms. Frankel and Mr. Hollman possess financial management expertise within the meaning of the listing standards of the NYSE.
Compensation Committee.
The Compensation Committee is responsible for overseeing compensation and benefit plans and policies, reviewing and approving equity grants and otherwise administering share- based plans, and reviewing and approving annually all compensation decisions relating to our executive officers. The Compensation Committee also has authority to grant awards under the Company’s 2020 Omnibus Incentive Plan (the “2020 Plan”). See “Compensation Discussion and Analysis,” “Compensation Committee Report” and the Compensation Committee’s charter for additional information on the responsibilities and activities of the Compensation Committee.
Role of Management
.
After consultation with our executive officers, Joel Agree, our President and Chief Executive Officer, makes recommendations to the Compensation Committee with respect to the design and implementation of the compensation program for the named executive officers. See “Compensation Discussion and Analysis — Determining Compensation for Named Executive Officers.”
Role of Compensation Consultant
.
In 2022, the Compensation Committee engaged Meridian Compensation Partners, LLC (“Meridian”) to assist the Company and the Compensation Committee with matters related to the Company’s executive compensation program. The Compensation Committee determined that Meridian meets the criteria for an independent consultant in accordance with SEC guidelines for such services.
Nominating and Governance Committee.
The Nominating and Governance Committee is responsible for establishing the requisite qualifications for directors, identifying and recommending the nomination of individuals qualified to serve as directors, establishing corporate governance practices in compliance with applicable regulatory requirements and consistent with the highest standards, recommending to the Board the corporate governance guidelines applicable to the Company, leading the Board in its annual review of the performance of the Board and management, recommending directors for each Board committee and overseeing the evaluation of the Board, including its committees, and management of the Company. The Nominating and Governance Committee also establishes corporate
17
governance practices in compliance with applicable regulatory requirements consistent with the highest standards and recommends to the Board the corporate governance guidelines applicable to us. In addition, the Nominating and Governance Committee has formal oversight responsibility for the Company’s ESG program. Refer to the Nominating and Governance Committee’s charter for additional information on the responsibilities and activities of the Nominating and Governance Committee.
Director Qualifications
.
Our Nominating and Governance Committee has established policies for the desired attributes of the Board as a whole, including as set forth in our Corporate Governance Guidelines. The Board seeks to ensure that a majority of its members are independent within the NYSE listing standards. Further, each director generally may not serve as a member of more than three other public company boards. In addition, Audit Committee members may not simultaneously serve on the audit committee of more than two other public companies, unless the Board determines that such simultaneous service would not impair the ability of the member to effectively serve on the Audit Committee. Each director must possess personal integrity, leadership skills, a business and professional background that would complement the skills and experience of the other members of the Board, the ability to think strategically about the long-term interests of the Company and our stockholders, and a breadth of knowledge about matters affecting the Company and its industry. In addition, directors must be committed to devoting the time and effort necessary to be responsible and productive members of the Board. The Board values diversity, in its broadest sense, reflecting, but not limited to, profession, gender, race, ethnicity, age, skills and experience and endeavors to include women and minority candidates in the qualified pool from which Board candidates are chosen. The Nominating and Governance Committee conducts reviews of current directors in light of the considerations described above and their historical contributions to the Board. The Board reviews the effectiveness of its director candidate nominating practices annually.
Identifying and Evaluating Nominees
.
Generally, the Nominating and Governance Committee will re- nominate incumbent directors who continue to satisfy its criteria for membership on the Board, who it believes will continue to make important contributions to the Board and who consent to continue their service on the Board.
Our Nominating and Governance Committee periodically assesses the appropriate number of directors comprising the Board and whether any vacancies on the Board are expected due to retirement or otherwise. The Nominating and Governance Committee will evaluate the qualifications set forth above and may consider additional factors it deems appropriate including judgment, skill, strength of character, experience with businesses and organizations comparable to our size or scope and specialized knowledge or experience. Depending on the current needs of the Board, certain factors may be weighted more or less heavily by the Nominating and Governance Committee.
The Nominating and Governance Committee considers candidates for the Board from any responsible source, including current Board members, stockholders, professional search firms or other persons. The Nominating and Governance Committee does not evaluate candidates differently based on who has made the recommendation. The Nominating and Governance Committee has the authority under its charter to hire and pay a fee to consultants or search firms to assist in the process of identifying and evaluating candidates.
Stockholder Nominees
.
Our Bylaws permit stockholders to nominate directors for consideration at an annual meeting of stockholders. We did not receive any director nominations by stockholders for the 2023 Annual Meeting. The Nominating and Governance Committee will consider properly submitted stockholder submissions for nominations to the Board and will apply the same evaluation criteria in considering such nominees as it would to persons nominated under any other circumstances. Such nominations may be made by a stockholder entitled to vote, who delivers written notice along with the additional information and materials to our Secretary in compliance with the requirements set forth in our Bylaws and below in “Additional Information — Proposals for 2024 Annual Meeting.”
Any stockholder nominations proposed for consideration by the Nominating and Governance Committee should include the nominee’s name, sufficient biographical information to demonstrate that the nominee meets the qualification requirements for Board service as set forth under “Director Qualifications,” and such other information regarding each nominated person as set forth in our Bylaws and that would be required in a proxy statement filed pursuant to the SEC’s proxy rules in the event of an
18
election contest. The nominee’s written consent to the nomination should also be included with the nominating submission, which should be addressed to: Agree Realty Corporation, 70 E. Long Lake Road, Bloomfield Hills, MI 48304, Attention: Secretary.
Executive Committee.
The Executive Committee has the authority to acquire and dispose of real property and the power to authorize, on behalf of the full Board, the execution of certain contracts and agreements, including those related to our borrowing of money, and generally to exercise all other powers of the Board except for those which require action by a majority of the independent directors or the entire Board.
D
irector
C
ompensation
The Compensation Committee establishes and oversees our director compensation program. Director compensation is established with a view to attract highly qualified non-management directors and fairly compensate non-management directors for their time and effort on behalf of stockholders. In consultation with Meridian, our Compensation Committee regularly benchmarks our director compensation to that of our peers to ensure that it remains competitive to attract and retain non-employee directors.
2023 Compensation
As part of its review of director compensation in consultation with Meridian, effective on February 3, 2023, the Compensation Committee adopted an updated policy with respect to non-employee director compensation. Pursuant to this policy, each of our non-employee directors receives an annual retainer of $180,000, $110,000 of which is payable in restricted stock awards with one year vesting, and the remainder of which is payable, at each director’s election, either quarterly in cash or in an additional restricted stock award with one-year vesting.
Additionally, the Lead Independent Director and Audit Committee Chair receive an additional annual payment of $15,000, and the Chair of each of our Compensation and Nominating and Governance Committees receive an additional annual payment of $7,500. These payments are subject to the same cash or stock election described above.
2022 Compensation
Each non-management director who is not an employee of, or affiliated with, the Company received an annual fee of $132,000 in 2022. $66,000 of the annual fee was payable in restricted stock awards with one year vesting, and the remaining $66,000 was payable in either cash or stock at each Director’s election. Cash payments were made quarterly. Stock payments were made in February 2022, and vested on the first anniversary of the grant date.
In 2022, the Chairperson of the Audit Committee and the Lead Independent Director each received an additional $6,000, which were subject to the same cash or common stock election described above.
Non-management directors do not receive any additional compensation in any form for their service, including for attendance at meetings of the Board or its committees. The Company reimburses directors for out-of-pocket expenses incurred in connection with their service on the Board.
The following table provides compensation information for the year ended December 31, 2022 for each non-management director.
|
Name
|
| |
Fees Earned or
Paid in Cash (1) |
| |
Stock
Awards (2) |
| ||||||
| Karen Dearing (3) | | | | $ | 72,000 | | | | | $ | 66,000 | | |
| Merrie S. Frankel (4) | | | | | 66,000 | | | | | | 66,000 | | |
| Michael Hollman (5) | | | | | 66,000 | | | | | | 66,000 | | |
| Michael Judlowe (6) | | | | | 66,000 | | | | | | 66,000 | | |
| Gregory Lehmkuhl (7) | | | | | 72,000 | | | | | | 66,000 | | |
| John Rakolta, Jr. (8) | | | | | 66,000 | | | | | | 66,000 | | |
| Jerome Rossi (9) | | | | | 66,000 | | | | | | 66,000 | | |
19
(1)
Our non-management directors had the option to receive shares of common stock in lieu of a portion of their cash fees earned and reported in this column. The aggregate number of shares of common stock issued in lieu of cash for 2022 included: Ms. Dearing, 1,150; Mr. Judlowe, 1,054; and Mr. Rakolta, 1,054.
(2)
Reflects restricted stock awards granted under the 2020 Plan. The amounts reported represent the grant date fair value of the restricted stock award, which is the closing trading price of a share of our common stock on the grant date multiplied by the number of shares subject to the award. The Company does not pay fractional shares.
(3)
Ms. Dearing held 2,204 shares of unvested restricted stock as of December 31, 2022.
(4)
Ms. Frankel held 1,054 shares of unvested restricted stock as of December 31, 2022.
(5)
Mr. Hollman held 1,054 shares of unvested restricted stock as of December 31, 2022.
(6)
Mr. Judlowe held 2,108 shares of unvested restricted stock as of December 31, 2022.
(7)
Mr. Lehmkuhl held 1,054 shares of unvested restricted stock as of December 31, 2022.
(8)
Mr. Rakolta held 2,108 shares of unvested restricted stock as of December 31, 2022.
(9)
Mr. Rossi held 1,054 shares of unvested restricted stock as of December 31, 2022.
As a named executive officer of the Company, compensation paid to Joel Agree for fiscal 2022 is fully reflected under “
Executive Compensation Tables — Summary Compensation Table.”
Richard Agree does not receive any compensation for his service as a director, but he does receive compensation for his position as Executive Chairman. In 2022, he received 6,971 shares with an aggregate grant date fair value of $436,524. Such awards will vest ratably over a five-year period.
C
orporate
G
overnance
The Board has adopted Corporate Governance Guidelines, a copy of which can be found in the Corporate Governance section of our website at www.agreerealty.com. These guidelines address, among other things, director responsibilities, qualifications (including independence), compensation and access to management and advisors. The Nominating and Governance Committee is responsible for overseeing and reviewing these guidelines and recommending any changes to the Board.
The Board also has adopted a Code of Business Conduct and Ethics (the “Code of Conduct”), which sets out basic principles to guide the actions and decisions of all of our employees, officers, including our chief executive officer, chief financial officer and chief accounting officer, and directors. The Code of Conduct, also available in the Corporate Governance section of our website at www.agreerealty.com, covers numerous topics including honesty, integrity, conflicts of interest, compliance with laws, corporate opportunities and confidentiality. Waivers of the Code of Conduct are discouraged, but any waiver that relates to our executive officers or directors may only be granted by the Board. See “Related Person Transactions” for additional information on the Board’s policies and procedures regarding related person transactions. The Board recently adopted several new policies, including a Human Rights Policy, an ESG Policy, and a Whistleblower Policy.
Copies of our committee charters, Corporate Governance Guidelines, Code of Conduct, and other policies are available on our website and will be sent to any stockholder, without charge, upon written request to our executive offices: Agree Realty Corporation, 70 E. Long Lake Road, Bloomfield Hills, MI 48304, Attention: Secretary.
C
ommunications with the
B
oard
Interested parties who want to communicate with our non-management directors confidentially may do so by sending correspondence to:
Non-Management Directors
Agree Realty Corporation
70 E. Long Lake Road
Bloomfield Hills, MI 48304
Attention: Secretary
Agree Realty Corporation
70 E. Long Lake Road
Bloomfield Hills, MI 48304
Attention: Secretary
Please note that the mailing envelope must contain a clear notification that it is confidential and your letter should indicate whether you are a stockholder of the Company.
20
Interested parties and stockholders of the Company who want to communicate with the Board or any individual director can write to:
Agree Realty Corporation
70 E. Long Lake Road
Bloomfield Hills, MI 48304
Attention: Secretary
70 E. Long Lake Road
Bloomfield Hills, MI 48304
Attention: Secretary
Your letter should indicate that you are an interested party or a stockholder of the Company. Depending on the subject matter, the Secretary will:
•
Forward the communication to the director or directors to whom it is addressed;
•
Attempt to handle the inquiry directly; for example, where it is a request for information about our Company or if it is a stock-related matter; or
•
Not forward the communication if it is primarily commercial in nature or if it relates to an improper or irrelevant topic.
21
EXECUTIVE OFFICERS
The following table sets forth our executive officers, followed by biographical information regarding each executive officer who is not also a director.
|
Name
|
| |
Age
|
| |
Title
|
|
| Richard Agree | | |
79
|
| | Executive Chairman of the Board and Director | |
| Joel Agree | | |
44
|
| | President, Chief Executive Officer and Director | |
|
Peter Coughenour
|
| |
31
|
| | Chief Financial Officer and Secretary | |
| Craig Erlich | | |
55
|
| | Chief Operating Officer | |
| Danielle Spehar | | |
55
|
| | General Counsel | |
| Nicole Witteveen | | |
33
|
| | Executive Vice President of People & Culture, Chief of Staff | |
Peter Coughenour
has served as Chief Financial Officer since December 2021, and had served as Interim Chief Financial Officer since August 2021. He is responsible for leading the Company’s capital markets, investor relations, risk management and financial planning and analysis functions. He also chairs the Company’s ESG Steering Committee. Prior to his appointment as Interim Chief Financial Officer, Mr. Coughenour served as Vice President, Corporate Finance of the Company and has served in various finance roles since joining the Company in 2015. He holds a Bachelor of Arts in Economics from Indiana University. Mr. Coughenour is also a member of the International Council of Shopping Centers as well as the National Association of Real Estate Investment Trusts.
Craig Erlich
has served as Chief Operating Officer since February 2021. Prior to his appointment as Chief Operating Officer, Mr. Erlich served as the Company’s Chief Investment Officer since August 2020 and was a member of the Board from July 2018 to August 2020. Prior to his appointment as Chief Investment Officer, Mr. Erlich served as an Executive Vice President and General Manager of the George P. Johnson Company (“GPJ”), a global experiential marketing firm with 30 offices worldwide since 2015. Mr. Erlich had full responsibility for operations in GPJ’s world headquarters in Detroit, Michigan and its Nashville, Tennessee facilities. Prior to GPJ, Mr. Erlich was the owner, President and Chief Executive Officer of pulse220, a boutique meetings and events firm which he successfully sold to GPJ in 2015. Prior to pulse220, Mr. Erlich served as the President of QMS, a direct marketing and fulfillment firm in Detroit, Michigan. Mr. Erlich is a two-time nominee of the Ernst & Young Entrepreneur of the Year award and holds a Bachelor of Arts in Marketing from the Eli Broad College of Business at Michigan State University. Mr. Erlich currently serves on the Executive Board of the Michigan and Northwest Ohio Chapter of JDRF (formerly called the Juvenile Diabetes Research Foundation).
Danielle Spehar
joined the Company in 2016 as Vice President of Transactions and was promoted to General Counsel in February 2019. She is responsible for leading the Company’s transaction team and managing the Company’s legal affairs. Prior to joining the Company, Ms. Spehar was engaged in the private practice of law at Maddin, Hauser, Roth & Heller, P.C. from November 2001 to December 2016, where she previously served as a member of the firm’s Executive Committee, co-head of the firm’s Real Estate Practice Group and member of the firm’s Recruiting Committee. She has extensive experience in the leasing and the acquisition, sale, and development of commercial real estate. Ms. Spehar holds a Juris Doctor degree from the University of Detroit Mercy School of Law, a Master of Business Administration from Wayne State University and a Bachelor of Science in Business Administration from Central Michigan University. She is a member of the Real Property Section of the State Bar of Michigan as well as the American Bar Association.
