UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.     )

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STORE Capital Corporation

 

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				2020 Notice of Annual Meeting of Stockholders and Proxy Statement

 

 

Christopher H. Volk President and Chief Executive Officer		To Our Stockholders:   At the time of this writing, the COVID-19 pandemic has resulted in historic capital markets volatility and equity valuation declines, and its full impact has yet to be determined. Our foremost thoughts are with the health and well-being of all our many stakeholders.   If we could take a moment to step back in time before the world changed, we do want to recognize that STORE performed exceptionally well in 2019, delivering our stockholders an annual return of 36.7%, outperforming both the S&P 500 (31.5%) and the broad Real Estate Investment Trust RMS benchmark (25.8%). More importantly, 2019 represented our fifth consecutive year of delivering our stockholders a double-digit rate of return. Since the beginning of 2015, STORE has delivered a cumulative annualized rate of return of 16.6%. The rate of return since our November 2014 IPO is even higher at 19.9%. We have handily beaten the S&P 500 and the RMS over these periods. Over the past five years, the sum of our average annual dividend yields and the rate of our growth in Adjusted Funds of Operations (“AFFO”) per share has approximated double digits each year, which simply means that our ability to deliver long-term, compound double digit rates of return results foremost from a solid underlying business model.   During 2019, we invested nearly $1.7 billion in acquisitions and accretively sold close to $430 million in real estate investments. We raised our dividend by 6.1% in the third quarter, which, as a reminder, was our fifth consecutive year of raising our dividend in a meaningful way. Even so, our dividend payout ratio for the fourth quarter was right at 70% of our adjusted funds from operations on a per share basis, serving to continue to provide our shareholders with a highly protected dividend. Our AFFO per share growth was a strong 8.2% for the year.
We concluded 2019 in a very strong financial position. Our occupancy rate stood approximately where it has for the past three years, at 99.5%, with just a dozen properties not subject to a lease contract. We had an undrawn $600 million credit facility, with cash balances comparatively high at nearly $100 million. Our corporate leverage remained steady at approximately 40% of gross portfolio cash cost, which equated to a stable run rate funded debt/EBITDA ratio of 5.5X, which is at the low end of our target range.   Corporate Responsibility   During 2019, STORE built upon our corporate responsibility initiatives, adding a tab to the front page of our website and a corporate responsibility section to our regular quarterly investor presentations. We also built on our Corporate Sustainability initiatives and formed a Board-guided leadership structure to oversee and drive these key initiatives, including the adoption of fundamental policies and practices. This includes a Policy Statement on Environmental Sustainability, a Policy Statement on Human Rights and a Vendor Code of Conduct. The STORE Environmental Policy Statement outlines our practices regarding understanding environmental risks and opportunities in our business, promoting greater awareness and responsibility among our employees, together with tenant engagement. The Human Rights Policy Statement solidifies our core principles regarding equal opportunity, competitive compensation, ethical behavior, workplace safety, open and risk-free communication and legal compliance. These commitments align seamlessly with our pledge to provide a work environment that attracts, develops, and retains top talent by affording our employees an engaging work experience that allows for career development and opportunities for meaningful civic involvement. Finally, the Vendor Code of Conduct sets uncompromising vendor standards for fair and ethical business practices, safe labor conditions, respect for human rights and environmental stewardship.   Conclusion   We at STORE are justly proud of our 2019 performance, which is a result of a potent corporate business model, an amazing staff of talented professionals and the dynamic middle market and larger companies that we address. With that said, I am writing this letter to you at the beginning of April 2020, at which time our share value has materially fallen as a result of the unprecedented COVID-19 global pandemic. While I do not have a crystal ball to see what is in store for us for the remainder of this year, I believe in the resilience of our tenants, the sustained relevancy of the sectors of our economy in which they operate, the need for our services in the large market that we address, the quality of our dedicated team and in the business model that we have created, which emphasizes tenant diversity, and which has performed so well for our stockholders over the past five years. It is with that perspective that we look to the future opportunities before us with excitement and anticipation.   Sincerely,

 

April 16, 2020

Dear Fellow Stockholder:

You are invited to attend the 2020 Annual Meeting of Stockholders of STORE Capital Corporation. The meeting will be held on Thursday, May 28, 2020, at 9:00 a.m., Arizona time. The Annual Meeting will be a completely “virtual” meeting of stockholders. You will be able to attend the Annual Meeting as well as vote and submit your questions during the live webcast of the meeting by visiting www.virtualshareholdermeeting.com/STOR2020 and entering the 16-digit control number included in your notice of Internet availability of the proxy materials, on your proxy card or in the instructions that accompanied your proxy materials.

The attached proxy statement, with the accompanying notice of the meeting, describes the matters expected to be acted upon at the meeting. We urge you to review these materials carefully and to take part in the business of our company by voting on the matters described in the accompanying proxy statement. We hope that you will be able to attend the meeting during which our directors and senior leadership team will be available to answer questions.

Your vote is important. Whether you plan to attend the meeting or not, please return a completed proxy card as promptly as possible or authorize your proxy on the Internet or by calling the toll-free telephone number included in the proxy materials provided to you. The attached proxy statement contains instructions regarding all three methods of authorizing your proxy. If you attend the meeting virtually through the Internet, you may continue to have your shares of common stock voted as instructed in a previously delivered proxy or you may electronically revoke your proxy and vote your shares of common stock online during the meeting. We look forward to your participation.

Sincerely,

 

 

 

Christopher H. Volk

President and Chief Executive Officer

 

This proxy statement is dated April 16, 2020, and is first being made available to stockholders on or about

April 16, 2020.

 

		8377 East Hartford Drive, Suite 100 Scottsdale, Arizona 85255 (480) 256-1100

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held on May 28, 2020

 

Date and Time:		Thursday, May 28, 2020, at 9:00 a.m., Arizona time.
Place:		The Annual Meeting will be a completely virtual meeting of stockholders, and you will be able to attend the Annual Meeting by visiting www.virtualshareholdermeeting.com/STOR2020 and entering the 16-digit control number included in your Notice of Internet Availability of Proxy Materials, on your proxy card or in the instructions that accompanied your proxy materials.
Items of Business:		Proposal 1 – To elect nine director nominees to serve until the 2021 annual meeting of stockholders and until their successors are duly elected and qualified;   Proposal 2 – To approve, on an advisory basis, the compensation of the Company’s named executive officers; and   Proposal 3 – To ratify the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020.
Record Date:		Stockholders of record at the close of business on March 31, 2020 will be entitled to notice of and to vote at the Annual Meeting and any adjournments or postponements thereof.
Delivery of Proxy Materials:		Beginning on April 16, 2020, we began mailing a Notice of Internet Availability of Proxy Materials to our stockholders rather than a full paper set of the proxy materials.
Voting:		Internet and telephone voting are available. Voting instructions are provided on the Notice of Internet Availability of Proxy Materials or, if you received a paper copy of the proxy materials, on the proxy card.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ CHAD A. FREED
Chad A. Freed
Executive Vice President – General Counsel, Chief Compliance Officer and Secretary
Scottsdale, Arizona
April 16, 2020

		How To Vote
		Please Choose One of the Following Voting methods
				Vote By Internet:
				Before The Meeting:
				Go to www.proxyvote.com or from a smartphone, scan the QR Barcode above. Have the information that is printed in the box marked by the arrow  ®xxxx xxxx xxxx xxxx (located on the following page) available and follow the instructions.
				During The Meeting:
				Go to www.virtualshareholdermeeting.com/STOR2020. Have the information that is printed in the box marked by the arrow  ®xxxx xxxx xxxx xxxx (located on the following page) available and follow the instructions.
				Vote By Mail: You can vote by mail by requesting a paper copy of the materials, which will include a proxy card.
		Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on May 28, 2020.   The Notice of Annual Meeting, Proxy Statement and our Annual Report on Form 10-K for the year ended December 31, 2019 (which constitutes our annual report to stockholders) are available at http://ir.storecapital.com.

 

TABLE OF CONTENTS

 

PROXY SUMMARY			S-1
CORPORATE RESPONSIBILITY			S-5
GOVERNANCE			1
PROPOSAL NO. 1 – ELECTION OF DIRECTORS			1
BOARD AND COMMITTEE GOVERNANCE			10
ADDITIONAL CORPORATE GOVERNANCE FEATURES			14
DIRECTOR COMPENSATION			17
DIRECTOR INDEPENDENCE AND RELATED PARTY TRANSACTIONS			19
EXECUTIVE COMPENSATION			21
PROPOSAL NO. 2 – ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS			21
EXECUTIVE OFFICERS			22
COMPENSATION DISCUSSION AND ANALYSIS			23
Executive Summary			23
Response to Advisory Vote on Executive Compensation			25
Compensation Philosophy and Objectives			26
How We Determine Compensation			26
Elements of 2019 Compensation			28
Results of 2017 Performance-Based RSU Grants			34
Status of Outstanding 2018 Performance-Based RSU Grants			35
401(k) Plan			35
Severance and Change in Control Arrangements			35

Perquisites and Other Personal Benefits			36
Other Compensation Policies			36
Tax and Accounting Considerations			36
Compensation Risk Assessment			37
Changes to Compensation Program Beginning in 2020			37
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION			38
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION			38
COMPENSATION TABLES			39
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL			43
OTHER COMPENSATION MATTERS			47
AUDIT MATTERS			48
REPORT OF THE AUDIT COMMITTEE			48
PROPOSAL NO. 3 – RATIFICATION OF THE SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			50
OWNERSHIP OF OUR STOCK			52
BENEFICIAL OWNERSHIP OF OUR COMMON STOCK BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			52
QUESTIONS AND ANSWERS			54
STOCKHOLDER PROPOSALS FOR 2021 ANNUAL MEETING			60
OTHER MATTERS			60
ADDITIONAL INFORMATION			60

 

 

 

			2020 Proxy Statement				i

PROXY SUMMARY

The Board of Directors (the “Board”) of STORE Capital Corporation is soliciting proxies for the annual meeting of stockholders (the “Annual Meeting”), and at any adjournments or postponements thereof, for the purposes set forth in this Proxy Statement and the accompanying notice. This Proxy Statement and the accompanying form of proxy card, and our Annual Report on Form 10-K for the year ended December 31, 2019, which constitutes our annual report to stockholders (the “Annual Report”), were first made available to stockholders on or about April 16, 2020. Throughout this Proxy Statement, we refer to STORE Capital Corporation as “we,” “us,” “our,” “STORE” or the “Company.”

The summary below highlights information contained elsewhere in the Proxy Statement. The summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement before voting. For more complete information regarding the Company’s 2019 performance, please review the Company’s Annual Report.

 

 

			2020 Proxy Statement				S-1

 

S-2		2020 Proxy Statement

 

			2020 Proxy Statement				S-3

2019 BUSINESS PERFORMANCE

2019 Financial Milestones

 

 

1, 3 and 5-Year Total Shareholder Return as of December 31, 2019

 

 

Comparison of the Company’s absolute TSR for the one-year, three-year and five-year periods ending on the last

trading day of 2019 relative to the absolute TSR for the MSCI US REIT Index and S&P 400 REIT Index

 

*	5-Year absolute TSR comparisons to the S&P 400 REIT Index as of December 31, 2019 are not currently available, as the S&P 400 REIT Index was launched in 2016

 

S-4		2020 Proxy Statement

CORPORATE RESPONSIBILITY

STORE defines its success by its ability to make a positive difference for its many stakeholders. STORE’s beginning was inspired by its belief that it could make a positive difference for real estate-intensive businesses across America by delivering innovative and superior real estate capital solutions. In that process, STORE has sought to add an important tool to middle market company capital formation while improving the liquidity of middle market businesses.

For its many customers, STORE’s real estate lease solutions have contributed to their prospects for wealth creation and to their ability to grow, create jobs and contribute to many communities across the country. In turn, meeting the needs of its customers provides an extraordinary investment opportunity that STORE believes holds the promise of sustainable long-term wealth creation for its stockholders. In fulfilling this mission, STORE has grown its staff to 97 associates, with a number of key leaders that have worked together through predecessor companies. From the earliest of these predecessor companies in the 1980’s, STORE’s leadership team has shown a commitment to employee development, employee engagement and personal growth central to the creation of a quality business.

At STORE, we believe that one of our most valuable corporate assets is our reputation for honesty, fairness and candor in all our business activities. It is the responsibility of everyone associated with STORE to protect and enhance our corporate integrity. Accordingly, we are committed to operating our business responsibly, guarding our valuable reputation and creating long-term and sustainable value for our company through a robust business model and attentiveness to all of our many stakeholders. During 2019, we built upon our existing corporate responsibility initiatives, adding a Corporate Responsibility tab to the front page of our website and a Corporate Responsibility section to our regular quarterly investor presentations. We also built on our Corporate Sustainability initiatives and formed a Board-guided leadership structure to oversee and drive these key initiatives, including the adoption of fundamental policies and practices.

 

 

			2020 Proxy Statement				S-5

Corporate Governance and Ethical Business Practices

STORE is committed to principles of good corporate governance and has implemented internal policies and procedures to ensure that its governance practices are best in class, and that its directors, officers and employees conduct business with integrity and in accordance with the highest ethical standards. Our Nominating and Corporate Governance Committee plays an active role in managing corporate governance and reputational risk and in developing and adopting corporate policies, processes and procedures that ensure full compliance with the rules and regulations of the US Securities and Exchange Commission (“SEC”) and the New York Stock Exchange (“NYSE”), promote ethical business practices and benefit our stockholders. The following highlights certain key aspects of our corporate governance framework:

 

 

S-6		2020 Proxy Statement

Environmental Stewardship

STORE is a net-lease real estate investment trust. We acquire single-tenant operational real estate from business owners, and then lease the properties back to the business owners under net-leases, substantially all of which are triple-net. Under a triple-net lease, the tenant is solely responsible for operating the business conducted in the building subject to the lease, keeping the building in good order and repair, remodeling and updating the building as it deems appropriate to maximize business value, and paying the insurance, property taxes and other property-related expenses. Under the triple-net lease model, therefore, it is the tenant, and not STORE, that controls energy, water usage and waste and recycling practices and decides when and how to implement environmentally-sustainable practices at a given property.

While we do not control the business operations at our properties, as the property owner, we nevertheless recognize that the operation of commercial real estate assets can have a meaningful impact on the environment—particularly with respect to resource consumption and waste generation—and on the health of building occupants. At STORE, we believe that being conscious of, and seeking to address, environmental impacts within our control, and supporting our tenant customers to do the same in their businesses, plays a role in building and sustaining successful enterprises.

 

 

 

			2020 Proxy Statement				S-7

Social Responsibility and Human Capital Development

STORE believes that delivering strong financial results while also contributing in a positive way to all of our many stakeholders defines true success. We seek to provide a work environment that attracts, develops and retains top talent by affording our employees an engaging work experience that allows for career development and opportunities for meaningful civic involvement. Our employees further our commitment to social responsibility through their personal efforts to build connections with one another and their involvement in outside organizations that promote education, environmental and social well-being. We engage with our customers to help them build and sustain successful businesses that have a positive impact on their own communities.

 

 

S-8		2020 Proxy Statement

Questions and Answers

Please see the section titled “Questions and Answers About the Proxy Materials and Voting Information” for important information about the proxy materials, voting, the Annual Meeting, Company documents, communications and the deadlines to submit stockholder proposals and director nominees for the 2021 annual meeting of stockholders. Additional questions may be directed to Chad A. Freed, Executive Vice President—General Counsel, Chief Compliance Officer and Secretary of the Company, at 8377 East Hartford Drive, Suite 100, Scottsdale, Arizona 85255.

Learn More About Our Company

You can learn more about the Company, view our governance materials and much more by visiting our website, www.storecapital.com.

Please also visit our 2020 Annual Meeting website, www.virtualshareholdermeeting.com/STOR2020, to easily access the Company’s interactive proxy materials, vote through the Internet, submit questions in advance of the 2020 Annual Meeting of Stockholders, and listen to a live webcast of the meeting.

 

			2020 Proxy Statement				S-9

GOVERNANCE

PROPOSAL NO. 1 – ELECTION OF DIRECTORS

 

•

What am I voting on?

 

Stockholders are being asked to elect nine director nominees for a one-year term.

 

•

Voting recommendation:

“FOR” the election of each director nominee. The Board and the Nominating and Corporate Governance Committee believe that the nine director nominees each possess the necessary qualifications, attributes, skills and experiences to provide quality advice and counsel to the Company’s management and effectively oversee the business and the long-term interests of our stockholders.