Nicole Witteveen
joined the Company in April 2019 and has been serving as the Company’s Executive Vice President, People & Culture and Chief of Staff, since August 2021. She is responsible for the Company’s talent management practices and the administration team. Ms. Witteveen served as the Company’s Director, People & Culture from April 2019 to August 2019 and Vice President, People & Culture from August 2019 to August 2021. Prior to joining Agree, she previously led the Human Resources department at Career Now Brands from May 2018 to April 2019 and served as Lead People Resources Business Partner at Enova International from November 2015 to May 2018. Ms. Witteveen has extensive experience in talent management, employee engagement, and workforce planning. She holds a Bachelor of Arts in Organizational Studies from the University of Michigan.
22
COMPENSATION DISCUSSION AND ANALYSIS
O
verview of
C
ompensation
P
rogram
The Compensation Committee (referred to as the “Committee” in this section), composed entirely of independent directors, administers our executive compensation program. The Committee’s responsibilities include recommending and overseeing compensation, benefit plans and policies, reviewing and approving equity grants, administering share-based and unit-based plans, and reviewing and approving, annually, all compensation decisions relating to our executive officers. This section of the proxy statement explains how our compensation programs are designed and operate with respect to our named executive officers, which includes Joel Agree, our President and Chief Executive Officer; Peter Coughenour, our Chief Financial Officer and Secretary; Craig Erlich, our Chief Operating Officer; Danielle Spehar, our General Counsel; and Nicole Witteveen, Executive Vice President, People & Culture and Chief of Staff. The following discussion and analysis should be read together with the tables and related footnote disclosures detailed below.
C
ompensation
O
bjectives and
P
hilosophy
Our compensation program for the named executive officers generally consists of base salary, annual incentive awards, long-term share-based and unit-based incentive awards and certain other benefits. We also provide severance arrangements for certain of our named executive officers. The following summarizes the key principles and objectives of our approach to executive compensation:
➢
Provide total compensation that is both fair and competitive.
To attract and reduce the risk of losing the services of valuable officers but to avoid the expense of excessive pay, compensation should be competitive. The Committee assesses the competitiveness of our compensation for our executive officers by comparing our compensation to executive officer compensation at peer public companies.
➢
Attract, retain and motivate key executives who are critical to our operations.
The primary purpose of our executive compensation program has been, and is, to achieve our business objectives by attracting, retaining and motivating talented executive officers by providing them with incentives and economic security.
➢
Reward superior individual and Company performance on both a short-term and long-term basis.
Performance-based pay aligns the interests of management with the interests of our stockholders. Performance-based compensation motivates and rewards individual efforts and company success.
➢
Align executives’ long-term interests with those of our stockholders.
The Company seeks to align these interests by providing a significant portion of executive officer compensation in the form of common stock. Through stock ownership guidelines for named executive officers and grants of restricted common stock with time-based vesting provisions and performance unit awards, the amount of which are based on total shareholder return, the value of the executive officers’ total compensation should increase as total returns to stockholders increase. The Company expects the value of these elements as a percentage of each executive officer’s annual base salary to motivate executive officers to continually improve their performance and create value for the Company over the long-term. In 2023, the Company’s executive compensation program will continue to be designed to reward favorable execution of specific Company performance goals.
The Committee seeks to ensure the foregoing objectives are achieved by considering individual performance reviews, Company performance, hiring and retention needs, internal pay equity, market data and other external market pressures in finalizing its compensation determinations.
23
D
etermining
C
ompensation for
N
amed
E
xecutive
O
fficers
The Committee meets without management present to determine the compensation of the named executive officers. Prior to such meeting, the Committee receives compensation recommendations from Joel Agree, our President and Chief Executive Officer. We believe that because of his experience with our Company and his involvement in setting and executing the Company’s business goals, strategies, and performance, he is able to provide valuable input regarding the overall effectiveness of the management team and each individual’s contribution to our performance. Joel Agree’s recommendations are supported by formal performance reviews for each named executive officer which include an evaluation of the individual’s performance against pre-determined performance metrics. The Committee retains the discretion to modify his recommendations and reviews such recommendations for their reasonableness based on Company performance, market information, and the Committee’s compensation philosophy and related considerations. Joel Agree does not provide input with respect to his own compensation.
In 2022, the Company and the Committee utilized Meridian to assist the Company with matters related to the composition of the Company’s compensation peer group and the Company’s establishment of, accounting for, and benchmarking of its executive compensation program.
C
ompensation
C
ommittee
C
onsideration of the
2022 V
ote on
E
xecutive
C
ompensation
In determining our executive compensation program for the remainder of 2022 and for 2023, the Committee considered the results of the 2022 advisory vote of our stockholders on executive compensation presented in our 2022 proxy statement. The Committee noted that prior to 2022, at least 95% of votes cast on our say-on-pay proposal approved executive compensation in each of the past 10 years. In 2022, while there were few changes to the Company’s compensation practices compared to prior years, the recommendation of the proxy advisory firm ISS changed, and the percentage of votes that were cast in support of executive compensation declined to 77%. To better understand stockholder concerns, we reached out to stockholders representing more than 77% of outstanding shares and communicated with approximately 65% of outstanding shares. The table below summarizes the feedback received from those conversations and the actions taken in response:
|
Stockholder Feedback
|
| |
Response
|
|
| The Company does not have a cap on payouts if absolute TSR is negative | | | The Company introduced a payout cap on performance units at 100% if absolute TSR is negative, starting with 2023 awards | |
| The Company does not disclose metrics and actual results for MBOs | | | In additional definitive materials filed in April 2022, the Company disclosed MBO metrics and actual results for 2021, and has continued that practice in this proxy statement, disclosing MBO metrics and actual results for 2022 | |
| The Company does not disclose the “net lease peer group” which is weighted 50% for TSR measurements for performance units | | | The Company disclosed its net lease peer group in the additional definitive materials filed in April 2022, and continued that practice in this proxy statement | |
| With respect to performance units previously disclosed, the Company does not disclose its performance results for prior periods | | | The Company historically disclosed performance results for prior periods in its annual report on Form 10-K, and has now incorporated that disclosure into this proxy statement | |
| LTI awards are 50% performance-based and 50% time-based, and stockholders would like to see a heavier weighting towards performance-based awards | | | The Compensation Committed decided to change LTI awards to be 55% performance-based and 45% time-based for all NEOs for 2023 | |
24
E
lements and
C
riteria of
C
ompensation in
2022
for
N
amed
E
xecutive
O
fficers
Our compensation program for named executive officers generally consists of base salary, annual cash incentive awards, long-term share-based and unit-based incentive awards and certain other benefits. We also provide severance arrangements for certain of our named executive officers. Below is an overview of the main components of the Company’s compensation program:
|
Component
|
| |
Description
|
| |
Objectives
|
|
| Annual Base Salary | | | Fixed cash compensation. Reviewed and adjusted periodically. Annual base salaries for executives are a minority of total compensation. | | | Attract and retain key executives by providing reliable source of income. Help contribute to total cash compensation that is competitive but not in excess of the market. | |
|
Annual Cash Incentive
|
| | “At risk” variable cash compensation based on company performance goals and individual performance goals. | | | Encourages executives to perform at a high-level and achieve annual company and individual performance goals. | |
| Restricted Shares | | | Awards vest in equal installments over a multi-year period. “At risk” given they are subject to continued service with the Company and may fluctuate in value based on the Company’s stock price. | | | Promotes long-term equity ownership by executives. Encourages the retention of executives and further aligns their interests with those of our stockholders. | |
| Performance Units | | | “At risk” variable equity compensation based on company performance over three-year performance period. Awards are granted in the form of common stock. | | | Encourages executives to achieve long-term performance targets, while incentivizing retention. Further aligns executives’ interest with those of our stockholders. | |
In consultation with Meridian, the Committee assesses the competitiveness of the Company’s current compensation levels for the named executive officers on an annual basis, considering the objectives above. This assessment compares the Company’s compensation of certain named executive officers to the same officer levels of a peer group. In 2022, the Committee worked with Meridian to determine a new peer group comprising companies of comparable size and performance. The Committee selected 13 publicly traded REITs, considering factors including enterprise value, market capitalization, funds from operations, total assets and alignment with peer groups selected by proxy advisory firms. The members of the peer group are:
| | Acadia Realty Trust | | | LXP Industrial Trust | |
| | Broadstone Net Lease, Inc. | | | National Retail Properties, Inc. | |
| | EastGroup Properties, Inc. | | | Retail Opportunity Investments Corp. | |
| | EPR Properties | | | Rexford Industrial Realty, Inc. | |
| | Essential Properties Realty Trust, Inc. | | | SITE Centers Corp. | |
| | Kite Realty Group Trust | | | Spirit Realty Capital, Inc. | |
| | | | | STAG Industrial, Inc. | |
According to the materials provided to the Committee, which members of management prepared and Meridian reviewed: (i) enterprise values of the peer group ranged from approximately $3.4 billion to approximately $12.6 billion, and the Company’s enterprise value was in the 65
th
percentile of the peer group; and (ii) market capitalizations of the peer group ranged from approximately $1.4 billion to approximately $10.4 billion, and the Company’s market capitalization was in the 80
th
percentile of the peer group.
The materials provided to the Committee and reviewed by Meridian included the tenure of the executive officers of the peer group companies in their current positions, as well as the following compensation components for the executive officers of the peer group companies: (i) base salary (data
25
primarily from 2021), (ii) target annual incentives (data primarily from 2021), (iii) target total cash compensation (sum of (i) and (ii)), (iv) long-term incentives (data primarily from 2021) and (v) total direct compensation (sum of (iii) and (iv)).
Based on the materials provided to the Committee, we believe that our compensation program is competitive and provides an appropriate mix of fixed and at-risk pay, while incentivizing both the achievement of short-term performance goals and long-term value creation for our stockholders. The Company sets annual base salaries at a level it believes necessary to attract and retain the named executive officers, commensurate with the officers’ responsibilities, reputations, and experience. The Company sets annual cash target incentive awards at levels it believes necessary to attract and retain the named executive officers, the amount of which ultimately is approved by the Committee and depends on management’s achievement of certain Company and individual objectives. The Company has also determined to pay time-based long-term equity incentive compensation to (i) encourage the named executive officers to pursue strategies that will create long-term value for our stockholders, (ii) align the interests of management with those of our stockholders by tying a significant portion of compensation to the value of common stock with time-based vesting and (iii) promote continuity of management by retaining our named executive officers.
For fiscal year 2022, the Committee paid or granted compensation that consisted of: (i) annual cash base salaries; (ii) annual cash incentive awards; and (iii) two forms of long-term equity-based compensation: 50% restricted share awards subject to time-based vesting provisions over a five-year period and 50% performance-based equity awards subject to a performance-based measurement period of three years and vesting provisions over a three-year period. The following narrative discusses the components of fiscal year 2022 compensation.
B
ase
S
alary
In 2022, each named executive officer received an annual base salary paid in cash. Initial base salaries of our named executive officers are negotiated in connection with their hiring, and the Committee reviews the base salaries of the named executive officers on an annual basis.
The Committee believes that base salary is a primary factor in retaining and attracting key employees in a competitive marketplace, as well as in preserving an employee’s commitment during downturns in the REIT industry and/or equity markets. When determining the base salary for each of the named executive officers, the Committee considers the individual’s experience, current performance, potential for advancement, internal pay equity and market data.
The base salaries paid to the named executive officers in 2022 are set forth below in the “Executive Compensation Tables — Summary Compensation Table.” For 2022, taking into account benchmarking data and individual performance, the Committee approved base salaries for the named executive officers as set forth below:
|
Named Executive Officer
|
| |
2021
Base Salary |
| |
2022
Base Salary |
| |
Change in
Salary (%) |
| |||||||||
| Chief Executive Officer | | | | $ | 875,000 | | | | | $ | 875,000 | | | | | | 0 % | | |
| Chief Financial Officer | | | | $ | 350,000 | | | | | $ | 350,000 | | | | | | 0 % | | |
| Chief Operating Officer | | | | $ | 400,000 | | | | | $ | 420,000 | | | | | | 5 % | | |
| General Counsel | | | | $ | 330,000 | | | | | $ | 375,000 | | | | | | 14 % | | |
| EVP, People & Culture and Chief of Staff | | | | $ | 225,000 | | | | | $ | 236,000 | | | | | | 5 % | | |
T
he
E
xecutive
I
ncentive
P
lan
The Company maintains an Executive Incentive Plan under which annual cash and long-term equity incentive awards for 2022 were granted to our participating named executive officers by our Committee. For purposes of the Executive Incentive Plan during 2022, participating named officers include the Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, General Counsel, and Executive Vice President, People & Culture, Chief of Staff.
26
In 2022, the Committee continued its practice of awarding annual cash awards and long-term equity incentive awards under the Executive Incentive Plan. In February 2020, following a review of the Company’s long-term equity incentive award program against that of its peer group, the Committee amended its Executive Incentive Plan through the establishment of fixed equity awards for each named executive officer. In connection with this decision, in February 2022, the Committee granted to certain executive officers long-term equity incentive awards comprised of restricted common stock and performance units. The restricted common stock awards are subject to time-based vesting conditions, and the restricted performance unit awards are subject to performance-based vesting conditions, which were established at the time of grant. A detailed summary of the awards and the vesting conditions are set forth below under “Long-Term Equity Incentive Compensation.”
Annual Cash Incentive Awards.
The Committee believes that annual cash incentive awards provide a meaningful incentive for the achievement of short-term Company and individual goals, while assisting us in retaining, attracting and motivating employees in the near term. The 2022 objectives were approved by the Committee in February 2022. For the Chief Executive Officer, the Committee considered that the target opportunity is set at a below-market 150% of base salary. This design was intentional as the Committee determined that a 150% target with a 233% maximum payout (350% of base salary) was more shareholder friendly and designed to incentivize corporate outperformance than a 175% target with a 200% maximum payout (same 350% of base salary). With this intentional design, the Committee was choosing to not overpay for merely target performance, while at the same time properly rewarding exceptional results. The 2022 threshold, target, and maximum cash incentive award opportunity, as well as the 2022 actual award as a percentage of base salary, is included below.
| | | |
2022 Annual Cash Incentive Bonus Opportunity
(as % of Base Salary) |
| |||||||||
|
Position
|
| |
Threshold
|
| |
Target
|
| |
Maximum
|
| |
2022 Actual
|
|
| Chief Executive Officer | | |
75%
|
| |
150%
|
| |
350%
|
| |
350%
|
|
| Chief Financial Officer | | |
50%
|
| |
100%
|
| |
150%
|
| |
150%
|
|
| Chief Operating Officer | | |
50%
|
| |
75%
|
| |
150%
|
| |
143%
|
|
| General Counsel | | |
25%
|
| |
50%
|
| |
100%
|
| |
100%
|
|
| EVP, People & Culture and Chief of Staff | | |
25%
|
| |
50%
|
| |
75%
|
| |
75%
|
|
The annual cash incentive opportunities were awarded to the extent the Company attained certain threshold, target or maximum-level achievements for the following performance goals during 2022, as certified by the Committee in February 2023:
AFFO Growth Goal:
For the Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, General Counsel and Executive Vice President People & Culture, Chief of Staff, 50% of the award was based upon year-over-year percentage growth of the Company’s AFFO per share. The 2022 threshold, target, and maximum- level achievements and 2022 actual performance is included below:
| | | |
Threshold
|
| |
Target
|
| |
Maximum
|
| |
2022 Actual
|
|
|
AFFO Growth
|
| |
5.0%
|
| |
7.0%
|
| |
9.0%
|
| |
9.2%
|
|
|
Cash Award Summary
|
| |
Threshold
|
| |
Target
|
| |
Maximum
|
| |
2022 Actual
|
| |
Award % of Target
|
|
| Chief Executive Officer | | |
$328,125
|
| |
$656,250
|
| |
$1,531,250
|
| |
$1,531,250
|
| |
233%
|
|
| Chief Financial Officer | | |
$ 87,500
|
| |
$175,000
|
| |
$ 262,500
|
| |
$ 262,500
|
| |
150%
|
|
| Chief Operating Officer | | |
$105,000
|
| |
$157,500
|
| |
$ 315,000
|
| |
$ 315,000
|
| |
200%
|
|
| General Counsel | | |
$ 46,875
|
| |
$ 93,750
|
| |
$ 187,500
|
| |
$ 187,500
|
| |
200%
|
|
| EVP, People & Culture and Chief of Staff | | |
$ 29,500
|
| |
$ 59,000
|
| |
$ 88,500
|
| |
$ 88,500
|
| |
150%
|
|
Management Business Objectives:
For the Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer, 35%, 35%, and 40%, respectively, of the award was based upon the achievement of specific operating and management business objectives. The specific operating and management business objectives are detailed below:
27
|
Management Business Objectives
|
| |
Threshold
|
| |
Target
|
| |
Maximum
|
| |
Actual
|
|
| Portfolio Occupancy | | |
96.5%
|
| |
97.5%
|
| |
98.5%
|
| |
99.7%
|
|
| Investment Grade Tenants as % of Annualized Base Rent | | |
60.0%
|
| |
62.5%
|
| |
65.0%
|
| |
67.8%
|
|
| Development & Partner Capital Solutions Commenced | | |
$25.0
|
| |
$50.0
|
| |
$75.0
|
| |
$109.6
|
|
| Acquisition Volume | | |
$1,000.0
|
| |
$1,200.0
|
| |
$1,400.0
|
| |
$1,592.7
|
|
| Net Debt to Recurring EBITDA at Year-End (1) | | |
5.5x
|
| |
5.0x
|
| |
4.5x
|
| |
3.1x
|
|
| Fixed Charge Coverage Ratio at Year-End | | |
4.50x
|
| |
4.75x
|
| |
5.00x
|
| |
5.01x
|
|
$ in millions.
(1)
Proforma for the settlement of any outstanding forward equity at year-end.
The threshold, target, and maximum-level achievements and 2022 actual performance is included below:
|
Cash Award Summary
|
| |
Threshold
|
| |
Target
|
| |
Maximum
|
| |
2022 Actual
|
| |
Award % of Target
|
|
| Chief Executive Officer | | |
$229,688
|
| |
$459,375
|
| |
$1,071,875
|
| |
$1,071,875
|
| |
233%
|
|
| Chief Financial Officer | | |
$ 61,250
|
| |
$122,500
|
| |
$ 183,750
|
| |
$ 183,750
|
| |
150%
|
|
| Chief Operating Officer | | |
$ 84,000
|
| |
$126,000
|
| |
$ 252,000
|
| |
$ 252,000
|
| |
200%
|
|
| General Counsel (1) | | |
N/A
|
| |
N/A
|
| |
N/A
|
| |
N/A
|
| |
N/A
|
|
| EVP, People & Culture and Chief of Staff (1) | | |
N/A
|
| |
N/A
|
| |
N/A
|
| |
N/A
|
| |
N/A
|
|
(1)
The awards for the General Counsel and Executive Vice President, People & Culture and Chief of Staff were not related to the achievement of specific operating results given the nature of their positions.
Subjective Achievements:
For the Chief Executive Officer and Chief Financial Officer, 15% of the award was based upon the Committee’s subjective review of activities or objectives determined at the discretion of the Committee. For the Chief Operating Officer, 10% of the award was based upon the Committee’s subjective review of activities or objectives determined at the discretion of the Committee. For the General Counsel and Executive Vice President People & Culture, Chief of Staff, 50% of the award was based upon the Committee’s subjective review of activities or objectives determined at the discretion of the Committee.
While the Committee takes the Chief Executive Officer’s recommendations under advisement in determining each named executive officer’s individual performance, the Committee retains the discretion to make the final compensation decision. The Committee evaluates each named executive officer’s performance through reports by these executives to the Board, and through other interactions with these executives concerning the Company’s strategy, operations, and performance. In reaching the subjective compensation decisions, the Committee evaluated the contribution of each named executive officer to the Company’s many achievements in 2022, including robust total shareholder returns, record investment volume while maintaining a high-quality portfolio, and conservative and proactive balance sheet management which strategically positioned the Company for continued growth.
Long-Term Equity Incentive Compensation.
The Committee believes that share-based incentive awards, with multi-year vesting, provide a strong incentive for employees to focus on our long-term fundamentals and thereby create long-term stockholder value. These awards also assist us in maintaining a stable, continuous management team in a competitive market. The Committee historically has issued restricted stock for purposes of long-term incentive compensation, which provides significant upside incentive and aligns our officers’ interests with our stockholders, while also maintaining some down-market protection. In 2022, the Committee determined to grant long-term equity grants consisting of 50% restricted common stock and 50% performance units.
Awards of Restricted Common Stock
.
The shares of restricted common stock granted to the individuals in February 2022 vest ratably over a five-year period with one-fifth (1/5
th
) of the shares on each of the first, second, third, fourth and fifth anniversaries of the grant date. The Committee awarded
28
an aggregate of 37,766 shares of restricted common stock for the 2022 incentive plan year for a total value of $2,364,907 to certain named executive officers. The grant date fair value of each share was $62.62 based on the closing sales price of our common stock on February 23, 2022. The grants were as follows: Joel Agree, 27,946 shares; Peter Coughenour, 1,437 shares; Craig Erlich, 3,593 shares; Danielle Spehar, 2,395 shares; and Nicole Witteveen, 2,395 shares.
Awards of Performance Units
.
The Committee awarded an aggregate of 33,934 performance units for a total value of $2,327,455 to the participating named executive officers on February 23, 2022. The number of units awarded were calculated based on the closing sales price of our common stock on the grant date of February 23, 2022, which was $62.62. The grants were as follows: Joel Agree, 27,946 units; Craig Erlich, 3,593 units; and Danielle Spehar, 2,395 units. The awards are subject to forfeiture in the event that the performance level is below threshold, as defined in the table below. The actual number of units to eventually be earned by the individuals will be calculated based on a three-year performance period beginning on January 1, 2022 and will be based on the achievement of the following performance goals:
•
Position within the MSCI US REIT Index: 50% of the award is based upon the TSR percentile rank versus the MSCI US REIT index for the three-year performance period; and
•
Position within the Company-defined Peer Group: 50% of the award is based upon TSR percentile rank versus a specified net lease peer group for the three-year performance period. The net lease peer group is defined as:
| |
◦
EPR Properties
◦
Essential Properties Trust, Inc.
◦
Four Corners Property Trust, Inc.
◦
Getty Realty Corporation
|
| |
◦
National Retail Properties, Inc.
◦
Realty Income Corporation
◦
Spirit Realty Capital, Inc.
◦
W.P. Carey Inc.
|
|
Following the three-year performance period, shares of restricted common stock will be issued correlating to the levels of achievement on the performance units: 50% at Threshold, 100% at Target, and 150% at Maximum. Achievement percentages between the threshold and target and between the target and maximum levels will be interpolated based on actual results in each category. Following the performance period, one-third of the shares earned will vest each year for three years. Performance levels and corresponding award funding levels for 2022 performance units are summarized in the below table:
| |
Performance Level
|
| |
3-Year Relative
TSR Positioning |
| |
% of Target
Award Funded |
|
| |
Below Threshold
|
| |
Below 25
th
Percentile
|
| |
0%
|
|
| |
Threshold
|
| |
25
th
Percentile
|
| |
50%
|
|
| |
Target
|
| |
50
th
Percentile
|
| |
100%
|
|
| |
Maximum
|
| |
75
th
Percentile
|
| |
150%
|
|
P
erquisites and
O
ther
B
enefits
We have historically maintained a conservative approach to providing perquisites to executive officers. We provide certain named executive officers with perquisites and other personal benefits that the Committee believes are reasonable and consistent with the overall executive compensation program and will better enable us to attract and retain superior employees for key positions. These perquisites have been carefully selected to ensure that the value provided to employees is not adverse to the interests of stockholders. The Committee periodically reviews the levels of perquisites and other personal benefits provided to the named executive officers. In 2022, certain of our officers were provided with an annual car allowance, associated car maintenance and fuel allowance. The Committee may revise, amend or add to each named executive officer’s perquisites and personal benefits if it deems it advisable.
Severance Payments.
We currently have employment agreements with Joel Agree, Peter Coughenour and Craig Erlich that provide severance payments under specified conditions. The
29
Committee believes these agreements help to retain executives who are essential to our long-term success. See “Executive Compensation Tables — Potential Payments Upon Termination or Change-in- Control” for a description of potential payments and benefits received by our named executive officers under our compensation plans and arrangements upon termination of employment or a change in control of our Company.
T
iming and
P
ricing of
S
hare
-B
ased
G
rants
We do not coordinate the timing of share-based grants with the release of material non-public information. The Committee approves its annual grants of restricted stock to the named executive officers at its regularly scheduled executive compensation meeting which occurs at the beginning of the following fiscal year. The effective date for annual share-based grants is determined at each meeting and is generally the date of such meeting or shortly thereafter. The Committee generally establishes the date for its regularly scheduled meeting at least a year in advance. The Committee has not granted stock options in recent years.
S
tock
O
wnership
G
uidelines
To further align the interests of certain executive officers and directors with the interest of our stockholders, and to promote our commitment to sound corporate governance, the Board has adopted stock ownership guidelines. The guidelines are applicable to the Executive Chairman, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, General Counsel and non-employee directors.
The stock ownership guidelines provide that within three years of the date a named executive officer first becomes subject to the guidelines, or within five years of the date a non-employee director first becomes subject to the guidelines, such individual will be subject to the following guidelines, as applicable:
•
Our Chief Executive Officer is required to own shares of our common stock, including restricted stock, valued at a minimum of five times annual base compensation;
•
Our Executive Chairman, Chief Financial Officer, Chief Operating Officer and General Counsel are required to own shares of our common stock, including restricted stock, valued at a minimum of three times annual base compensation; and
•
Non-employee directors are required to own shares of our common stock valued at a minimum of five times the cash portion of their annual director compensation.
As of December 31, 2022, all of our directors and the above-referenced executive officers were either in compliance with our stock ownership guidelines or within the transition period and making progress to be compliant within the period specified by the guidelines.
P
olicy
P
rohibiting
H
edging and
P
ledging of
C
ompany
S
tock
The Board believes that ownership of shares of the Company’s common stock by the Company’s executive officers and members of the Board promotes alignment of the interests of the Company’s stockholders with those of its leadership. The Board recognizes that transactions that are designed to hedge or offset declines in the market value of the Company’s shares of common stock can disrupt this alignment, interfere with the Company’s compensation programs and philosophies, and undermine policies regarding share ownership.
The Board also recognizes that officer and director pledging of the Company’s common stock as collateral for indebtedness can be adverse to the interests of the Company’s stockholders because it creates the risk of forced sales that depress the value of the Company’s common stock, creates risk of legal violations, and may encourage excessive risk-taking by executives and directors.
The Board has adopted an anti-hedging and pledging policy that applies to transactions in shares of the Company’s common stock and other equity securities by members of the Board and officers of the Company designated by the Board as “executive officers” for the purposes of federal securities laws.
30
Under the policy, executive officers and directors of the Company shall not, directly or indirectly:
•
Purchase any financial instrument or enter into any transaction that is designed to hedge or offset any decrease in the market value of the Company’s common stock or other equity securities (including, but not limited to, prepaid variable forward contracts, equity swaps, collars, or exchange funds); or
•
Pledge, hypothecate, or otherwise encumber the Company’s common stock or other equity securities as collateral for indebtedness, including holding such shares in a margin account.
E
xecutive
C
ompensation
C
lawback
P
olicy
In the event that the Board determines that any fraud, intentional misconduct or lack of sufficient oversight by a current or former executive officer of the Company was a significant contributing factor to the Company (i) having to restate all or a portion of its financial statements or (ii) having miscalculated one or more performance metrics used by the Committee to determine previously paid compensation that, if calculated correctly, would have resulted in a lower payment to one or more executive officers, the Board or Committee may take, in its discretion, such action as it deems appropriate to recover any cash or equity- based incentive compensation of any executive officer that was granted, earned, paid or vested in the three completed fiscal years immediately preceding the date of such determination and take other actions to prevent the recurrence of such fraud, intentional misconduct or lack of sufficient oversight to the fullest extent permitted by governing law. They may approve or recommend to the Board for approval the creation or revision of any such clawback policy as the Committee determines to be necessary or appropriate, or as required by applicable law or stock exchange requirements.
T
ax and
A
ccounting
I
mplications
Deductibility of Executive Compensation.
Section 162(m) (“Section 162(m)”) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), provides that subject to certain exceptions, a publicly-held corporation may not deduct compensation for federal income tax purposes exceeding $1 million in any one year paid to any of its “covered employees”. For this purpose, a “covered employee” is any individual who (i) is or acts in the capacity as the principal executive officer or the principal financial officer of the publicly-held corporation at any time during the year, (ii) is one of the three other most highly compensated officers of the publicly-held corporation for the year, or (iii) was an individual listed in either of the foregoing clauses (i) or (ii) in respect of the publicly-held corporation or any predecessor in any prior year beginning after 2016. We must distribute a specified minimum percentage of our taxable income to maintain our qualification as a REIT under the Internal Revenue Code, and we are not subject to federal income tax on our REIT taxable income if and to the extent we distribute the income to our stockholders. Accordingly, to the extent we pay compensation to any of our covered employees in excess of $1 million in any year, we may have to increase the amount of our distributions to stockholders to avoid tax liability and the loss of our REIT status. This in turn may result in a larger portion of distributions being taxable to stockholders as dividend income, instead of being treated as a nontaxable return of capital to stockholders.
Nonqualified Deferred Compensation.
Section 409A of the Internal Revenue Code provides that amounts deferred under nonqualified deferred compensation arrangements will be included in an employee’s income when vested unless certain conditions are met. If the certain conditions are not satisfied, amounts subject to such arrangements will upon vesting be taxable and employees will be subject to additional income tax, penalties and a further additional income tax calculated as interest on income taxes deferred under the arrangement.
31
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management and based on such review and discussions, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in this 2023 proxy statement and the Company’s annual report on Form 10-K for the year ended December 31, 2022.