 

•

Vote Required:

The affirmative vote of a plurality of all the votes cast at the Annual Meeting is required for the election of directors. This means that the nine director nominees receiving the greatest number of votes will be elected. Stockholders of the Company are not permitted to cumulate their votes for the election of directors. Broker non-votes or withhold votes will have no effect on the results of the election of directors. Unless contrary instructions are given, shares represented by proxies solicited by the Board will be voted for the election of each of the director nominees identified below.

2020 Director Nominees

The number of directors that serve on the Board is currently set at nine and may be fixed from time to time by the Board in the manner provided in the Company’s charter and bylaws. Upon the unanimous recommendation of the Nominating and Corporate Governance Committee, the Board has unanimously nominated the following candidates for election as directors at the Annual Meeting:

 

 

•

Joseph M. Donovan

 

•

Mary Fedewa

 

•

Morton H. Fleischer

 

•

William F. Hipp

 

•

Tawn Kelley

•

Catherine D. Rice

 

•

Einar A. Seadler

 

•

Quentin P. Smith, Jr.

 

•

Christopher H. Volk

 

 

If any of the foregoing nominees should be unable or unwilling to stand for election at the time of the Annual Meeting, proxies will be voted for a replacement nominee designated by the Board or, in the event no such designation is made, proxies will be voted for a lesser number of nominees. At this time, the Board knows of no reason why the nominees listed above may not be able to serve as a director if elected.

Each of the nine director nominees currently serves as a director of the Company and, other than Ms. Kelley, was elected at the 2019 annual meeting of stockholders. Ms. Kelley was recommended by our Nominating and Corporate Governance Committee and appointed to the Board in February 2020. If elected, each director will hold office until the 2021 annual meeting of stockholders and until his or her successor is elected and qualified or until his or her earlier resignation or removal.

The Board and the Nominating and Corporate Governance Committee believe that the combination of the various qualifications, attributes, skills and experiences of the director nominees has contributed and will continue to contribute to an effective and well-functioning Board and that, individually and as a whole, the director nominees possess the necessary qualifications to provide effective oversight of the business and quality advice and counsel to the Company’s management.

 

			2020 Proxy Statement				1

Set forth below is biographical information for each director nominee named above. The following information also describes the specific experience, qualifications, attributes and skills that qualify each person to serve on the Company’s Board.

 

Joseph M. Donovan    Age: 65
Director Since:    2014		Mr. Donovan has served as a director since 2014. Mr. Donovan is currently the non-executive Chairman of the Board and Chairman of the Audit Committee of Fly Leasing Limited, a Dublin, Ireland based commercial aircraft leasing company (NYSE:FLY), which he joined in 2007 prior to its initial public offering. Mr. Donovan also served, from 2009 to 2015, as a director of Institutional Financial Markets Inc. (AMEX:IFMI), a New York City based broker dealer and asset management company. Mr. Donovan has been involved in investment banking since 1983 and has worked at CS First Boston/The First Boston Corporation, Smith Barney Inc., Prudential Securities and Credit Suisse Securities (USA) LLC. Mr. Donovan was formerly a licensed certified public accountant. Mr. Donovan holds a B.B.A. degree in Accountancy from the University of Notre Dame and an M.B.A. with a concentration in Finance from the Wharton School, University of Pennsylvania.   Specific Qualifications, Attributes, Skills and Experience:   •   Service as a member of public company boards of directors •   Extensive investment banking and capital markets experience •   Expertise in accounting and finance   Other Public Company Boards:   •   Fly Leasing Limited (NYSE:FLY)
Independent:    Yes
Committees:
•   Audit •   Investment

 

Mary Fedewa    Age: 54
Director Since:    2016		Ms. Fedewa was one of the Company’s founders in May 2011 and has served as the Company’s Chief Operating Officer since October 2017. She was appointed to serve as a director in August 2016. From the Company’s organization until October 2017 she served as the Company’s Executive Vice President—Acquisitions, Assistant Secretary and Assistant Treasurer. Ms. Fedewa has over 20 years of experience in a broad range of financial services. Prior to co-founding the Company, Ms. Fedewa spent several years investing as principal in single-tenant commercial real estate for private real estate companies. From 2004 to 2007, Ms. Fedewa was a Managing Director of Acquisitions at Spirit Finance Corporation (now Spirit Realty Capital, Inc. (NYSE: SRC)) (“Spirit”), a real estate investment trust, originating net-lease transactions in a variety of industries across the United States. Prior to Spirit, Ms. Fedewa held numerous positions within GE Capital, concluding as a Senior Vice President of GE Franchise Finance, which was the successor company to Franchise Finance Corporation of America (“FFCA”), a Scottsdale, Arizona-based REIT acquired by GE Capital in 2001. Throughout her GE Capital tenure, Ms. Fedewa held leadership positions within Mortgage Insurance, Private Label Financing and Commercial Finance. While at GE, Ms. Fedewa was awarded a Six Sigma Black Belt and also served as a GE Quality Leader. Ms. Fedewa attended North Carolina State University, where she graduated summa cum laude with a B.A. degree in Business Management with a concentration in Finance. Ms. Fedewa was recommended for appointment to the Board by our Chief Executive Officer.   Specific Qualifications, Attributes, Skills and Experience:   •   Familiarity with the Company’s history and operations •   Extensive experience acquiring and selling net-lease real estate •   Management service at three public companies   Other Public Company Boards:   •   None
Independent:    No
Committees:
•   None

 

2		2020 Proxy Statement

Morton H. Fleischer    Age: 83
Director Since:    2011		Mr. Fleischer has served as the non-executive Chairman of the Board since STORE’s organization in May 2011. Prior to his role as Chairman, Mr. Fleischer co-founded Spirit and served as Chairman from its inception in 2003 to February 2010, including the three years that Spirit was publicly traded on the NYSE, 2004 to 2007. Prior to Spirit, Mr. Fleischer founded numerous real estate limited partnerships in the 1980s that were predecessors to FFCA, a REIT that he formed and took public on the NYSE in 1994. Mr. Fleischer served as FFCA’s Chairman of the board of directors and Chief Executive Officer until FFCA was acquired by GE Capital in 2001. FFCA was the nation’s largest publicly traded net-lease REIT and owned or financed over 5,000 single-tenant properties at the time of its sale to GE Capital in 2001. As a result of over 35 years of experience in the real estate and net-lease industries and the invaluable guidance, support and wisdom Mr. Fleischer provided to the Company in the early years of its formation, our executive team considers him an honorary founder of STORE.   Specific Qualifications, Attributes, Skills and Experience:   •   Familiarity with the Company’s history and operations •   Extensive real estate and capital markets experience •   Service as a chief executive officer of two public companies   Other Public Company Boards:   •   None
Independent:    Yes
Committees:
•  Compensation •  Nominating and Corporate Governance •  Executive •  Investment

 

William F. Hipp    Age: 65
Director Since:    2016		Mr. Hipp has served as a director since 2016. Mr. Hipp spent over 35 years in commercial banking, where he developed extensive experience with REITs, real estate capital markets and corporate finance. From 2004 until his retirement in 2015, Mr. Hipp was employed by KeyBank in various senior level roles, most recently as head of the Institutional Capital Group (ICG) for KeyBank’s real estate business, which he founded upon joining the bank and ran until his retirement. ICG’s mission is to identify real estate related borrowers, particularly public and private REITs and real estate opportunity funds with effective debt ratings ranging from high yield to mid investment grade, that have a significant need for bank debt and M&A advisory services, and for access to the syndicated loan market, the public equity markets, and the commercial mortgage backed securities and agency debt markets (Fannie Mae/Freddie Mac). Through the ICG platform, KeyBank provided debt and equity capital and advisory services to real estate related borrowers; and Mr. Hipp, in his capacity as head of ICG, was responsible for formulating and implementing strategy and for client selection and initial credit and risk decisions. Prior to his employment with KeyBank, Mr. Hipp spent 20 years with BankBoston, as head of its real estate group, and FleetBoston (following the merger of BankBoston and Fleet Financial Group) as co-head of real estate. Mr. Hipp holds a B.A. degree in Economics from Emory University and an M.B.A. with a concentration in Finance and Accounting from Tulane University.   Specific Qualifications, Attributes, Skills and Experience:   •   Experience identifying, underwriting and evaluating real estate investments •   Familiarity with the Company’s history and operations •   Expertise in accounting and finance   Other Public Company Boards:   •   None
Independent:    Yes
Committees:
•   Audit •   Investment

 