COMPENSATION COMMITTEE
Gregory Lehmkuhl, Chair
Michael Judlowe
Jerome Rossi
Michael Judlowe
Jerome Rossi
32
E
xecutive
C
ompensation
T
ables
Summary Compensation Table
The following table sets forth information concerning the total compensation paid or earned by each of the named executive officers in 2022, 2021 and 2020.
|
Name and Principal Position
|
| |
Year
|
| |
Salary
($) |
| |
Bonus
($) (1) |
| |
Stock
Awards ($) (2) |
| |
Non-Equity
Incentive Plan Compensation ($) (3) |
| |
All Other
Compensation ($) (4) |
| |
Total
($) |
| |||||||||||||||||||||
|
Joel Agree
President and Chief Executive Officer |
| | | | 2022 | | | | | $ | 875,000 | | | | | $ | — | | | | | $ | 3,666,730 | | | | | $ | 3,062,500 | | | | | $ | 51,842 | | | | | $ | 7,656,072 | | |
| | | | 2021 | | | | | | 875,000 | | | | | | — | | | | | | 3,469,080 | | | | | | 2,947,365 | | | | | | 50,180 | | | | | | 7,341,625 | | | ||
| | | | 2020 | | | | | | 792,788 | | | | | | 1,500,000 | | | | | | 3,731,809 | | | | | | 1,446,744 | | | | | | 46,025 | | | | | | 7,517,366 | | | ||
|
Peter Coughenour
(5)
Chief Financial Officer, Secretary |
| | | | 2022 | | | | | $ | 350,000 | | | | | $ | — | | | | | $ | 89,985 | | | | | $ | 525,000 | | | | | $ | 15,657 | | | | | $ | 980,642 | | |
| | | | 2021 | | | | | | 163,365 | | | | | | — | | | | | | 44,998 | | | | | | 90,000 | | | | | | 9,457 | | | | | | 307,820 | | | ||
|
Craig Erlich
(6)
Chief Operating Officer |
| | | | 2022 | | | | | $ | 416,462 | | | | | $ | — | | | | | $ | 471,429 | | | | | $ | 598,500 | | | | | $ | 44,868 | | | | | $ | 1,531,259 | | |
| | | | 2021 | | | | | | 392,308 | | | | | | — | | | | | | 111,468 | | | | | | 577,369 | | | | | | 41,630 | | | | | | 1,122,775 | | | ||
| | | | 2020 | | | | | | 125,912 | | | | | | — | | | | | | 299,978 | | | | | | 112,432 | | | | | | 11,563 | | | | | | 549,885 | | | ||
|
Danielle Spehar
General Counsel |
| | | | 2022 | | | | | $ | 367,039 | | | | | $ | — | | | | | $ | 314,242 | | | | | $ | 375,000 | | | | | $ | 39,140 | | | | | $ | 1,095,421 | | |
| | | | 2021 | | | | | | 324,808 | | | | | | — | | | | | | 297,291 | | | | | | 165,000 | | | | | | 36,213 | | | | | | 823,312 | | | ||
| | | | 2020 | | | | | | 300,961 | | | | | | — | | | | | | 200,005 | | | | | | 150,000 | | | | | | 32,946 | | | | | | 683,912 | | | ||
|
Nicole Witteveen
(7)
Executive Vice President, People & Culture, Chief of Staff |
| | | | 2022 | | | | | $ | 234,054 | | | | | $ | — | | | | | $ | 149,975 | | | | | $ | 177,000 | | | | | $ | 24,694 | | | | | $ | 585,723 | | |
| | | | 2021 | | | | | | 161,699 | | | | | | — | | | | | | 309,989 | | | | | | 100,000 | | | | | | 10,047 | | | | | | 581,735 | | | ||
(1)
For Mr. Agree, the 2020 amount reported reflects a one-time cash bonus granted in connection with the signing of Mr. Agree’s new employment agreement in October 2020.
(2)
The amounts reported represent the full value of the stock awards issued for the applicable year and have been issued in accordance with the Company’s 2014 Omnibus Incentive Plan (the “2014 Plan”) or the 2020 Plan, depending on the year. Regarding the performance-based units, the amounts reported reflect the grant date fair value determined in accordance with FASB ASC Topic 718. For a discussion of the assumptions used to calculate the value of performance share awards made to Named Executive Officers, refer to Note 11 to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2022. The amounts that would be earned at the maximum performance level are set forth below in the Grant of Plan-Based Awards Table. For Mr. Erlich, the amount reported in 2020 includes a sign-on bonus in the form of restricted stock on August 19, 2020. Mr. Erlich received 4,541 shares subject to time-based vesting provisions over a five-year period in connection with the award, based on a fair market value of $66.06 per share, the closing price of our common stock on August 19, 2020. For Ms. Witteveen, the amount reported in 2021 includes a sign-on bonus in the form of restricted stock on August 19, 2021. Ms. Witteveen received 3,369 shares subject to time-based vesting provisions over a five-year period in connection with the award, based on a fair market value of $74.21 per share, the closing price of our common stock on August 19, 2021.
(3)
The amounts reported represent annual cash incentive awards under the Executive Incentive Plan or pursuant to separate determination by the Compensation Committee. Because Mr. Coughenour was not appointed to Chief Financial Officer until December 2021, Mr. Coughenour’s non-equity incentive plan award for 2021 was not granted pursuant to the Executive Incentive Plan. Because Mr. Erlich was not appointed to Chief Investment Officer until August 2020, Mr. Erlich’s non-equity incentive plan award for 2020 was not granted pursuant to the Executive Incentive Plan. Because Ms. Witteveen was not appointed to Executive Vice President, People & Culture, Chief of Staff until August 2021, Ms. Witteveen’s non-equity incentive plan award for 2021 was not granted pursuant to the Executive Incentive Plan.
(4)
For Mr. Agree, the amounts reported in 2022 represent the aggregate incremental cost to the Company of his matching Simple IRA contribution, $14,000; health insurance premiums, $17,074; and annual car allowance and associated car maintenance and fuel, $20,768. For Mr. Coughenour, the amounts reported in 2022 represent the aggregate incremental cost to the Company of his matching Simple IRA contribution, $10,500; and health insurance premiums, $5,157. For Mr. Erlich, the amounts reported in 2022 represent the aggregate incremental cost to the Company of his matching Simple IRA contribution, $17,000; and health insurance premiums, $27,868. For Ms. Spehar, the amounts reported in 2022 represent the aggregate incremental cost to the Company of her matching Simple IRA contribution, $17,000; and health insurance premiums, $22,140. For Ms. Witteveen, the amounts reported in 2022 represent the aggregate incremental cost to the Company of her matching Simple IRA contribution, $12,452; and health insurance premiums, $12,242.
(5)
Mr. Coughenour was appointed as Chief Financial Officer and Secretary in December 2021.
(6)
Mr. Erlich served as Chief Investment Officer from August 2020 to February 2021.
(7)
Ms. Witteveen was appointed Executive Vice President, People & Culture and Chief of Staff in August 2021.
33
Grants of Plan-Based Awards for 2022
The following table sets forth information concerning equity and non-equity awards granted to the named executive officers in 2022:
|
Name
|
| |
Grant
Date |
| |
Estimated Future Payouts
Under Non-Equity Incentive Plan Awards ($) |
| |
Estimated Future Payouts
Under Equity Incentive Plan Awards (#) |
| |
All
Other Stock Awards; Number of Shares of Stock or Units (#) (1) |
| |
Grant
Date Fair Value of Stock and Option Awards ($) (2) |
| |||||||||||||||||||||||||||||||||||||||
| |
Threshold
|
| |
Target
|
| |
Maximum
|
| |
Threshold
|
| |
Target
|
| |
Maximum
|
| ||||||||||||||||||||||||||||||||||||||
| Joel Agree | | | | | 2/4/2022 | | | | | $ | 656,250 | | | | | $ | 1,312,500 | | | | | $ | 3,062,500 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| Joel Agree | | | | | 2/23/2022 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 27,946 | | | | | | 1,749,979 | | |
| Joel Agree | | | | | 2/23/2022 | | | | | | — | | | | | | — | | | | | | — | | | | | | 13,973 | | | | | | 27,946 | | | | | | 41,919 | | | | | | — | | | | | | 1,916,751 | | |
| Peter Coughenour | | | | | 2/4/2022 | | | | | $ | 175,000 | | | | | $ | 350,000 | | | | | $ | 525,000 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| Peter Coughenour | | | | | 2/23/2022 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 1,437 | | | | | | 89,985 | | |
| Peter Coughenour | | | | | 2/23/2022 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| Craig Erlich | | | | | 2/4/2022 | | | | | $ | 210,000 | | | | | $ | 315,000 | | | | | $ | 630,000 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| Craig Erlich | | | | | 2/23/2022 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 3,593 | | | | | | 224,994 | | |
| Craig Erlich | | | | | 2/23/2022 | | | | | | — | | | | | | — | | | | | | — | | | | | | 1,797 | | | | | | 3,593 | | | | | | 5,390 | | | | | | — | | | | | | 246,436 | | |
| Danielle Spehar | | | | | 2/4/2022 | | | | | $ | 93,750 | | | | | $ | 187,500 | | | | | $ | 375,000 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| Danielle Spehar | | | | | 2/23/2022 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 2,395 | | | | | | 149,975 | | |
| Danielle Spehar | | | | | 2/23/2022 | | | | | | — | | | | | | — | | | | | | — | | | | | | 1,198 | | | | | | 2,395 | | | | | | 3,593 | | | | | | — | | | | | | 164,268 | | |
| Nicole Witteveen | | | | | 2/4/2022 | | | | | $ | 59,000 | | | | | $ | 118,000 | | | | | $ | 177,000 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| Nicole Witteveen | | | | | 2/23/2022 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 2,395 | | | | | | 149,975 | | |
| Nicole Witteveen | | | | | 2/23/2022 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
(1)
The equity awards set forth in this column reflect restricted stock granted in 2022. Awards vest in equal installments over a five-year period from February 23, 2022, the date of the grant. Awards set forth in this column were granted under the 2020 Plan. Cash dividends are paid on the restricted stock during the vesting period.
(2)
The amounts reported in this column represent the full value of the stock awards granted in 2022 and have been issued in accordance with the 2020 Plan. For Joel Agree, Craig Erlich and Danielle Spehar the awards consist of 50% restricted common stock subject to time-based vesting provisions over a five-year period and 50% performance-based units subject to a performance-based measurement period of three years and vesting provisions over a three-year period. Regarding the performance-based units, the amounts reported assume the achievement of target performance levels. For Peter Coughenour and Nicole Witteveen, the awards consist of shares of restricted common stock that vest in equal installments over a five-year period from the date of grant.
34
Narrative Disclosure of Summary Compensation Table and Grants of Plan-Based Awards Table
In the case of Ms. Spehar and Ms. Witteveen, certain base salary determinations and grants of plan-based awards during the periods reflected in the tables above were influenced by the employment agreements and promotions discussed below.
Initially hired pursuant to the terms of a letter agreement dated October 11, 2016 (the “Spehar Agreement”), Danielle Spehar was employed as our Vice President of Transactions. Ms. Spehar was subsequently promoted to General Counsel in February 2019 and her compensation was increased based on a review of executive officers of peer group companies in similar positions. The compensation reflected in the Summary Compensation Table above is based on the Committee’s review of peer group benchmarking on an annual basis.
Initially hired pursuant to the terms of a letter agreement dated March 18, 2019 (the “Witteveen Agreement”), Nicole Witteveen was employed as our Director, People & Culture. Ms. Witteveen was subsequently promoted to Executive Vice President, People & Culture and Chief of Staff in August 2021 and her compensation was increased based on a review of executive officers of peer group companies in similar positions. The compensation reflected in the Summary Compensation Table above is based on the Committee’s review of peer group benchmarking on an annual basis.
For a discussion of the material terms of the employment agreements of Joel Agree, Peter Coughenour, and Craig Erlich, see “Executive Compensation Tables — Potential Payments Upon Termination or Change-in-Control — Employment Agreements” discussion below.
Outstanding Equity Awards at December 31, 2022
The following table sets forth information on the holdings of unvested stock awards by the named executive officers as of December 31, 2022. No stock options are outstanding.
| | | | | | | | | |
Stock Awards
|
| |||||||||||||||||||||
|
Name
|
| |
Grant Date
|
| |
Number of Shares or
Units of Stock That Have Not Vested (#) (1) |
| |
Market Value of
Shares or Units of Stock That Have Not Vested ($) (2) |
| |
Equity Incentive
Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (1) |
| |
Equity Incentive Plan
Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (2) |
| |||||||||||||||
| Joel Agree | | | | | 2/23/2022 | | | | | | 46,043 | | | | | | 3,265,830 | | | | | | 27,946 | | | | | | 1,982,210 | | |
| | | | | | 2/23/2021 | | | | | | 35,498 | | | | | | 2,517,873 | | | | | | 27,107 | | | | | | 1,922,700 | | |
| | | | | | 2/23/2020 | | | | | | 13,187 | | | | | | 935,354 | | | | | | 21,980 | | | | | | 1,559,041 | | |
| | | | | | 2/23/2019 | | | | | | 10,243 | | | | | | 726,536 | | | | | | — | | | | | | — | | |
| | | | | | 2/23/2018 | | | | | | 5,524 | | | | | | 391,817 | | | | | | — | | | | | | — | | |
|
Peter Coughenour
|
| | | | 2/23/2022 | | | | | | 1,437 | | | | | | 101,926 | | | | | | — | | | | | | — | | |
| | | | | | 2/23/2021 | | | | | | 558 | | | | | | 39,579 | | | | | | — | | | | | | — | | |
| | | | | | 2/23/2020 | | | | | | 283 | | | | | | 20,073 | | | | | | — | | | | | | — | | |
| | | | | | 2/23/2019 | | | | | | 182 | | | | | | 12,909 | | | | | | — | | | | | | — | | |
| | | | | | 2/23/2018 | | | | | | 104 | | | | | | 7,377 | | | | | | — | | | | | | — | | |
| Craig Erlich | | | | | 2/23/2022 | | | | | | 3,593 | | | | | | 254,841 | | | | | | 3,593 | | | | | | 254,851 | | |
| | | | | | 2/23/2021 | | | | | | 697 | | | | | | 49,438 | | | | | | 871 | | | | | | 61,780 | | |
| | | | | | 8/19/2020 | | | | | | 2,724 | | | | | | 193,213 | | | | | | — | | | | | | — | | |
| Danielle Spehar | | | | | 2/23/2022 | | | | | | 2,395 | | | | | | 169,877 | | | | | | 2,395 | | | | | | 169,877 | | |
| | | | | | 2/23/2021 | | | | | | 1,858 | | | | | | 131,788 | | | | | | 2,323 | | | | | | 164,770 | | |
| | | | | | 2/23/2020 | | | | | | 1,508 | | | | | | 106,962 | | | | | | — | | | | | | — | | |
| | | | | | 2/23/2019 | | | | | | 365 | | | | | | 25,889 | | | | | | — | | | | | | — | | |
| | | | | | 2/232018 | | | | | | 193 | | | | | | 13,689 | | | | | | — | | | | | | — | | |
| Nicole Witteveen | | | | | 2/23/2022 | | | | | | 2,395 | | | | | | 169,877 | | | | | | — | | | | | | — | | |
| | | | | | 2/23/2021 | | | | | | 743 | | | | | | 52,701 | | | | | | — | | | | | | — | | |
| | | | | | 8/17/2021 | | | | | | 2,695 | | | | | | 191,156 | | | | | | — | | | | | | — | | |
| | | | | | 2/23/2020 | | | | | | 227 | | | | | | 16,101 | | | | | | — | | | | | | — | | |
| | | | | | 8/13/2019 | | | | | | 282 | | | | | | 20,002 | | | | | | — | | | | | | — | | |
35
(1)
Shares of restricted stock vest in the following years along with performance units assuming the achievement of target performance goals for 2020, 2021 and 2022 performance unit awards. Performance units are subject to a performance-based measurement period of three years. Following the performance period, one-third of the shares earned will vest each year for three years. In February 2023, the Compensation Committee certified that the 2020 performance unit awards were earned at 150% of target given the Company’s three-year total shareholder return performance was in the 75
th
percentile or higher of the MSCI US REIT Index and the Company-defined Peer Group. Shares of restricted stock vest in equal installments over a five-year period from the date of grant.
| | | |
2023
|
| |
2024
|
| |
2025
|
| |
2026
|
| |
2027
|
| |||||||||||||||
| Joel Agree | | | | | 56,241 | | | | | | 45,938 | | | | | | 41,083 | | | | | | 29,362 | | | | | | 14,904 | | |
| Peter Coughenour | | | | | 715 | | | | | | 611 | | | | | | 522 | | | | | | 428 | | | | | | 288 | | |
| Craig Erlich | | | | | 1,801 | | | | | | 2,092 | | | | | | 3,289 | | | | | | 2,381 | | | | | | 1,915 | | |
| Danielle Spehar | | | | | 1,823 | | | | | | 2,403 | | | | | | 3,019 | | | | | | 2,515 | | | | | | 1,277 | | |
| Nicole Witteveen | | | | | 1,555 | | | | | | 1,556 | | | | | | 1,415 | | | | | | 1,337 | | | | | | 479 | | |
(2)
Based upon the closing price of our common stock on the NYSE on December 30, 2022 of $70.93.
36
O
ption
E
xercises and
S
tock
V
ested in
2022
The following table sets forth information on the shares of restricted stock and performance units or shares held by the named executive officers that vested during 2022. No stock options are outstanding.
| | | |
Stock Awards
|
| |||||||||
|
Name
|
| |
Number of
Shares Acquired on Vesting (#) |
| |
Value Realized on
Vesting ($) (1) |
| ||||||
| Joel Agree | | | | | 53,608 | | | | | | 3,356,933 | | |
| Peter Coughenour | | | | | 511 | | | | | | 31,999 | | |
| Craig Erlich | | | | | 1,082 | | | | | | 82,909 | | |
| Danielle Spehar | | | | | 1,344 | | | | | | 84,161 | | |
| Nicole Witteveen | | | | | 1,077 | | | | | | 81,013 | | |
(1)
The value realized is based on the number of shares of stock that vested on the vesting date multiplied by the closing price of our common stock on the NYSE on the vesting date.
P
otential
P
ayments
U
pon
T
ermination or
C
hange
-
in
-C
ontrol
The following section describes and quantifies potential payments and benefits to the named executive officers as of December 31, 2022, under our compensation and benefit plans and arrangements upon termination of employment or a change in control of our Company.
Joel Agree, Peter Coughenour and Craig Erlich are subject to employment agreements with us that provide certain benefits in the event of the termination of their employment or a change in control. In addition, certain of our compensatory plans contain provisions, applicable to all of our named executive officers, regarding the acceleration of vesting and payment upon specified termination events, including in connection with a change in control.
C
ompany
S
hare
-B
ased
P
lans
2020 Omnibus Incentive Plan
Joel Agree, Peter Coughenour, Craig Erlich, Danielle Spehar and Nicole Witteveen participate in the 2020 Plan. Immediately following the termination of the participant’s employment for any reason, any unvested shares of restricted stock are forfeited, as well as any unpaid dividends on such shares. Additionally, under the 2020 Plan, any unvested performance units are also forfeited upon termination of employment. Under the 2020 Plan, the unvested shares of restricted stock and unvested performance awards (at target) immediately vest in the event our stockholders approve an agreement to merge, consolidate, liquidate or sell all, or substantially all, of our assets. The Compensation Committee is authorized to accelerate the vesting of restricted stock at any time. In addition, in the event of a Change in Control (as defined therein) or a dissolution or liquidation of our Company, all unvested shares of restricted stock and unvested performance awards (at target) will become immediately vested. The Board has the discretion to determine whether any leave of absence should constitute a termination of employment.
E
mployment
A
greements
Chief Executive Officer and President — Joel Agree
On October 9, 2020, the Company entered into a new employment agreement with Joel Agree to extend Mr. Agree’s term as President and Chief Executive Officer of the Company through September 30, 2023 (the “Agree Agreement”). The Agree Agreement supersedes Mr. Agree’s prior employment agreement with the Company, which had a term that was scheduled to expire on June 30, 2021.
37
The term of Mr. Agree’s employment under the Agree Agreement extends through September 30, 2023, and will automatically renew for successive two-year periods unless either party provides notice of non- renewal at least 60 days prior to the expiration of any term.
Under the Agree Agreement, Mr. Agree is entitled to receive a base salary of $875,000, subject to annual review by the Committee and participate in all benefit programs generally available to the Company’s executive officers, including any equity incentive plan or bonus plan. Beginning with the 2021 calendar year, Mr. Agree became eligible to receive (1) a target annual bonus of 150% of his base salary based on attainment of performance targets, up to a maximum value of 350% and a threshold value of 75% (the “Annual Bonus”), and (2) target long-term incentive compensation equal to a grant date fair market value of 400% of his base salary to be awarded in restricted stock and performance awards in accordance with the 2020 Plan. Upon execution of the Agree Agreement, Mr. Agree was entitled to receive a one-time cash bonus of $1,500,000.
Upon any termination, Mr. Agree will receive a payment in cash of salary and other benefits earned and accrued prior to the date of termination. Except as set forth below or required by law, all other benefits and unvested securities of the Company will be forfeited as of the termination date.
In the event of termination of the Agree Agreement because of Mr. Agree’s death or Disability (as defined in the Agree Agreement), he (or his estate) will receive (i) salary and other benefits earned and accrued prior to the termination date, including reimbursement for expenses, (ii) the prorated portion of the Annual Bonus at “target” level for the year in which the termination occurs, (iii) elimination of any exclusively time vesting conditions on any restricted stock, stock option or other equity awards held by Mr. Agree to the extent unvested, and (iv) in the event of Mr. Agree’s death, (a) a cash payment equal to two months of salary payable no later than 10 days after termination and (b) continuation to Mr. Agree’s spouse and dependents of fully paid health insurance under the Company’s health plans and programs applicable to senior executives during the one-year period following the date of termination.
If Mr. Agree’s employment is terminated by the Company for any reason other than death, Disability or Cause (as defined in the Agree Agreement), or by Mr. Agree for Good Reason (as defined in the Agree Agreement), the Company shall pay to Mr. Agree (i) any accrued but unpaid salary and accrued but unused vacation, (ii) reimbursement of expenses incurred but unpaid prior to termination, (iii) a cash payment equal to 200% of his base salary, (iv) a cash payment equal to 200% of Mr. Agree’s average Annual Bonus for the three years immediately preceding the year of termination, (v) vesting of any restricted stock, stock option or other equity awards held by Mr. Agree to the extent unvested, including any performance awards at target and (vi) for a period of one year after termination, health benefits under the Company’s health plans and programs applicable to senior executives of the Company.
If Mr. Agree’s employment is terminated for nonrenewal of the employment agreement by either party, he will receive (i) any accrued but unpaid salary and accrued but unused vacation, (ii) reimbursement of expenses incurred but unpaid prior to termination, (iii) a cash payment equal to 100% of his base salary, (iv) for a period of one year after termination, health benefits under the Company’s health plans and programs applicable to senior executives of the Company, (v) a prorated Annual Bonus at the “target” level for the year in which the termination occurs and (vi) only in the case of expiration of the initial Term, elimination of any exclusively time-based vesting conditions on any restricted stock, stock option or other equity awards held by Mr. Agree to the extent unvested.
If a Change in Control (as defined in the Agree Agreement) occurs prior to the expiration of the Agree Agreement and Mr. Agree is terminated by the Company for reasons other than death, Disability or Cause, or Mr. Agree terminates employment for Good Reason, the Company will pay to Mr. Agree, (i) any accrued but unpaid salary and accrued but unused vacation, (ii) reimbursement of expenses incurred but unpaid prior to termination, (iii) a cash payment equal to 300% of his base salary, (iv) a cash payment equal to 300% of his average Annual Bonus for the three years immediately preceding the year of the termination, (v) vesting of any restricted stock, stock option or other equity awards held by Mr. Agree to the extent unvested, (vi) for a period of one year after termination, health benefits under the Company’s health plans and programs applicable to senior executives of the Company and (vii) a prorated Annual Bonus at “target” level for the year in which his employment is terminated.
If Mr. Agree is terminated for Cause or Mr. Agree terminates his employment without Good Reason, the Company will pay him in cash the salary and other benefits (excluding any Annual Bonus not yet paid)
38
earned and accrued prior to the date of termination, including reimbursement for expenses. If he is terminated by the Company for Cause or voluntarily terminates his employment, Mr. Agree will be subject to non- compete and non-solicitation provisions for one year following the date of termination. In addition, the Agree Agreement contains customary confidentiality provisions.
Chief Financial Officer and Secretary — Peter Coughenour
Under the terms of a letter agreement dated January 5, 2022 (the “Coughenour Agreement”), Peter Coughenour is employed as the Company’s Chief Financial Officer and Secretary. Under the Coughenour Agreement, Mr. Coughenour is entitled to receive a base salary of $350,000, subject to annual review by the Committee, and participate in all benefit programs generally available to the Company’s executive officers, including any equity incentive plan or bonus plan. Beginning with the 2022 calendar year, Mr. Coughenour will be eligible to receive (1) a target annual bonus of 100% of his base salary based on attainment of performance targets, up to a maximum value of 150% and a threshold value of 50% (the “Annual Bonus”), and (2) target long-term incentive compensation equal to a grant date fair market value of 114% of his base salary to be awarded in restricted stock and performance awards in accordance with the 2020 Plan.
Under the Coughenour Agreement, if Mr. Coughenour were terminated without Cause (as defined therein) due to or within one year following a Change in Control (as defined therein), he would receive either (1) a cash amount equal to the sum of (i) 200% of his current annual base salary, (ii) 200% of his annual cash incentive award for the previous fiscal year and (iii) any long-term incentive compensation for the year in which the termination occurs will be considered earned at the target level and immediately vested, or (2) in the event his employment were terminated due to a change in control which occurred during the first fiscal year of his employment, a cash amount equal to the sum of (i) 200% of his current annual base salary plus $200,000, (ii) 200% of his projected threshold annual cash incentive award, and (iii) his threshold long-term incentive compensation would be considered earned at the target level and immediately vested. The values for items (1) (i) and (ii) and (2) (i) and (ii) will automatically be adjusted down from 200% to 100% after the two-year anniversary of Mr. Coughenour’s start date. Mr. Coughenour would not receive any severance following a change in control in the event he were retained by a successor organization for one year substantially on the same terms as set forth under the Coughenour Agreement.
If Mr. Coughenour’s employment were terminated by the Company for Cause, he would not be entitled to any severance payments, and he would forfeit any unvested securities of the Company. If Mr. Coughenour’s employment were terminated by the Company without Cause or by him with Good Reason (as defined therein), he will (i) receive a severance amount equal to 100% of his annual base salary, (ii) be deemed to have vested in a pro rata portion of the restricted stock, including any restricted shares awarded at the end of a performance period pursuant to performance awards, set forth in the letter agreement, based on the number of completed years of service since the start date and (iii) be released from his post- employment non-competition covenant.
The Coughenour Agreement conditions the receipt of severance payments on Mr. Coughenour’s compliance with his post-employment obligations, which include confidentiality, non-solicitation and non-compete obligations.
Chief Operating Officer — Craig Erlich
Under the terms of a letter agreement dated June 18, 2020 (as amended, the “Erlich Agreement”), Craig Erlich was employed as our Chief Investment Officer beginning August 19, 2020 and remained in this role until his February 2021 appointment as Chief Operating Officer. The Erlich Agreement provided for a base salary of $350,000, subject to adjustment, and provided him with eligibility to receive an annual cash incentive award of 62.5% to 87.5% of his base salary, subject to performance hurdles determined by the Company, and an annual grant of restricted stock and performance units valued at 62.5% to 87.5% of his base salary. He was also entitled to an equity signing bonus in the form of a grant of restricted stock in the value of $300,000.
Under the Erlich Agreement, if Mr. Erlich is terminated without Cause (as defined therein) due to or within one year following a Change in Control (as defined in the 2020 Plan), he will receive either (1) a cash amount equal to the sum of (i) 200% of his current annual base salary, (ii) 200% of his annual cash
39
incentive award for the previous fiscal year and (iii) any long-term incentive compensation for the year in which the termination occurs will be considered earned at the target level and immediately vested, or (2) in the event his employment is terminated due to a change in control which occurs during the first year of employment, a cash amount equal to the sum of (i) 200% of his current annual base salary plus $200,000, (ii) 200% of his target annual cash bonus, and (iii) his long-term incentive compensation will be considered earned at the target level and immediately vested. The values for items (1) (i) and (ii) and (2) (i) and (ii) shall be automatically adjusted down from 200% to 100% after the two-year anniversary of Mr. Erlich’s start date.
If Mr. Erlich’s employment was terminated without cause by the Company during the 12 months following the Start Date (the “Severance Period”) (as defined in the Erlich Agreement), Mr. Erlich would have received in addition to any accrued amounts: (1) during the remainder of the Severance Period, continued payment of his Annual Base Salary, payable in equal installments as if his employment had not ended; (2) a payment equal to his Annual Cash Bonus at target, prorated based on the percentage of the year that he was employed by the Company; (3) immediate vesting of any restricted stock, stock option or other equity awards held by Mr. Erlich, to the extent unvested, including any performance awards at target during the Severance Period; and (4) during the Severance Period, such health benefits under the Company’s health plans and programs applicable to senior executives of the Company generally as he would have received and at such costs to him as would have applied in the absence of such termination, provided that the Company would have in no event be required to provide such benefits after such time as he become entitled to receive benefits from another employer or recipient of his services.
The Erlich Agreement conditions the receipt of severance payments on Mr. Erlich’s compliance with his post-employment obligations, which include confidentiality, non-solicitation and non-compete obligations.
40
C
hange in
C
ontrol
/S
everance
P
ayment
T
ables
The following table estimates the potential payments and benefits to named executive officers upon termination of employment or a change in control, assuming such event occurs on December 31, 2022. The actual payments due on terminations occurring on different dates could materially differ from the estimates in the table.
Items Not Reflected in Table
The following items are not reflected in the table set forth below:
•
Accrued and unpaid salary, bonus and vacation.
•
Costs of COBRA or any other mandated governmental assistance program to former employees.