			2020 Proxy Statement				3

Tawn Kelley    Age: 56
Director Since:    2020		Ms. Kelley has served as a director since February 2020. As Executive Vice President of Taylor Morrison and President of its Financial Services unit, Ms. Kelley contributes to the executive leadership of Taylor Morrison and leads Taylor Morrison Home Funding, Inspired Title Services and Mortgage Funding Direct Ventures. She is responsible for the management, financial performance and long-term growth strategies of these companies. Prior to joining Taylor Morrison, in 2001, Ms. Kelley founded and served as CEO and President of Mortgage Funding Direct Ventures (“MFDV”), a management company that partnered with production homebuilders to create in-house mortgage subsidiaries. Among the various partnerships under the Mortgage Funding Direct family, Taylor Morrison Home Funding was also established in 2001. The successful partnership expanded nationally and evolved from a mortgage brokerage to a lender, ultimately paving the way for Taylor Morrison to acquire the MFDV management company in 2009. As an executive member of Taylor Morrison Corporation, (NYSE:TMHC) Ms. Kelley has held several senior-executive level positions that have impacted and contributed to the growth and expansion of Taylor Morrison.   Specific Qualifications, Attributes, Skills and Experience:   •   Experience in the real estate industry •   Experience as a senior operating executive of a public company •   Expertise in lending and finance   Other Public Company Boards:   •   None
Independent:    Yes
Committees:
•  Nominating and Corporate Governance

 

Catherine D. Rice    Age: 60
Director Since:    2017		Ms. Rice has served as a director since October 2017. Ms. Rice has over 30 years of experience in the real estate capital and investment markets and in the management and operation of public and private real estate companies. She currently serves as the lead independent director and a member of each of the Audit, Compensation, and Nominating and Corporate Governance Committees of the board of directors of Colony Credit Real Estate, Inc. (NYSE: CLNC), one of the largest commercial real estate credit REITs. From 2013 to 2016, Ms. Rice was Chief Financial Officer and then Senior Managing Director of W.P. Carey (NYSE: WPC), one of the largest global net lease REITs, where she completed a comprehensive reorganization of the finance, accounting and IT functions and the build-out of the investor relations and capital markets areas. She was responsible for financial strategy, all public capital-raising initiatives, and a company-wide strategic evaluation. She was a member of the operating and investment committees. From 2010 to 2013, Ms. Rice was a partner at Parmenter Realty Partners, a private real estate investment firm focused on distressed and value-add properties in the Southern regions of the U.S. Her responsibilities included both capital raising and investing for the firm’s fourth fund. From 2002 to 2009, Ms. Rice was the Chief Financial Officer of iStar Financial (NYSE: STAR), a publicly traded finance company focused on the commercial real estate industry, where she was responsible for financial strategy and capital-raising initiatives, financial reporting and investor relations. Ms. Rice spent the first 16 years of her career as a professional in the real estate investment banking groups of Merrill Lynch, Lehman Brothers and Banc of America Securities. During her career as an investment banker, she was involved in numerous capital-raising and strategic advisory transactions, including REIT IPOs, public and private debt and equity offerings, mergers and acquisitions, leveraged buyouts, and asset and corporate acquisitions and dispositions. Ms. Rice received a B.A. degree from the University of Colorado and an M.B.A. from Columbia University.   Specific Qualifications, Attributes, Skills and Experience:   •   Extensive real estate and capital markets experience •   Service as a chief financial officer of a public company •   Experience investing in and managing commercial real estate projects   Other Public Company Boards:   •   Colony Credit Real Estate (NYSE:CLNC)
Independent:    Yes
Committees:
•   Audit •   Investment

 

4		2020 Proxy Statement

Einar A. Seadler    Age: 63
Director Since:    2016		Mr. Seadler has served as a director since 2016. Mr. Seadler is the founder and President of EAS Advisors LLC, a management consulting firm specializing in advisory services to senior executives who seek to develop and execute enduring growth, operational improvement and human capital strategies. Prior to starting EAS Advisors in 2016, Mr. Seadler was a managing director of Accenture Strategy, an operating unit of Accenture PLC (NYSE: ACN), which he joined in 2008. His responsibilities included advising senior executives of Fortune 500 companies on increasing stockholder value, primarily in the consumer goods and services, retail, fast food dining, industrial, infrastructure and government sectors. Prior to Accenture, Mr. Seadler served as a leader in McKinsey & Company’s Operations Strategy Practice. He has also served in senior executive roles in retail and business services companies, with responsibilities that spanned sales, marketing, operations, real estate, supply chain, technology and finance. Mr. Seadler began his career as a United States Army infantry officer serving in various command and staff assignments, including as an associate professor at the United States Military Academy at West Point. Mr. Seadler is a graduate of the United States Military Academy at West Point and received a Master of Science degree from Cornell University.   Specific Qualifications, Attributes, Skills and Experience:   •   Experience in business and operational strategy across multiple industry sectors •   Advisor to senior executives on increasing stockholder value across industry sectors relevant to the Company •   Top leadership and operational experience as a senior executive   Other Public Company Boards:   •   None
Independent:    Yes
Committees:
•   Compensation

 

Quentin P. Smith, Jr.    Age: 68
Director Since:    2014		Mr. Smith has served as a director since 2014. Mr. Smith is the founder and President of Cadre Business Advisors LLC, a management consulting firm that specializes in strategic planning, business performance improvement, capital formation and turnaround management. Prior to starting Cadre, Mr. Smith was Partner in Charge of Arthur Andersen’s Desert Southwest business consulting practice with responsibility for business development and client engagement management for Arizona and New Mexico. Mr. Smith has business development, growth and operational profit and loss experience across a wide variety of industries. Mr. Smith also has over eight years of diversified corporate management experience. He currently serves on the board, and chairs the compensation committee, of Banner Health and previously served as its Chairman. From January 2015 through March 2017, Mr. Smith served as a member of the board of directors of Patriot National, Inc. (NYSE:PN), a provider of comprehensive full-service outsourcing solutions within the workers’ compensation insurance marketplace, chaired its compensation committee and served on its audit committee. He has served on the boards of the Arizona Public Service Company and Arizona MultiBank, as well as on the boards of Employee Solutions, Inc., Rodel, Inc. and iCrossing, Inc. until those companies were sold or acquired. Mr. Smith holds a B.S. degree in Industrial Management and Computer Science from Purdue University and an M.B.A. degree from Pepperdine University.   Specific Qualifications, Attributes, Skills and Experience:   •   Prior service as a member of public company boards of directors •   Management consulting, corporate management and operational experience •   Experience on public company compensation and audit committees   Other Public Company Boards:   •   None
Independent:    Yes
Committees:
•  Compensation •  Nominating and Corporate Governance •  Executive

 

			2020 Proxy Statement				5

Christopher H. Volk    Age: 63
Director Since:    2011		Mr. Volk was one of the Company’s founders in May 2011 and has served as the Company’s President and Chief Executive Officer and as a director since its organization. With more than 30 years of experience in structuring, managing and financing commercial real estate companies, Mr. Volk led the largest ever real estate limited partnership roll-up transaction of its time in 1994 in the formation of FFCA; oversaw the issuance of FFCA’s unsecured debt rating in 1995, which was the first unsecured debt rating ever issued to a net-lease REIT; and, in 2005 while CEO of Spirit, led the creation of the first commercial real estate master trust debt conduit in the United States designed to finance net-lease assets. Prior to forming the Company, Mr. Volk co-founded Spirit and served as its President and Chief Executive Officer and as a member of its board from August 2003 to February 2010. Prior to co-founding Spirit in 2003, Mr. Volk served for over 16 years in numerous capacities with FFCA, including President and Chief Operating Officer and a member of FFCA’s board of directors. Mr. Volk continued as Chief Operating Officer of GE Capital Franchise Finance, the new name given to the business following the FFCA acquisition, until December 2002. In addition to his service on the Board and as the Company’s President and Chief Executive Officer, Mr. Volk currently serves as chairman of the nominating and corporate governance committee of Banner Health, and as a member of the investment committee . He received a B.A. degree from Washington and Lee University and an M.B.A. degree from Georgia State University.   Specific Qualifications, Attributes, Skills and Experience:   •   Familiarity with the Company’s history and operations •   Extensive real estate and capital markets experience •   Senior executive at three public companies   Other Public Company Boards:   •   None
Independent:    Yes
Committees:
•   Executive

Board Recommendation

The Board recommends that you vote “FOR” the election of each of the

director nominees named above.