•
Welfare benefits provided to all salaried employees.
|
Named Executive Officer
|
| |
Base Salary
|
| |
Bonus
|
| |
Early Vesting of
Stock Awards (1) |
| |
Other
(2)
|
| |
Total
|
| |||||||||||||||
| Joel Agree (3) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Death or Disability | | | | $ | 145,833 | | | | | $ | 1,312,500 | | | | | $ | 7,837,410 | | | | | $ | 17,074 | | | | | $ | 9,312,818 | | |
| Change in Control | | | | | 2,625,000 | | | | | | 6,901,609 | | | | | | 13,301,361 | | | | | | 17,074 | | | | | | 22,845,044 | | |
| Other (except for cause) | | | | | 1,750,000 | | | | | | 3,726,073 | | | | | | 13,301,361 | | | | | | 17,074 | | | | | | 18,794,508 | | |
| Peter Coughenour (4) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Death or Disability | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| Change in Control | | | | | 700,000 | | | | | | 580,000 | | | | | | 181,865 | | | | | | — | | | | | | 1,461,865 | | |
| Other (except for cause) | | | | | 350,000 | | | | | | — | | | | | | — | | | | | | — | | | | | | 350,000 | | |
| Craig Erlich (5) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Death or Disability | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| Change in Control | | | | | 420,000 | | | | | | 1,577,369 | | | | | | 814,135 | | | | | | — | | | | | | 2,811,504 | | |
| Other (except for cause) | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| Danielle Spehar (6) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Death or Disability | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| Change in Control | | | | | — | | | | | | — | | | | | | 782,854 | | | | | | — | | | | | | 782,854 | | |
| Other (except for cause) | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| Nicole Witteveen (6) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Death or Disability | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| Change in Control | | | | | — | | | | | | — | | | | | | 449,838 | | | | | | — | | | | | | 449,838 | | |
| Other (except for cause) | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
(1)
For all named executive officers with respect to the accelerated vesting of share-based awards, the table reflects the fair market value of such acceleration, which for each unvested share of restricted stock is $70.93, the closing price of our common stock on the NYSE on December 30, 2022. The table reflects the accelerated vesting of all unvested shares of restricted stock for all named executive officers. The table reflects the accelerated vesting of certain unearned performance units awarded as of December 31, 2022 as outlined in “Compensation Discussion and Analysis.”
(2)
Represents payment of health benefits of executive.
(3)
The information presented is based on the terms of Joel Agree’s employment agreement in place as of December 31, 2022.
(4)
The information presented is based on the terms of Peter Coughenour’s employment agreement in place as of December 31, 2022.
(5)
The information presented is based on the terms of Craig Erlich’s employment agreement in place as of December 31, 2022.
(6)
The information presented is based on the 2020 Plan.
41
P
ay
R
atio
As required by Section 953(b) of the Dodd-Frank Wall Street Reform 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 employees and the annual total compensation of Mr. Joel Agree, our President and Chief Executive Officer. The Company’s Chief Executive Officer to median employee pay ratio was calculated in accordance with SEC requirements. However, due to the flexibility afforded in calculating the pay ratio, the ratio presented herein is a reasonable estimate and may not be comparable to the pay ratio presented by other companies.
The Company identified the median employee by examining 2022 compensation for all employees of the Company excluding the President and Chief Executive Officer. We determined our median employee compensation, based on total compensation including base salary, bonuses earned, incentive stock granted and health care premiums for each of our 75 employees, excluding Mr. Joel Agree, as of December 31, 2022, to be $108,465. As disclosed in the Summary Compensation Table, our current Chief Executive Officer’s annual total compensation for 2022 was $7,656,072. Based on the foregoing, our estimate of the ratio of the annual total compensation of our Chief Executive Officer and President to the median of the annual total compensation of all other employees was 71 to 1.
The compensation measure described above was consistently applied to this entire employee population. The Company did not make any assumptions, adjustments or estimates with respect to the employee population or the compensation measure and did not annualize the compensation for any employees that were not employed by the Company for all of 2022.
P
ay
V
ersus
P
erformance
The following table provides information about the relationship between executive compensation actually paid and certain financial performance of the Company. For further information concerning the Company’s variable pay-for-performance philosophy and how the Company’s aligns executive compensation with the Company’s performance, refer to “Compensation Discussion and Analysis.”
|
Year
|
| |
Summary
Compensation Table Total for PEO (1) |
| |
Compensation
Actually Paid to PEO (2) |
| |
Average
Summary Compensation Table Total for Non-PEO NEOs (3) |
| |
Average
Compensation Actually Paid to Non-PEO NEOs (4) |
| |
Value of Initial Fixed $100
Investment Based On: |
| |
Net Income
( thousands ) (7) |
| |
(per diluted common share and partnership unit) |
| |||||||||||||||||||||||||||
| |
Total
Shareholder Return (5) |
| |
Peer Group
Total Shareholder Return (6) |
| ||||||||||||||||||||||||||||||||||||||||||||
|
(a)
|
| |
(b)
|
| |
(c)
|
| |
(d)
|
| |
(e)
|
| |
(f)
|
| |
(g)
|
| |
(h)
|
| |
(i)
|
| ||||||||||||||||||||||||
| 2022 | | | | $ |
|
| | | | $ |
|
| | | | $ |
|
| | | | $ |
|
| | | | $ |
|
| | | | $ |
|
| | | | $ |
|
| | | | $ |
|
| |
| 2021 | | | | $ |
|
| | | | $ |
|
| | | | $ |
|
| | | | $ |
|
| | | | $ |
|
| | | | $ |
|
| | | | $ |
|
| | | | $ |
|
| |
| 2020 | | | | $ |
|
| | | | $ |
|
| | | | $ |
|
| | | | $ |
|
| | | | $ |
|
| | | | $ |
|
| | | | $ |
|
| | | | $ |
|
| |
(1)
(2)
The dollar amounts reported in column (c) represent the amount of “compensation actually paid” to Mr. Agree, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned by or paid to Mr. Agree during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to Mr. Agree’s total compensation for each year to determine the compensation actually paid:
42
|
Year
|
| |
Reported
Summary Compensation Table Total for PEO |
| |
Reported
Value of Equity Awards (a) |
| |
Equity Award
Adjustments (b) |
| |
Compensation
Actually Paid to PEO |
| ||||||||||||
| 2022 | | | | $ |
|
| | | | $ |
(
|
| | | | $ |
|
| | | | $ |
|
| |
| 2021 | | | | $ |
|
| | | | $ |
(
|
| | | | $ |
|
| | | | $ |
|
| |
| 2020 | | | | $ |
|
| | | | $ |
(
|
| | | | $ |
|
| | | | $ |
|
| |
(a)
The grant date fair value of equity awards represents the total of the amounts reported in the “Stock Awards” column in the Summary Compensation Table for the applicable year.
(b)
The equity award adjustments for each applicable year include the addition (or subtraction, as applicable) of the following: (i) the year-end fair value of any equity awards granted in the applicable year that are outstanding and unvested as of the end of the year; (ii) the amount of change as of the end of the applicable year (from the end of the prior fiscal year) in fair value of any awards granted in prior years that are outstanding and unvested as of the end of the applicable year; (iii) for awards that are granted and vest in same applicable year, the fair value as of the vesting date; (iv) for awards granted in prior years that vest in the applicable year, the amount equal to the change as of the vesting date (from the end of the prior fiscal year) in fair value; (v) for awards granted in prior years that are determined to fail to meet the applicable vesting conditions during the applicable year, a deduction for the amount equal to the fair value at the end of the prior fiscal year; and (vi) the dollar value of any dividends or other earnings paid on stock in the applicable year prior to the vesting date that are not otherwise reflected in the fair value of such award or included in any other component of total compensation for the applicable year. The valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant. The amounts deducted or added in calculating the equity award adjustments are as follows:
|
Year
|
| |
Year End Fair
Value of Equity Awards Granted During the Year That are Outstanding and Unvested as of the End of the Year |
| |
Year over
Year Change in Fair Value of Outstanding and Unvested Equity Awards |
| |
Year over
Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year |
| |
Value of
Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation |
| |
Total
Equity Award Adjustments |
| |||||||||||||||
| 2022 | | | | $ |
|
| | | | $ |
|
| | | | $ |
(
|
| | | | $ |
|
| | | | $ |
|
| |
| 2021 | | | | $ |
|
| | | | $ |
|
| | | | $ |
(
|
| | | | $ |
|
| | | | $ |
|
| |
| 2020 | | | | $ |
|
| | | | $ |
|
| | | | $ |
|
| | | | $ |
|
| | | | $ |
|
| |
(3)
The dollar amounts reported in column (d) represent the average of the amounts reported for the Company’s NEOs as a group (excluding Mr. Agree) in the “Total” column of the Summary Compensation Table in each applicable year. The names of each of the NEOs (excluding Mr. Agree) included for purposes of calculating the average amounts in each applicable year are as follows: (i) for 2022, Peter Coughenour, Craig Erlich, Danielle Spehar, and Nicole Witteveen; (ii) for 2021, Peter Coughenour, Craig Erlich, Simon Leopold, Danielle Spehar, Clayton Thelen and Nicole Witteveen; and (iii) for 2020, Clayton Thelen, Laith Hermiz, Craig Erlich, and Danielle Spehar.
(4)
The dollar amounts reported in column (e) represent the average amount of “compensation actually paid” to the NEOs as a group (excluding Mr. Agree), as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual average amount of compensation earned by or paid to the NEOs as a group (excluding Mr. Agree) during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to average total compensation for the NEOs as a group (excluding Mr. Agree) for each year to determine the compensation actually paid, using the same methodology described above in Note 2:
43
|
Year
|
| |
Average
Reported Summary Compensation Table Total for Non-PEO NEOs |
| |
Average
Reported Value of Equity Awards |
| |
Average
Equity Award Adjustments (a) |
| |
Average
Compensation Actually Paid to Non-PEO NEOs |
| ||||||||||||
| 2022 | | | | $ |
|
| | | | $ |
(
|
| | | | $ |
|
| | | | $ |
|
| |
| 2021 | | | | $ |
|
| | | | $ |
(
|
| | | | $ |
|
| | | | $ |
|
| |
| 2020 | | | | $ |
|
| | | | $ |
(
|
| | | | $ |
|
| | | | $ |
|
| |
(a)
The amounts deducted or added in calculating the total average equity award adjustments are as follows:
|
Year
|
| |
Average
Year End Fair Value of Equity Awards Granted During the Year That are Outstanding and Unvested as of the End of the Year |
| |
Average
Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards |
| |
Average
Year over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year |
| |
Average
Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year |
| |
Average
Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation |
| |
Average
Total Equity Award Adjustments |
| ||||||||||||||||||
| 2022 | | | | $ |
|
| | | | $ |
(
|
| | | | $ |
(
|
| | | | $ |
|
| | | | $ |
|
| | | | $ |
|
| |
| 2021 | | | | $ |
|
| | | | $ |
|
| | | | $ |
(
|
| | | | $ |
(
|
| | | | $ |
|
| | | | $ |
|
| |
| 2020 | | | | $ |
|
| | | | $ |
|
| | | | $ |
|
| | | | $ |
|
| | | | $ |
|
| | | | $ |
|
| |
(5)
Cumulative TSR is calculated by dividing the sum of the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and the difference between the Company’s share price at the end and the beginning of the measurement period by the Company’s share price at the beginning of the measurement period.
(6)
Represents the weighted peer group TSR, weighted according to the respective companies’ stock market capitalization at the beginning of each period for which a return is indicated. The peer group used for this purpose is the following published industry index: MSCI US REIT (RMZ) Index.
(7)
The dollar amounts reported represent the amount of net income reflected in the Company’s audited consolidated financial statements for the applicable year.
(8)
The Company defines Adjusted Funds From Operations (AFFO) as net income computed in accordance with GAAP, excluding certain non-cash and infrequently occurring items, specifically, (i) depreciation of real-estate and non-real estate assets; (ii) amortization of acquisition related lease intangibles and leasing costs; (iii) provision for impairment; (iv) gains (or losses) from sales of real estate assets and/or changes in control; (v) loss on extinguishment of debt and settlement of related hedges; (vi) straight-line accrued rent; (vii) stock-based compensation expense; (viii) amortization of financing fees; and (ix) certain other items, such as deferred tax expense, that increase net income in accordance with GAAP. While the Company uses numerous financial and non-financial performance measures for the purpose of evaluating performance for the Company’s compensation programs, the Company has determined AFFO (per diluted common share and partnership unit) is the financial performance measure that, in the Company’s assessment, represents the most important performance measure (that is not otherwise required to be disclosed in the table) used by the company to link compensation actually paid to the company’s NEOs, for the most recently completed fiscal year, to Company performance.
Financial Performance Measures
As described in greater detail in “Compensation Discussion and Analysis,” the Company’s executive compensation program reflects a variable pay-for-performance philosophy. The metrics that the Company uses for both our long-term and short-term incentive awards are selected based on the objective of incentivizing our NEOs to increase the value of our enterprise for our shareholders. The most important financial performance measures used by the Company to link executive compensation actually paid to the Company’s NEOs, for the most recently completed fiscal year, to the Company’s performance are as follows:
•
44
•
•
Analysis of the Information Presented in the Pay Versus Performance Table
The Company is providing the following descriptions of the relationships between information presented in the Pay Versus Performance table, including “compensation actually paid”, as required by Item 402(v) of Regulation S-K. The Compensation Committee has not previously used or considered “compensation actually paid” as computed in accordance with Item 402(v) of Regulation S-K to set NEO target pay or align our NEO compensation to Company performance. See “Compensation Discussion and Analysis” for a discussion of how the Compensation Committee designs our executive compensation program and sets NEO target pay.
The charts below compare (i) the compensation actually paid to our PEO and the average of the compensation actually paid to our non-PEO NEOs, with (ii) our cumulative TSR, (iii) the MSCI US REIT Index TSR, and (iv) our AFFO Per Share in each case, for the fiscal years ended December 31, 2020, 2021 and 2022.
![[MISSING IMAGE: bc_comptsr-pn.gif]](bc_comptsr-pn.gif)
45
![[MISSING IMAGE: bc_compaffo-pn.gif]](bc_compaffo-pn.gif)
AUDIT-RELATED MATTERS
R
eport of the
A
udit
C
ommittee
Management is responsible for the Company’s financial statements, internal controls, accounting and financial reporting processes and compliance with applicable laws and regulations. The independent registered public accounting firm is responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with standards of the Public Company Accounting Oversight Board (“PCAOB”) and an independent audit of the effectiveness of the Company’s internal control over financial reporting in accordance with the standards of the PCAOB, and for expressing their opinions thereon. The Audit Committee’s responsibility is to provide general oversight of the foregoing matters, as well as to engage the Company’s independent registered public accounting firm and establishing the terms of retention. The Audit Committee is governed by a charter, a copy of which is available on our website at
www.agreerealty.com
.
Review and Discussions with Management and Independent Accountants.
In this context, the Audit Committee has met and held discussions with management and Grant Thornton, the Company’s independent registered public accounting firm. Management represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America, and the Audit Committee has reviewed and discussed the audited consolidated financial statements with management and Grant Thornton. The Audit Committee discussed with Grant Thornton the matters required to be discussed by the applicable requirements of the PCAOB and the SEC.
Grant Thornton also provided to the Audit Committee the written disclosures and letter from Grant Thornton required by the applicable requirements of the PCAOB regarding Grant Thornton’s communications with the Audit Committee concerning independence, and the Audit Committee has discussed with Grant Thornton its independence with respect to the Company. The Audit Committee has reviewed the original proposed scope of the annual audit of the Company’s financial statements and the associated fees and any significant variations in the actual scope of the audit and fees. See “Audit Committee Matters” for additional information regarding the Audit Committee’s pre-approval policies and procedures for audit and non-audit services provided by Grant Thornton.
Conclusion
. Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the Company’s audited consolidated financial statements be included in the Company’s annual report on Form 10-K for the year ended December 31, 2022 for filing with the SEC.
AUDIT COMMITTEE
Karen Dearing, Chair
Merrie S. Frankel
Michael Hollman
Merrie S. Frankel
Michael Hollman
47
A
udit
C
ommittee
M
atters
P
re
-A
pproval
P
olicies and
P
rocedures for
A
udit and
N
on
-A
udit
S
ervices
In accordance with Audit Committee policies and procedures and applicable law, the Audit Committee must pre-approve all services to be provided by its independent registered public accounting firm. In determining whether to pre-approve such services, the Audit Committee must consider whether the provision of such services is consistent with the independence of such accountants. The Audit Committee generally provides pre-approvals at its regularly scheduled meetings. The Audit Committee has delegated to its chairperson, Karen Dearing, the authority to grant pre-approvals of non-audit services between regularly scheduled meetings of the Audit Committee, provided that any such pre-approval by the chairperson shall be reported to the Audit Committee at its next scheduled meeting. However, pre-approval of non-audit services is not required if (1) the aggregate amount of non-audit services is less than 5% of the total amount paid by us to the auditor during the fiscal year in which the non-audit services are provided; (2) such services were not recognized by us as non-audit services at the time of the engagement; and (3) such services are promptly brought to the attention of the Audit Committee and, prior to completion of the audit, are approved by the Audit Committee or by one or more Audit Committee members who have been delegated authority to grant approvals.
F
ees
P
aid to
I
ndependent
R
egistered
P
ublic
A
ccounting
F
irms
Grant Thornton audited and reported on the Company’s financial statements for the years ended December 31, 2022 and December 31, 2021. The following table sets forth the fees that we were billed for audit and other services provided by Grant Thornton in 2022 and 2021. All such fees paid to Grant Thornton were approved in conformity with the pre-approval policies and procedures noted above.
| | | |
2022
|
| |
2021
|
| ||||||
| Audit Fees | | | | $ | 971,250 | | | | | $ | 875,875 | | |
| Audit-Related Fees | | | | | — | | | | | | — | | |
| Tax Fees | | | | | — | | | | | | — | | |
| All Other Fees | | | | | — | | | | | | — | | |
| | | | | $ | 971,250 | | | | | $ | 875,875 | | |
Audit Fees
. Audit Fees consist of fees and expenses billed for professional services rendered to audit financial statements, assess effectiveness of internal control over financial reporting, review interim consolidated financial statements, review registration statements and prepare comfort letters, services that are normally provided in connection with statutory and regulatory filings or engagements.
Audit-Related Fees
. Audit-Related Fees consist of fees and expenses for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements that are not Audit Fees. There were no audit-related fees for the years ended December 31, 2022 and 2021.
48
PROPOSALS
P
roposal
1 —
E
lection of
D
irectors
Pursuant to the Bylaws, the directors are required to be divided into three classes serving three-year staggered terms. At the 2023 Annual Meeting, three directors will be elected to serve until the annual meeting of stockholders in 2026, or until such director’s earlier resignation, retirement or other termination of service, and, in the case of a holdover director, until his or her successor is duly elected and qualified.
The Board has re-nominated (i) Merrie Frankel, John Rakolta, Jr. and Jerome Rossi whose terms expire at the 2023 Annual Meeting, to serve until the annual meeting of stockholders in 2026. The Board has affirmatively concluded that each of Merrie Frankel, John Rakolta, Jr., and Jerome Rossi are independent under the applicable rules of the NYSE.
Each nominee has consented to serve his or her term until his or her successor has been duly elected and qualified, if elected by the stockholders. If any nominee becomes unable or unwilling to serve between the date of this proxy statement and the 2023 Annual Meeting, the Board may designate a new nominee and the persons named as proxies by the Board will vote for that substitute nominee. Alternatively, the Board may reduce the size of the Board.
The Board recommends that you vote “
FOR
” the election of its director nominees.
The following table sets forth the director nominees and continuing directors of the Board:
|
Name
|
| |
Age
|
| |
Title
|
| |
Term Ending
|
|
| Jerome Rossi (1) | | |
79
|
| | Independent Director | | |
2023
|
|
| Merrie Frankel (1) | | |
68
|
| | Independent Director | | |
2023
|
|
|
John Rakolta, Jr.
.(1)
|
| |
75
|
| | Independent Director | | |
2023
|
|
| Richard Agree | | |
79
|
| | Executive Chairman of the Board and Director | | |
2024
|
|
| Karen Dearing | | |
58
|
| | Independent Director | | |
2024
|
|
| Michael Hollman | | |
42
|
| | Independent Director | | |
2024
|
|
| Joel Agree | | |
44
|
| | Chief Executive Officer and Director | | |
2025
|
|
| Michael Judlowe | | |
57
|
| | Independent Director | | |
2025
|
|
|
Gregory Lehmkuhl
|
| |
50
|
| | Independent Director | | |
2025
|
|
(1)
Standing for re-election to a three-year term.
The biographical descriptions below set forth certain information with respect to the director nominees and continuing directors of the Board. The Board has identified specific attributes of each director that the Board has determined qualify that person for service on the Board.
Joel Agree
has been our President and a Director since June 2009. He was appointed as Chief Executive Officer in January 2013, and from June 2009 to that date he served as Chief Operating Officer. Prior to being promoted to President and Chief Operating Officer, from January 2006 to June 2009, Mr. Joel Agree served as our Executive Vice President. He is a member of the State Bar of Michigan and the International Council of Shopping Centers. He holds a Juris Doctor degree from Wayne State University Law School and a Bachelor of Arts degree in Political Science from the University of Michigan. Joel Agree is the son of Richard Agree, our Executive Chairman.
The Board has determined that it is in the best interests of our Company and our stockholders for Mr. Joel Agree, in light of his day-to-day company-specific operational, management and market experience through his position as President and Chief Executive Officer of our Company, to continue to serve as a director of the Board.
Michael Judlowe
has been a Director of our Company since September 2021. Mr. Judlowe most recently served as Chairman of Jefferies’ US Real Estate, Gaming and Lodging investment banking practice from June 2019 to March 2021. Mr. Judlowe previously served as Co-Head of Equity Capital Markets Americas from 2013 to 2019. He joined Jefferies as a Managing Director in 2010 to establish the
49
Real Estate Equity Capital Markets practice. Prior to his time at Jefferies, Mr. Judlowe spent 10 years in Equity Capital Markets at Citigroup. Over his career in banking, Mr. Judlowe has led a significant number of equity transactions and successful initial public offerings, including National Storage Affiliates Trust (NYSE: NSA), QTS Realty Trust, Inc. (NYSE: QTS), AmREIT, Inc. (formerly NYSE: AMRE) and ClubCorp Holdings, Inc. (formerly NYSE: MYCC). Mr. Judlowe earned his B.A. in Political Science from Tufts University and an M.B.A. in Marketing from NYU’s Stern School of Business. The Board has determined that it is in the best interests of our Company and our stockholders for Mr. Judlowe, in light of his significant experience in equity capital markets, investment banking and REITs, to continue to serve as a director of the Board.
Gregory Lehmkuhl
has been a Director of our Company since July 2018 and has served as our Lead Independent Director since December 2020. Mr. Lehmkuhl is the President and Chief Executive Officer of Lineage Logistics (“Lineage”) and oversees all facets of the company’s operations nationwide. Prior to joining Lineage, Mr. Lehmkuhl served as Corporate Executive Vice President for Con-Way and President of Con- Way Freight, where he was responsible for overall company operating and financial performance, strategic planning and business plan development, as well as direction of the company’s continuous improvement processes. Prior to Con-Way, he held senior management positions at Menlo Worldwide Logistics, Delphi Automotive Systems and Penske Logistics. Mr. Lehmkuhl holds a Bachelor’s Degree in Business from Michigan State University, as well as a Master of Business Administration from Oakland University.
The Board has determined that it is in the best interests of our Company and our stockholders for Mr. Lehmkuhl, in light of his extensive operational and executive experience, to continue to serve as a director of the Board.
Jerome Rossi
has been a Director of our Company since January 2015. Mr. Rossi currently serves as the Chief Executive Officer of R&R Consulting and previously served as the Chairman of Gabe’s Stores, a private fashion discount retailer. Mr. Rossi was formerly Senior Executive Vice President and Group President of The TJX Companies from 2005 until January 2015. He served as Chief Operating Officer of HomeGoods from 2000 to 2005, Executive Vice President and Chief Operating Officer of The Marmaxx Group from 1995 to 2000 and President and Chief Executive Officer of Marshalls from 1990 to 1995. Mr. Rossi began his career in 1967 as a Certified Public Accountant with Arthur Young & Co. Mr. Rossi currently serves on the Board of Directors of Home Base, the Board of Advisors at Bentley College, the Board of Directors at Bethany Hill School, the Board of Overseers at Newton Wellesley Hospital, the Board of Overseers at Beth Israel Hospital and the Board of Directors of The National Domestic Violence Hotline.
The Board has determined that it is in the best interests of our Company and our stockholders for Mr. Rossi, in light of his extensive career as a senior executive, deep knowledge of retail real estate and retail operations, strong leadership capabilities and public company experience, to continue to serve as a director of the Board.
Merrie S. Frankel
has been a Director of our Company since October 2016. Ms. Frankel is currently President of Minerva Realty Consultants, LLC (“Minerva”), an independent real estate investment trust (“REIT”) and ratings advisory firm that also provides litigation support for REITs, public and private companies and funds. Prior to joining Minerva, Ms. Frankel spent 18 years at Moody’s Investors Service in the Commercial Real Estate Finance Group as Vice President and Senior Credit Officer, where she was responsible for rating REITs and real estate operating companies in the United States and Canada. Prior to her time at Moody’s, she was Senior Vice President and Director of Portfolio Management for the Argo Funds and also held numerous positions within the real estate industry at notable companies including Ernst & Young, Cushman & Wakefield, J.P. Morgan Securities and Salomon Brothers Inc. Ms. Frankel is currently an adjunct professor at Columbia University’s Graduate School of Architecture, Planning and Preservation and New York University’s Schack Institute of Real Estate where she teaches capital markets. She holds J.D. and M.B.A. degrees from Hofstra University Law and Graduate Business School and graduated with a B.A. in English from the University of Pennsylvania with various honors and is admitted to the New York Bar. Among her industry affiliations, she is a Trustee and previously chaired the New York District Council for the Urban Land Institute; on the board of the Financial Women’s Association of New York as a finance committee representative; and a member of the Advisory Committee
50
for Women in PropTech. She recently served as a Treasurer of the New York Women Executives in Real Estate Charitable Fund; a board member and chair of the Audit/Finance committee for the Martha Graham Dance Company; and on the Nareit Editorial Advisory Board. She was cited as one of the “2020 Directors to Watch” by Board and Directors and one of 50 “Women of Influence” for “Real Estate New York” in 2008.
The Board has determined that it is in the best interests of our Company and our stockholders for Ms. Frankel, in light of her experience as a senior executive in the real estate and financial services industries, as well as her significant expertise in capital markets, accounting and REITs, to continue to serve as a director of the Board.
Ambassador John Rakolta, Jr. (Ret.)
was reappointed to the Board in February 2021. Mr. Rakolta currently serves as the chairman of Walbridge, on the Board of Directors of Business Leaders for Michigan, and he recently served as the United States Commissioner General of Expo Dubai 2020. He previously served on the Board from August 2011 until his confirmation as United States Ambassador to the United Arab Emirates in September 2019. Prior to such confirmation, Mr. Rakolta served as the long-time chairman and chief executive officer of Walbridge, a privately held construction company. Mr. Rakolta also served on the board and was co-chairman of the Metropolitan Affairs Corporation and the Coalition for the Future of Detroit School Children until his confirmation as United States Ambassador to the United Arab Emirates in September 2019. He was also a director and member of the Executive Committee of the Detroit Regional Chamber and served on the Board of Directors of New Detroit, Inc. and the College for Creative Studies. Mr. Rakolta was appointed Romania’s Honorary Consul General to the United States in 1998, a position that he resigned from upon his confirmation as United States Ambassador to the United Arab Emirates in September 2019. He received a Bachelor of Science degree in Civil Engineering from Marquette University in 1970.
The Board has determined that it is in the best interests of our Company and our stockholders for Mr. Rakolta, in light of his strong executive background in business and construction and his leadership skills to continue to serve as a director of the Board.
Richard Agree
has been the Executive Chairman of the Board since January 2013. From December 1993 until January 2013, he was our Chief Executive Officer and Chairman of the Board. Prior thereto, he worked as managing partner of the general partnerships which held our properties prior to the formation of our Company and the initial public offering and was President of the predecessor company since 1971. Mr. Richard Agree has managed and overseen the development of over eight million square feet of retail real estate during the past 50 years. He is a graduate of the Detroit College of Law, a member of the State Bar of Michigan and the International Council of Shopping Centers. Mr. Richard Agree is the father of Mr. Joel Agree, our Chief Executive Officer and one of our Directors.
The Board has determined that it is in the best interests of our Company and our stockholders for Mr. Richard Agree, in light of his extensive company-specific, operational, market and finance experience as the founder and former Chief Executive Officer of our Company, his leadership abilities and his expertise in the ownership, development, acquisition and management of retail real estate net leased to national tenants, to continue to serve as a director of the Board.
Karen Dearing
was appointed to the Board in December 2020. She currently serves as Executive Vice President — Special Projects overseeing the integration of Sun Communities Inc.’s (“Sun Communities”) investments in the United Kingdom, as well as advising on other strategic initiatives. Ms. Dearing served as Sun Communities’ Chief Financial Officer, Treasurer, and Secretary from 2008 — April 2022. In this role, she was responsible for the overall management of the information technology, accounting, tax and finance departments, and all internal and external financial reporting. Prior to becoming Chief Financial Officer and Executive Vice President, Ms. Dearing served as Senior Vice President of Sun Communities from 2006 to 2008, Corporate Controller from 2002 to 2006 and Director of Finance from 1998 to 2002. Ms. Dearing has worked extensively on Sun Communities’ accounting and finance matters related to its ground-up developments and expansions. Before joining Sun Communities, Inc., Ms. Dearing had over seven years of experience as the Financial Controller of a privately-owned automotive supplier and over four years of experience as a certified public accountant with Deloitte. Ms. Dearing holds a B.S. in accounting from Michigan State University. She is a Certified Public Accountant and a member of Nareit, AICPA and MICPA.
51
The Board has determined that it is in the best interests of our Company and our stockholders for Ms. Dearing, in light of her corporate accounting expertise and finance and real estate experience, to continue to serve as a director of the Board.
Michael Hollman
was appointed to the Board in August 2020. He currently serves as SVP, Treasurer and Head of Strategic Finance at Hilton, a position he has held since 2020. In this role, he oversees the Corporate Finance, Corporate Strategy and Global Treasury teams, and is responsible for a wide variety of activities and initiatives, including public market offerings, capital allocation, cash management, business development and Mergers & Acquisitions. Prior to becoming Treasurer, Mr. Hollman served as Vice President of Mergers & Acquisitions and Capital Markets from 2017 to 2020. Before joining Hilton, Mr. Hollman worked in investment banking, specializing in the real estate and lodging sectors. He most recently served as a Director of the Real Estate and Lodging Investment Banking Group at Citigroup from 2013 to 2017, and previously held similar roles at UBS Investment Bank from 2004 to 2013. Prior to banking, Mr. Hollman was a management consultant at Kurt Salmon Associates, now a part of Accenture Strategy, from 2004 to 2007, where he was responsible for the development and execution of strategic initiatives and supply chain-related projects for consumer product and retail companies. He currently serves on the board of directors and as the Treasurer on the executive committee of DC Central Kitchen. He received a B.S. in Industrial Engineering from the Georgia Institute of Technology with honors and an M.B.A. from Columbia Business School.