 

6		2020 Proxy Statement

OUR BOARD OF DIRECTORS

Role of the Board

The stockholders of the Company elect the Board to oversee their interests in the long-term health and overall success of the Company’s business. The Board serves as the ultimate decision-making body of the Company, except for those matters reserved to or shared with the stockholders. The Board plays a critical role in the strategic planning process and regularly discusses strategy throughout the year. The Board selects and oversees the members of our senior management team, who are charged by the Board with conducting the day-to-day business of the Company.

Board Composition and Refreshment

Our Board and its Nominating and Corporate Governance Committee seek nominees to serve on the Board who have diverse skills, professional experience and backgrounds, and effectively represent the long-term interests of our stockholders. The Board and its Nominating and Corporate Governance Committee also understand the importance of Board refreshment; because term limits may cause the loss of experience and expertise important to the optimal operation of the Board, we currently do not impose limits on the number of terms a director may serve, but we do strive to maintain an appropriate balance of tenure, turnover, diversity and skills on the Board. The Board believes that new perspectives and ideas are critical to a forward-looking and strategic Board, as is the ability to benefit from the valuable experience and familiarity that longer-serving directors offer. Of our nine director nominees, five have joined the Board since the beginning of 2016, with our newest director, Ms. Tawn Kelley, joining in early 2020.

Board Evaluation Process

The Board believes that a robust and constructive evaluation process is an essential component of good corporate governance and Board effectiveness. The Board, acting through the Nominating and Corporate Governance Committee, conducts a self-evaluation at least annually to determine whether it and its committees are functioning effectively, and whether the combination and mixture of skills, experience and judgment that directors bring to the Board provide the Board with the necessary tools to perform its oversight function effectively. Each of the Audit, Compensation, and Nominating and Corporate Governance Committees also conducts a self-evaluation at least annually and reports the results to the Board, acting through the Nominating and Corporate Governance Committee. The results of this evaluation process are discussed by the full Board and each applicable committee and changes in practices or procedures may be considered and implemented as appropriate. The Nominating and Corporate Governance Committee may periodically review the format of the evaluation process to ensure that the matters being evaluated remain relevant and that useful feedback on the operation of the Board and its committees is received.

Director Nominee Selection Process and Considerations

Management-Recommended Director Candidates. The Nominating and Corporate Governance Committee is responsible for recommending to the Board a slate of nominees for election at each annual meeting. Nominees may be suggested by directors, members of management or stockholders (as discussed below). In evaluating candidates to serve on the Board, the Nominating and Corporate Governance Committee’s objective is to select individuals with holistically diverse skills and experience that can assist the Company and the Board in achieving their objectives. The Committee considers individual qualifications, including relevant career experience, strength of character, maturity of judgment, and experience in, and familiarity with, the Company’s industry and business. It also considers other factors it considers appropriate, which may include:

 

Though neither the Board nor the Nominating and Corporate Governance Committee has a formal policy concerning diversity, the Board values diversity on the Board, believes diversity should be considered in the director identification and nominating process, and seeks to compose a Board that is holistically diverse, with a range of views, backgrounds,

 

			2020 Proxy Statement				7

leadership and business experience, and that includes women and underrepresented minorities. The Committee also considers the extent to which a candidate would fill a present need on the Board. In selecting director nominees, the Board seeks to monitor the mix of specific experiences, qualifications and skills of its members in order to assure that the Board, as a whole, has the necessary tools to perform its oversight function effectively in light of the Company’s business and structure. Presently, our nine-person board includes four diverse members, including three women.

Once a prospective nominee has been identified, the Nominating and Corporate Governance Committee will make an initial determination as to whether to conduct a full evaluation of the candidate. This initial determination will be based on the information provided to the Committee with the recommendation of the prospective candidate, as well as the Committee’s own knowledge of the prospective candidate, which may be supplemented by inquiries to the person making the recommendation or others.

Stockholder-Recommended Director Candidates. A stockholder who desires to recommend a prospective nominee for the Board should notify Chad A. Freed, Executive Vice President—General Counsel, Chief Compliance Officer and Secretary of the Company, at 8377 East Hartford Drive, Suite 100, Scottsdale, Arizona 85255. As set forth in the Company’s bylaws, to be timely, a stockholder’s notice must be delivered not earlier than the 150th day nor later than 5:00 p.m., Mountain Time, on the 120th day prior to the first anniversary of the date the Company’s proxy statement was released to stockholders in connection with the previous year’s annual meeting. Recommendations by stockholders that are made in accordance with these procedures will receive the same consideration by the Nominating and Corporate Governance Committee as other suggested nominees.

Stockholder-Nominated Director Candidates. Pursuant to the Company’s bylaws, stockholders are permitted to nominate directors in accordance with the Company’s advance notice provision contained in Article II, Section 11 of the bylaws. Article II, Section 11(a) provides that nominations of individuals for election to the Board may be made at an annual meeting of stockholders by any stockholder of the Company who was a stockholder of record both at the time of giving of notice by the stockholder as provided for in Section 11(a) and at the time of the annual meeting and who is entitled to vote at the meeting in the election of each individual so nominated. For any nomination to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the secretary of the Company and satisfied the other requirements set forth in Article II, Section 11 of the Company’s bylaws. To be timely, a stockholder’s notice must be delivered to the principal executive offices of the Company (8377 East Hartford Drive, Suite 100, Scottsdale, AZ 85255) not less than 120 days nor more than 150 days prior to the first anniversary of the date of the proxy statement for the preceding year’s annual meeting of stockholders; provided, however, if an annual meeting of stockholders is called for a date that is not within 30 days before or after the anniversary date of the preceding year’s annual meeting, then, in order to be timely, a stockholder’s notice must be received by the Company no earlier than the 150th day prior to the date of such annual meeting and no later than the later of (a) the 120th day prior to the date of such annual meeting, as originally convened, or (b) the tenth day following the day on which public announcement of the date of such meeting is first made. The stockholder notice must comply with the information requirements set forth in the Company’s bylaws.

Proxy Access Rights

In 2019, the Company amended its bylaws to adopt a proxy access provision to permit a stockholder, or group of no more than 20 stockholders, meeting specified eligibility requirements, to include director nominees in the Company’s proxy materials for annual meetings of stockholders. In order to be eligible to utilize these proxy access provisions, a stockholder, or group of stockholders, must, among other requirements:

 

•

have owned shares of common stock equal to at least 3% of the outstanding shares of the Company’s common stock continuously for at least the prior three years;

 

•

represent that such shares were acquired in the ordinary course of business and not with the intent to change or influence control of the Company and that such stockholder or group does not presently have such intent; and

 

•

provide a notice requesting the inclusion of director nominees in the Company’s proxy materials and provide other required information to the Company not earlier than 150 days nor later than 120 days prior to the first anniversary of the date of mailing of the notice for the prior year’s annual meeting of stockholders (with adjustments if the date for the upcoming annual meeting is advanced by more than 30 days or delayed by more than 60 days from the anniversary date of the prior year’s annual meeting).

Additionally, all director nominees submitted through these provisions must be independent and meet specified additional criteria, and stockholders will not be entitled to utilize this proxy access right at an annual meeting if the Company receives notice through the advanced notice bylaw provisions that a stockholder intends to nominate a director at such meeting. The maximum number of director nominees that may be submitted pursuant to these provisions may not exceed

 

8		2020 Proxy Statement

the greater of two directors or 20% of the number of directors then serving on the Board (rounding down to the closest whole number). The foregoing proxy access right is subject to additional eligibility, procedural and disclosure requirements set forth in the Company’s bylaws.

Annual Elections of Directors

We do not have a staggered board; our directors are elected each year at the annual meeting of stockholders to hold office until the next annual meeting and until their successors are elected and qualified. The Nominating and Corporate Governance Committee evaluates the qualifications and performance of each incumbent director before recommending the nomination of that director for an additional term.

Policy on Directors Who Fail to Achieve a Majority Vote

Our Corporate Governance Guidelines provide that, in an election of directors where the number of nominees does not exceed the number of directors to be elected, each director must receive the majority of the votes cast with respect to that director (without regard to withhold votes or broker non-votes). If a director does not receive a majority vote, the director will promptly, and in any event within ten (10) days from the date of the certification of the election results, tender his or her resignation to the Board. The Nominating and Corporate Governance Committee will make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken. The Board will act on the resignation taking into account the recommendation of the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee, in making its recommendation, and the Board, in making its decision, may each consider any factors or other information that it considers appropriate and relevant, including, but not limited to:

 

•

the stated reasons, if any, why stockholders withheld their votes;

 

•

possible alternatives for curing the underlying cause of the withheld votes;

 

•

the director’s tenure, qualifications, and past and expected future contributions to the Company; and

 

•

the overall composition of the Board, and whether accepting the tendered resignation would cause the Company to fail to meet any applicable rule or regulation, including under NYSE listing requirements and federal securities laws.

When deciding the action to take, the Board may accept or reject the resignation offer or, upon the recommendation of the Nominating and Corporate Governance Committee, decide to pursue alternative actions such as (i) allowing the director to remain on the Board but not be re-nominated to the Board at the end of the current term, (ii) deferring acceptance of the resignation until a replacement director with certain necessary qualifications held by the subject director (for example, audit committee financial expertise) can be identified and elected to the Board, or (iii) deferring acceptance of the resignation if the director can cure the underlying cause of the withheld votes within a specified period of time (for example, if the withheld votes were due to another board directorship, by resigning from that other board). If the Board accepts a director’s resignation offer, then the Board, in its sole discretion, may fill any resulting vacancy or may decrease the size of the Board, in each case pursuant to the applicable provisions of the Company’s bylaws as then in effect. If the Board rejects a director’s resignation offer, then such director will continue to serve through the remainder of his or her term and until his or her successor is duly elected, or his or her earlier resignation or removal.

The director who tenders his or her resignation will not participate in the recommendation of the Nominating and Corporate Governance Committee or the decision of the Board with respect to his or her resignation; provided, however, that (a) if a majority of the members of the Nominating and Corporate Governance Committee did not receive the vote of at least “the majority of the votes cast,” then the independent directors of the Board (including any who received the vote of at least “the majority of the votes cast” in such election) shall appoint a committee amongst themselves to consider the resignation offers and recommend to the Board whether to accept them, and (b) if three or fewer independent directors received at least “the majority of the votes cast” in the same election, then all independent directors may participate in any discussions or actions with respect to accepting or declining the resignation offers (except that no such director will vote to accept or decline his or her own resignation offer).

The Board must take action on the resignation within 90 days of the certification of the election results and will publicly disclose its decision and its rationale promptly thereafter.

In addition, pursuant to our Corporate Governance Guidelines, a director who experiences a significant change in his or her principal current employer or principal employment, including any director who is currently an officer or employee of the Company, or other similarly significant change in professional occupation or association, is asked to consider whether his or her resignation is appropriate. The Board will then determine the action, if any, to be taken with respect to any offer to resign.

 

			2020 Proxy Statement				9

BOARD AND COMMITTEE GOVERNANCE

We believe that effective corporate governance is critical to our ability to create long-term value for our stockholders. Accordingly, the Company has structured its corporate governance to align the Company’s interests with those of its stockholders, including but not limited to the following:

 

Director Attendance at Annual Meetings

Although we do not have a formal policy regarding attendance by members of the Board at annual meetings of stockholders, we expect that our directors will participate in our meetings, absent a valid reason for not doing so. Eight of our nine directors then serving on the Board attended the 2019 annual meeting of stockholders.

Board Leadership Structure

The Board has no fixed policy with respect to the separation of the offices of Chairman of the Board and Chief Executive Officer. The Board retains the discretion to determine, at any time, whether to combine or separate the positions as it deems to be in the best interests of the Company and its stockholders. In making leadership structure determinations, the Board considers many factors, including the specific needs of the business and what is in the best interests of the Company’s stockholders. Currently, the Board believes that separating the positions of Chief Executive Officer and Chairman is the best structure for the Company because it improves the ability of the Board to exercise its oversight role by having an independent director who is not an officer or member of management to serve in the role of Chairman.

Board Executive Sessions

The non-management members of the Board meet in executive session without management present at the conclusion of each regular Board meeting. Mr. Fleischer, the Chairman of our Board, acts as the presiding director at all of these executive sessions.

Board Role in Succession Planning

A key responsibility of the Board is to ensure that the Company has the necessary senior management talent to operate the business and be successful into the future. Our Nominating and Corporate Governance Committee is charged with periodically reviewing with the Chairman of the Board and the Chief Executive Officer the succession plans relating to positions held by executive officers, and making recommendations to the Board with respect to the selection of individuals to occupy those positions. Consistent with its responsibilities, our Nominating and Corporate Governance Committee regularly discusses succession planning with our Chief Executive Officer and reports to the Board regarding those plans.

 

10		2020 Proxy Statement

Our consistent focus on succession planning enabled us to successfully handle the transition of Andrew L. Rosivach to the position of Executive Vice President—Chief Credit Officer and Chad A. Freed to the position of Executive Vice President— General Counsel, Chief Compliance Officer and Secretary during 2019. In addition, in early 2020, we promoted three Vice Presidents to the position of Senior Vice President and eight Directors to the position of Vice President.

Board Role in Risk Oversight

The Board oversees the proper safeguarding of the assets of the Company, the maintenance of appropriate financial and other internal controls and the Company’s compliance with applicable laws and regulations and proper governance. Inherent in these responsibilities is the Board’s understanding and oversight of a company-wide approach to risk management that is carried out by our senior leadership team. The Board determines the appropriate risk for us generally, assesses the specific risks faced by us and reviews the steps taken by our senior leadership team to manage those risks. The Board’s committees assist in discharging the Board’s risk oversight role by performing the subject matter responsibilities outlined below. The Board retains full oversight responsibility for all subject matters not assigned to a committee. In fulfilling its risk management responsibilities, the Board recognizes that it is neither possible nor prudent to eliminate all risk and that purposeful and appropriate risk taking is essential for the Company to be competitive in its industry and to achieve the Company’s long-term strategic objectives. In performing its oversight responsibilities, the Board and its committees review policies and guidelines that senior management uses to manage the Company’s exposure to material categories of risk. As these issues sometimes overlap, committees address certain issues at the full Board level.

In addition, the Board oversees the Company’s cyber risk management program. In order to respond to the threat of security breaches and cyber-attacks, we have developed a program that is designed to protect and preserve the confidentiality, integrity and continued availability of all information owned by, or in the care of, the Company. This program also includes a cyber-incident response plan. The Audit Committee, which is tasked with oversight of certain risk issues, receives periodic reports, and regularly briefs the full Board, on these matters, and the full Board also receives periodic briefings on cybersecurity threats in order to enhance our directors’ literacy on cybersecurity issues.

 

 

			2020 Proxy Statement				11

In establishing the Board’s current leadership structure, risk oversight was one factor among many considered by the Board, and the Board believes that the current leadership structure is conducive to and appropriate for its risk oversight function. The Board regularly reviews its leadership structure and evaluates whether it, and the Board as a whole, is functioning effectively. If, in the future, the Board believes that a change in its leadership structure is required to, or potentially could, improve the Board’s risk oversight function, it may make any change it deems appropriate.

Committees and Meetings of the Board

During the year ended December 31, 2019, the Board met five times. Seven of our eight current directors attended 100% of the aggregate of the total number of Board meetings and the total number of meetings held by all committees on which he or she served that were held during the year ended December 31, 2019 and that were held while such person was a director of the Company or a member of such committee; one of our current directors attended all Board meetings and 94% of the combined total of sixteen meetings of the Board and committees on which he served. The Board has five standing committees: the Audit Committee, the Compensation Committee, the Nominating and Corporate Governance Committee, the Investment Committee and the Executive Committee. The charters of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee are available on our investor relations website at http://ir.storecapital.com. The Board may establish other committees as it deems necessary or appropriate from time to time.

 

 

 

12		2020 Proxy Statement

 

 

Executive Committee   Meetings Held in 2019:    One
Members		Independence		Primary Responsibilities of the Committee
Morton H. Fleischer (Chair)   Christopher H. Volk   Quentin P. Smith, Jr.		✔ ✘ ✔		•   acting on behalf of the Board during intervals between regularly scheduled meetings of the Board; and •   exercising all powers of the Board, except as otherwise provided by law and the Company’s bylaws and consistent with the authority which has been delegated to the Executive Committee by the Board.