The Board has determined that it is in the best interests of our Company and our stockholders for Mr. Hollman, in light of his corporate finance and investment banking experience, to continue to serve as a director of the Board.
52
P
roposal
2
—
R
atification of appointment of independent registered public accounting firm for
2023
The Audit Committee currently believes that we should continue our relationship with Grant Thornton and has appointed Grant Thornton to continue as our independent accountants for 2023. See “Audit Related Matters — Report of the Audit Committee” and “Audit Related Matters — Audit Committee Matters” for additional information on matters related to Grant Thornton’s provision of services to us.
The affirmative vote of a majority of votes cast is necessary to ratify the Audit Committee’s appointment of Grant Thornton as our independent registered public accounting firm for 2023. Abstentions are not treated as votes cast under Maryland law and, therefore, they have no effect on the outcome of this proposal. Although stockholder ratification of the appointment is not required by current law, rules or regulations and is not binding on us, the Board considers the selection of the independent registered public accounting firm to be an important matter of stockholder concern and the Audit Committee will take your vote into consideration when appointing our independent registered public accounting firm in the future. Even if the stockholders ratify the appointment of Grant Thornton, the Audit Committee in its sole discretion may terminate the engagement of Grant Thornton and engage another independent auditor at any time during the year, although it has no current intention to do so.
A representative of Grant Thornton will be present at the 2023 Annual Meeting and will be provided with the opportunity to make a statement if desired. Such representative will also be available to respond to appropriate questions.
The Board recommends that you vote “
FOR
” the ratification of the appointment of Grant Thornton as our independent registered public accounting firm for 2023.
53
P
roposal
3
—
A
dvisory
(N
on
-B
inding
) V
ote
A
pproving
E
xecutive
C
ompensation
We are presenting the following proposal, which gives you as a stockholder the opportunity to endorse or not endorse our executive compensation program for named executive officers by voting for or against the following resolution.
“RESOLVED, that the stockholders approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed in the Company’s proxy statement for the 2023 Annual Meeting pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and the other related disclosure.”
The Board will consider the outcome of the stockholder affirmative vote a majority of votes cast to approve our executive compensation, which is an advisory, non-binding vote. Abstention and broker non-votes are not treated as votes cast under Maryland law and, therefore, they have no effect on the outcome of this proposal. While this vote is advisory and not binding on us, it will provide information to us and the Compensation Committee regarding stockholder sentiment about our executive compensation philosophy, policies and practices, which the Compensation Committee will be able to consider when determining executive compensation for the remainder of 2023 and beyond. We recognize the interest our stockholders have in the compensation of our executive officers, and we are providing this advisory vote in recognition of that interest as required by Section 14A of the Exchange Act. In a non-binding advisory vote on the frequency of advisory votes on executive compensation held at our 2017 annual meeting of stockholders, stockholders voted in favor of holding such votes annually. In light of this result and other factors considered by the Board, the Board determined that the Company would hold advisory votes on executive compensation on an annual basis until the next required advisory vote.
As described in detail under the heading “Compensation Discussion and Analysis” above, we seek to closely align the interests of our executive officers with the interests of our stockholders. Our compensation programs are designed to reward the executive officers for the achievement of short-term and long-term strategic and operational goals, while at the same time avoiding the encouragement of unnecessary or excessive risk-taking. Following is a summary of some of the primary components and rationale of our compensation philosophy.
•
Provide total compensation
that is both fair and competitive. To attract and reduce the risk of losing the services of valuable officers but to avoid the expense of excessive pay, compensation should be competitive. The Compensation Committee assesses the competitiveness of our compensation to our executive officers by comparing it to the compensation of executive officers at other public companies. The Compensation Committee assesses the competitiveness of the Company’s compensation to its executive officers through review of materials provided or reviewed by Meridian and by reviewing the 2020 Nareit Compensation and Benefits Survey to provide it with relevant market data.
•
Attract, retain and motivate key executives who are critical to our operations
. The primary purpose of our executive compensation program has been and is to achieve our business objectives by attracting, retaining and motivating talented executive officers by providing incentives and economic security.
•
Reward superior individual and company performance on both a short-term and long-term basis
. Performance-based pay aligns the interests of management with the interests of our stockholders. Performance-based compensation motivates and rewards individual efforts and company success.
•
Align executives’ long-term interests with those of our stockholders
. The Compensation Committee believes that requiring the executive officers to maintain a meaningful ownership interest in the Company relative to their annual base salaries may encourage the executive officers to act in a manner that creates value for our stockholders.
The Board recommends that you vote “
FOR
” the approval of the compensation of our named executive officers as disclosed in this proxy statement.
54
P
roposal
4
—
A
dvisory
(N
on
-B
inding
) V
ote
O
n
T
he
F
requency
O
f
A
dvisory
V
otes
O
n
N
amed
E
xecutive
O
fficer
C
ompensation
The Dodd-Frank Act also enables our stockholders to indicate how frequently we should seek an advisory vote on the compensation of our named executive officers, as disclosed pursuant to the SEC’s compensation disclosure rules, such as Proposal 3 included in this proxy statement. By voting on this Proposal 4, stockholders may indicate whether they would prefer an advisory vote be held on named executive officer compensation once every one, two, or three years.
After careful consideration of this Proposal, our Board has determined that an advisory vote on named executive officer compensation that occurs every year is the most appropriate alternative for the Company, and therefore our Board recommends that you vote for a one-year interval for the advisory vote on named executive officer compensation. An annual advisory vote on named executive officer compensation will allow our stockholders to provide us with their direct input on our compensation philosophy, policies and practices as disclosed in the proxy statement every year. We understand that our stockholders may have different views as to what is the best approach for the Company, and we look forward to hearing from our stockholders on this Proposal.
You may cast your vote on your preferred voting frequency by choosing the option of one year, two years, three years or abstain from voting.
The affirmative vote of a majority of the votes cast at the 2023 Annual Meeting is required to approve the frequency of future votes on our named executive officers’ compensation. Abstentions and broker non-votes are not treated as votes cast under Maryland law and, therefore, they have no effect on the outcome of this proposal. The Board expects to be guided by the alternative that receives the greatest number of votes, even if not a majority. This vote is advisory and not binding on the Board or the Company in any way, and therefore the Board may decide that it is in the best interests of our stockholders and the Company to hold an advisory vote on named executive officer compensation more or less frequently than the option approved by our stockholders.
The Board recommends a vote of “
EVERY YEAR
” for Proposal 4.
55
RELATED PERSON TRANSACTIONS
P
olicies and
P
rocedures
Under SEC rules, a related person transaction is any transaction or any series of transactions in which our Company was or is to be a participant, the amount involved exceeds $120,000, and in which any related person had or will have a direct or indirect material interest. A “related person” is a director, officer, nominee for director or a more than 5% stockholder since the beginning of our last completed fiscal year, and their immediate family members.
We adopted a Related Party Transactions Policy in 2022 to ensure that all related person transactions are subject to review, approval or ratification in accordance with specified procedures. The Board or Audit Committee approves or ratifies only those related person transactions that are determined by it to be, under all of the circumstances, in the best interests of the Company and its stockholders.
In addition, our written Code of Conduct expressly prohibits any actions that would cause a conflict of interest except under guidelines approved by the Board. Our Code of Conduct requires officers and directors along with other employees to provide full disclosure of any such transaction to appropriate persons. Officers, directors and employees are encouraged to speak with specified persons if there is any doubt as to whether a transaction could comprise a related person transaction or otherwise constitute a conflict of interest.
If a related person transaction is proposed, the non-interested directors of the Board review such transaction to ensure that our involvement in such transaction is on terms comparable to those that could be obtained in arm’s length dealings with an unrelated third party and is in the best interests of us and our stockholders. If necessary or appropriate, we will engage third party consultants and special counsel, and the Board may create a special committee, to review such transactions. There were no related person transactions in 2022, except for the Reimbursement Agreement described below.
The Company and Richard Agree, the Executive Chairman of the Company, are parties to a Reimbursement Agreement dated November 18, 2014. Pursuant to the Reimbursement Agreement, Mr. Agree has agreed to reimburse the Company for any loss incurred under the unsecured revolving credit facility of our majority owned partnership, Agree Limited Partnership (the “Operating Partnership”) in an amount not to exceed $14 million to the extent that the value of the Operating Partnership’s assets available to satisfy the Operating Partnership’s obligations under the revolving credit facility is less than $14 million.
56
ADDITIONAL INFORMATION
C
ost of
P
roxy
S
olicitation
All of the expenses of preparing, assembling, printing and mailing the Notice and the other materials used in the solicitation of proxies will be paid by us. Arrangements will be made with brokerage houses and other custodians, nominees and fiduciaries to forward soliciting materials, at our expense, to the beneficial owners of shares held of record by such persons. Our directors and officers may solicit proxies by mail, telephone, telecopy or in person. They will not receive any additional compensation for such work.
P
roposals for
2024 A
nnual
M
eeting
Pursuant to Rule 14a-8 of the Exchange Act, any stockholder proposal to be considered for inclusion in our proxy statement and form of proxy for the annual meeting of stockholders to be held in 2024 must be received at our office at 70 E. Long Lake Road, Bloomfield Hills, MI 48304, Attn: Secretary, no later than November 30, 2023 and must be in compliance with the requirements of our Bylaws and the SEC’s proxy rules.
Our Bylaws currently provide that in order for a proposal of a stockholder to be presented at our 2024 Annual Meeting of stockholders, other than a stockholder proposal or director nomination to be included in our proxy statement as described above, it must be received at our principal executive offices no earlier than the 150th day and no later than 5:00 p.m., Eastern Time, on the 120th day prior to the anniversary of the date of mailing of the notice for the 2023 Annual Meeting. For our 2024 annual meeting of stockholders, our Secretary must receive this notice between November 2, 2023 and 5:00 p.m., Eastern Time, on December 2, 2023. If the 2024 annual meeting of stockholders is scheduled to take place more than 30 days before or after May 11, 2024, then notice must be delivered no earlier than the 150th day prior to the 2024 annual meeting of stockholders and not later than 5:00 p.m., Eastern Time, on the later of the 120th day prior to the 2024 annual meeting of stockholders or the 10th day following the day on which public announcement of the date of the 2024 annual meeting of stockholders is first made public by our Company. Any such proposal should be mailed to our Secretary, Peter Coughenour at our office at 70 E. Long Lake Road, Bloomfield Hills, MI 48304.
In addition, stockholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must also comply with the additional requirements of Rule 14a-19(b).
See “Board Matters — Committees of the Board-Nominating and Governance Committee” for additional information.
57
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on May 11, 2023
The Notice of the Annual Meeting, this proxy statement, our annual report to stockholders for the year ended December 31, 2022, including the audited consolidated financial statements for the three years ended December 31, 2022, and the accompanying proxy card are available at www.proxyvote.com.
By Order of the Board of Directors
Peter Coughenour
Chief Financial Officer and Secretary
Chief Financial Officer and Secretary
March 31, 2023
58
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AGREE REALTY CORPORATION 70 E. LONG LAKE ROAD BLOOMFIELD HILLS, MI 48304 ATTN: PETER COUGHENOURInvestor Address Line 1Investor Address Line 2Investor Address Line 3Investor Address Line 4Investor Address Line 5John Sample1234 ANYWHERE STREETANY CITY, ON A1A 1A1 234567 8234567 8234567 8234567 8234567 8234567 8 111OF2 SCAN TOVIEW MATERIALS & VOTEVOTE BY INTERNET - www.proxyvote.com or scan the QR Barcode aboveUse the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 P.M. ET on 05/10/2023. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.During The Meeting - Go to www.virtualshareholdermeeting.com/ADC2023You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions.VOTE BY PHONE - 1-800-690-6903Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 P.M. ET on 05/10/2023. Have your proxy card in hand when you call and then follow the instructions.VOTE BY MAILMark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. NAMETHE COMPANY NAME INC. - COMMONTHE COMPANY NAME INC. - CLASS ATHE COMPANY NAME INC. - CLASS BTHE COMPANY NAME INC. - CLASS CTHE COMPANY NAME INC. - CLASS DTHE COMPANY NAME INC. - CLASS ETHE COMPANY NAME INC. - CLASS FTHE COMPANY NAME INC. - 401 KTO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:x CONTROL # →SHARES123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345PAGE1OF2KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.DETACH AND RETURN THIS PORTION ONLY The Board of Directors recommends you vote FOR the following:1. Election of DirectorsNominees01) Merrie Frankel02) John Rakolta, Jr. ForWithholdFor AllAllAllExcept00003) Jerome Rossi To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. 020000000000 TheBoard ofDirectors recommends you vote FOR proposals2. and3.ForAgainstAbstain2.To
ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm for 2023.0003.Toapprove, by non-binding vote, executive compensation.000TheBoard ofDirectors recommends you vote 1 YEAR on thefollowing proposal:1 year2 years3 yearsAbstain4.Toapprove, by non-binding vote, the frequency of executivecompensation votes.0000NOTE: Such other business as may properly come before the meeting or any adjournment thereof. R1.0.0.61 _ 0000597832 Investor Address Line 1Investor Address Line 2Investor Address Line 3Investor Address Line 4Please sign exactly as your name(s) appear(s) hereon. When signing asInvestor Address Line 5John Sampleattorney, executor, administrator, or other fiduciary, please give full1234 ANYWHERE STREETtitle as such. Joint owners should each sign personally. All holders mustANY CITY, ON A1A 1A1sign. If a corporation or partnership, please sign in full corporate orpartnership name by authorized officer.SHARESCUSIP #JOB #SEQUENCE #Signature [PLEASE SIGN WITHIN BOX]DateSignature (Joint Owners)Date
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TABLE OF CONTENTS
ABOUT THE ANNUAL MEETING PROXY SUMMARY SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT BOARD MATTERS The Board of Directors Committees of the Board Director Compensation 2023 Compensation 2022 Compensation Corporate Governance Communications with the Board EXECUTIVE OFFICERS COMPENSATION DISCUSSION AND ANALYSIS Overview of Compensation Program Compensation Objectives and Philosophy Determining Compensation for Named Executive Officers Compensation Committee Consideration of the 2022 Vote on Executive Compensation Elements and Criteria of Compensation in 2022 for Named Executive Officers Base Salary The Executive Incentive Plan Perquisites and Other Benefits Timing and Pricing of Share-Based Grants Stock Ownership Guidelines Policy Prohibiting Hedging and Pledging of Company Stock Executive Compensation Clawback Policy Tax and Accounting Implications COMPENSATION COMMITTEE REPORT EXECUTIVE COMPENSATION TABLES Summary Compensation Table Grants of Plan-Based Awards for 2022 Outstanding Equity Awards at December 31, 2022 Option Exercises and Stock Vested in 2022 Potential Payments Upon Termination or Change-in-Control Change in Control/Severance Payment Tables Pay Ratio Pay Versus Performance AUDIT-RELATED MATTERS Report of the Audit Committee Audit Committee Matters PROPOSALS Proposal 1 Election of Directors