Changes in Committee Composition

In connection with the appointment of Tawn Kelley to the Board, effective February 13, 2020, the Nominating and Corporate Governance Committee recommended, and the Board approved, the appointment of Ms. Kelley to serve on the Nominating and Corporate Governance Committee and the appointment of Ms. Rice to serve on the Investment Committee, in each case filling the vacancy created by Mr. Shourie’s resignation.

 

			2020 Proxy Statement				13

Communication with the Board

The Board has adopted a process by which stockholders and other interested parties who desire to contact our Board, a particular Board committee, a particular group of directors (e.g., our independent directors), or individual members of the Board, including our Chairman (the presiding director), may do so electronically by email at CorporateSecretary@storecapital.com, or by mail addressed to the named individual, the committee, the group, or the Board as a whole c/o Chad A. Freed, Executive Vice President—General Counsel, Chief Compliance Officer and Secretary, at STORE Capital Corporation, 8377 East Hartford Drive, Suite 100, Scottsdale, AZ 85255. In general, any communication delivered to the Company for forwarding to the Board, a Board committee, a particular group of directors or specified Board members will be forwarded in accordance with the stockholder’s instruction, except that we reserve the right not to forward any abusive, threatening or otherwise inappropriate materials.

ADDITIONAL CORPORATE GOVERNANCE FEATURES

Stockholder Authority to Amend Bylaws

One of the major proxy advisory firms adopted a policy in late 2016 pursuant to which it will recommend that stockholders vote against, or withhold their votes for, director nominees who are members of the governance committee of any public company that has governance documents that restrict the stockholders’ ability to amend that company’s bylaws by a majority vote of the outstanding shares entitled to be cast on the matter. Prior to 2019, our bylaws, consistent with Maryland law, generally vested the Board with the exclusive power to adopt, alter or repeal any provision of our bylaws and to make new bylaws.

In response to the proxy advisory firm’s policy, our Nominating and Corporate Governance Committee has considered in each of the last two years whether changing our bylaws to grant stockholders the concurrent right to amend our bylaws by a majority vote of the outstanding shares entitled to be cast on the matter was in the best interests of the Company and all of its stockholders. For the various reasons discussed in our proxy materials for the 2017 and 2018 annual meetings of stockholders, the committee, while reiterating its commitment to strong corporate governance practices, determined that the Board was in the best position to consider possible future bylaw amendments, including any that may be proposed by our stockholders in accordance with the provisions of our bylaws.

In connection with its regular review of the Company’s corporate governance structure during 2018 and early 2019, the Nominating and Corporate Governance Committee considered several modifications to the Company’s corporate governance practices, including amending the Company’s bylaws to adopt a proxy access right and further amending the bylaws to grant stockholders the concurrent right to amend the bylaws by a majority vote of the outstanding shares entitled to be cast on the matter. The Nominating and Corporate Governance Committee determined that the adoption of a proxy access bylaw, the terms of which have been developed over the course of the past decade and adopted by a significant number of companies on a consistent basis, was in the best interests of the Company and its stockholders. Accordingly, as discussed above, on February 13, 2019, the Company amended its bylaws to adopt a proxy access provision that permits a stockholder, or group of no more than 20 stockholders, meeting specified eligibility requirements, to include director nominees in the Company’s proxy materials for annual meetings of stockholders.

With regard to amending the Company’s bylaws to grant stockholders the concurrent right to amend the bylaws by a majority vote of the outstanding shares entitled to be cast on the matter, after further careful consideration of this matter, the Nominating and Corporate Governance Committee and the Board ultimately concluded, after direct and meaningful engagement with stockholders representing nearly half of our outstanding shares, that amending the Company’s bylaws to grant stockholders the concurrent right to amend the bylaws was in the best interests of the Company and its stockholders. Accordingly, in February 2019, the Nominating and Corporate Governance Committee approved and recommended to the Board, and the Board approved and proposed for approval and adoption by our stockholders at the 2019 annual meeting of stockholders, an amendment to our bylaws that would allow stockholders to amend the Company’s bylaws by a majority vote of the outstanding shares entitled to be cast on the matter, pursuant to a binding proposal submitted for approval at a duly called annual meeting or special meeting of stockholders by a stockholder, or group of up to 20 stockholders, owning at least 3% of the Company’s outstanding common stock continuously for at least the prior three years. As proposed, the foregoing right to submit a binding proposal to amend the bylaws would be subject to additional eligibility, procedural and disclosure requirements set forth in Sections 3 and 11 of Article II of the Company’s bylaws. In addition, pursuant to the terms of the proposed bylaw amendment, a stockholder proposal submitted under such provision could not alter or repeal (i) Article XII of the bylaws, which provides for indemnification and advancement of expenses for the Company’s directors and officers, (ii) Article XIV of the bylaws, which provides an exclusive forum for certain litigation, or (iii) Article XV, which addresses procedures for amendment of the bylaws, without the approval of the Board.

 

14		2020 Proxy Statement

As authorized by our Board, a proposal to approve the foregoing bylaw amendment was included in our proxy statement for our 2019 annual meeting of stockholders. At the 2019 annual meeting of stockholders, held on May 30, 2019, stockholders holding shares of our common stock representing approximately 72% of the votes cast on the proposal voted in favor of the proposal. Accordingly, our stockholders now have the authority to amend out bylaws in accordance with the terms described above.

Stockholder Engagement

Over the years, we have developed our stockholder engagement program as a means to provide continuous and meaningful interaction with our stockholders. The Company engages with its stockholders through a multi-pronged program pursuant to which we seek input, address questions and concerns, and provide perspective on Company policies and practices to our stockholders throughout the entire year. In developing the Company’s approach to stockholder engagement, our principal goal is to develop strong relationships with our key stockholders that will allow us to understand those issues that are most meaningful to them, thereby giving us insight into stockholder support of any initiatives and strategies that we propose to implement in furtherance of our long-term growth, improved governance or other matters. We recognize that stockholders are the owners of the Company and we use every component of the engagement effort to provide stockholders with detailed disclosures about our business and our thoughts on relevant issues, including the rationale for our corporate strategy.

The five components of our stockholder engagement program are:

 

•

Direct Engagement. Each year we seek to engage with our significant stockholders on matters related to our business, corporate governance or other matters that they may wish to discuss. These engagements consist of focused, one-on-one meetings (in person or via teleconference) between stockholders and our management that are designed to give our institutional stockholders an opportunity to better understand our company so that they may speak directly with management regarding any concerns they have, as well as fulfill their own fiduciary duties to their own investors. To make these meetings most productive for our investors’ governance teams, we will seek to set meeting times well in advance and provide advance materials covering the primary topics of discussion, thus ensuring that stockholder participants will have the opportunity and information to prepare and engage in meaningful dialogue.

 

•

Biennial Investor Day. We host an Investor Day every other year. At the event, our senior executives and acquisition team members provide market commentary, as well as investment and portfolio management case-studies and other informative insights. We design our Investor Days to provide stockholders a view of our long-term outlook and strategy. The event draws institutional equity and fixed income investors, as well as analysts who generally publish their observations. As necessary, highlights of the presentations are also filed with the SEC in a Form 8-K and made available to all stockholders.

 

•

Virtual Stockholder Meeting. We conduct our annual meeting as a “virtual meeting,” allowing our stockholders to join remotely from anywhere with an Internet connection or access to a telephone. Our virtual meeting platform empowers stockholders to submit questions to our Board and management team, who are then able to thoughtfully review and respond to those questions in an organized manner. We remain very sensitive to concerns regarding virtual meetings generally from investor advisory groups and other stockholder rights advocates, who have suggested that virtual meetings may diminish stockholder voice or reduce accountability. Accordingly, we have designed this virtual format to enhance, rather than constrain, stockholder access, participation and communication. For example, the online format allows stockholders to communicate with us in advance of, and during, the meeting so they can ask questions of our Board or management. During the live question-and-answer session of the meeting, we answer questions as they come in and address those asked in advance, as time permits. We have committed to publishing and answering each question received following the meeting. Although the live webcast is available only to stockholders at the time of the meeting, a replay of the meeting is made publicly available on the company’s investor relations site. We have continued to receive positive support from larger holders of our shares who have indicated the virtual format is beneficial and appropriate in the context of our broader direct outreach program and given our geographic location, which is far removed from the offices of our principal investors.

Virtual stockholder meetings also offer other benefits. We avoid the time, effort and elevated expenses of organizing physical meetings which historically have been attended by only a few stockholders; our stockholders who wish to attend our annual meeting do not need to incur travel and other costs to do so; and we reduce the environmental impact our annual meetings have by cutting transport and related carbon emissions, paper materials and other negative impacts necessarily a part of a physical meeting. Our virtual meeting platform also allows us to better track attendance and more easily verify the identity of our stockholders. We believe these factors allow us to conduct our annual meetings in a manner that is more meaningful to us and our stockholders.

 

			2020 Proxy Statement				15

•

Annual Letter to Stockholders. On an annual basis, our Chief Executive Officer, Christopher H. Volk, publishes a letter to our stockholders. In this letter, Mr. Volk provides insights into our financial performance, the foundational elements of our business, the long-term strategies that we follow and the value that we provide to our customers. The annual letter is announced via press release in concert with the filing with the SEC of the Company’s Annual Report on Form 10-K and is available on our investor relations website.

 

•

Quarterly Investor Presentation. Each quarter, together with the filing of our earnings release, we prepare and file a comprehensive investor presentation that provides detailed information regarding our corporate strategy, financial results, investment portfolio statistics and other key metrics regarding our business. We update this presentation each quarter, file it with the SEC and make it available on our investor relations website.

We supplement these efforts throughout the year through post-earnings communications, participation at industry and investor conferences and general availability to respond to investor inquiries. We believe this multi-pronged approach to stockholder engagement allows us to maintain meaningful interaction with a broad audience including large institutional investors, smaller to mid-size institutions, pension funds, advisory firms and individual investors.

Anti-Hedging, Anti-Short Sale and Anti-Pledging Policies

The Board considers it inappropriate for any director, officer or employee to enter into speculative transactions in the Company’s securities, as well as transactions that, while allowing the holder to own the Company’s securities without the full risks and rewards of ownership, potentially separate the holder’s interests from those of other stockholders. Therefore, the Company’s Corporate Governance Guidelines prohibit the purchase or sale of puts, calls, options or other derivative securities based on the Company’s securities by directors, officers or employees. They also prohibit hedging or monetization transactions, such as forward sale contracts, in which the stockholder continues to own the underlying security without all the risks or rewards of ownership. Under the terms of the Company’s insider trading policy, our directors and executive officers are, in addition, prohibited from engaging in short sales of our common stock, from purchasing securities on margin or, except with the prior written consent of the Chief Compliance Officer, pledging securities as collateral for a loan or other arrangement.

Stock Ownership Guidelines Applicable to Executive Officers and Outside Directors

We believe that stock ownership by our executive officers and outside directors helps to align their interests with the interests of our stockholders. As such, we maintain a stock ownership policy applicable to our executive officers and outside directors under which they are expected to maintain beneficial ownership of shares of our common stock with a value equal to the following:

 

Position		Minimum Equity Ownership Requirement
Chief Executive Officer		6x annual base salary
Chief Operating Officer / Executive Vice President		3x annual base salary
Outside Director		5x annual cash fees

Calculation of required ownership levels. The required stock ownership levels are based on the annual base salary or annual cash fees payable to an executive officer or outside director, as applicable, as of the date such person becomes subject to the stock ownership guidelines and the average closing sale price of the Company’s common stock for the 60 trading days following such date. The requirement is determined on an individual basis, first in dollars as a multiple of the person’s annual base salary or annual cash fees, as applicable, and then by converting such amount to a fixed number of shares. Once established, a person’s requirement will not change due to changes in his or her base salary or annual cash director fees or fluctuations in the Company’s stock price and will only change in connection with a change to a different executive position.

Eligible equity. Each person may count toward his or her ownership requirement shares owned directly, including restricted stock and shares deliverable upon settlement of restricted stock units the performance period for which has been completed (but not restricted stock units still subject to the achievement of performance goals), and shares owned indirectly, if the person has an economic interest in the shares. Stock options and outstanding performance-based awards do not count toward the requirement.

Satisfying the requirement. Each person subject to the policy has five years to satisfy his or her applicable ownership requirement after becoming subject to the policy or following a change in the person’s requirement. If a person does not

 

16		2020 Proxy Statement

satisfy the specified ownership levels when the applicable transition period ends, the stock ownership policy does not require the person to purchase shares in the open market but does require that person to retain 100% of any shares then held and any shares subsequently acquired pursuant to any equity grants (after the payment of any applicable exercise costs and taxes) until the minimum ownership requirement is satisfied. As of December 31 2019, all of our directors and executive officers were in compliance with the stock ownership policy.

Corporate Governance Guidelines and Code of Business Conduct and Ethics

The Board has adopted Corporate Governance Guidelines and a Code of Business Conduct and Ethics that apply to all of our directors, officers and employees. The current versions of these corporate governance documents are available free of charge on the Company’s investor relations website at http://ir.storecapital.com and in print to any stockholder who requests copies by contacting Chad A. Freed, Executive Vice President—General Counsel, Chief Compliance Officer and Secretary of the Company, at 8377 East Hartford Drive, Suite 100, Scottsdale, Arizona 85255. The Company will promptly disclose to our stockholders, if required by applicable law or NYSE rules and regulations, any amendments to, or waivers from, provisions of the Code of Business Conduct and Ethics that apply to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, by posting such information on our website, www.storecapital.com, rather than by filing a Form 8-K.

Diverse Board and Management Team

We seek to provide a work environment that attracts, develops and retains top talent by affording our employees an engaging work experience that allows for career development and opportunities for meaningful civic involvement. Since the founding of the Company in 2011, and at the prior companies founded by our management team, we have maintained that we must have the best talent, including individuals who possess a diverse range of experiences, backgrounds and skills that enable us to anticipate and meet the needs of our business and those of our customers. Over time, we have hired, developed and retained a diverse workforce that is a key component in the Company’s success and an important part of the Company’s culture.

Our ability to attract, develop and retain diverse talent is reflected at both the Board and management levels. Our nine-person Board, which includes three women and one other underrepresented minority, reflects our emphasis on inclusion and diversity. In addition, two of our five named executive officers and eight of our fourteen officers at the level of Senior Vice President and above are currently held by women, including Mary Fedewa, our Chief Operating Officer and a Board member since 2016, and Catherine Long, our Executive Vice President—Chief Financial Officer, Treasurer and Assistant Secretary.

DIRECTOR COMPENSATION

The following tables sets forth the elements of our director compensation program in effect in 2019:

 

 

Compensation Element
		Position		2019
Annual Cash Fees:		Non-Executive Chairman:		$200,000
		Other Non-Employee Directors:		$65,000
Annual Equity Grant:		Non-Executive Chairman:		$200,000 in restricted stock that vests over four years
		Other Non-Employee Directors:		$100,000 in restricted stock that vests at the end of their one-year term
Board and Committee Meeting Fees:		All Non-Employee Directors:		None
Committee Chair Fee:		Audit:		$20,000
		Compensation:		$15,000
		Nominating and Corporate Governance:		$12,500 (if other than Mr. Fleischer)

 

			2020 Proxy Statement				17

Under this program, in 2019, Mr. Fleischer, as the non-executive Chairman of the Board of the Company, received cash fees of $200,000 and a grant of restricted stock having a value of $200,000 at grant that vests over four years. In 2019, our other non-employee directors each received cash fees of $65,000 (with the exception of Mr. Shourie, who received a prorated amount of his $65,000 annual retainer calculated based on the date he joined the Board in February 2019 through his December 19, 2019 resignation) and a grant of restricted stock in May 2019 having a value of $100,000 at grant that vests at the end of their one-year term (with the exception of Mr. Shourie, who, in addition to the May 2019 grant, also received a prorated grant at the date he joined the Board in February 2019). The restricted stock grant to Mr. Fleischer is made in February of each year, while the grants to the other non-employee directors are made on the date of the annual meeting each year.

In 2019, Messrs. Donovan and Smith also received additional cash fees of $20,000 and $15,000 for their service as the chairs of our Audit Committee and Compensation Committee, respectively. Mr. Fleischer does not receive additional fees for his service as the chair of the Nominating and Corporate Governance Committee. If, in the future, a non-employee director other than Mr. Fleischer serves as chair of the Nominating and Corporate Governance Committee, that person would receive additional cash fees pursuant to the director compensation program as then in effect. All cash fees are paid in quarterly installments over the calendar year.

The following table shows the compensation paid to the non-employee directors who served on our Board during 2019:

 

Name		Fees Earned or Paid in Cash ($)				Stock Awards ($)(1)(2)				Total ($)
Joseph M. Donovan			85,000				99,986				184,986
Morton H. Fleischer			200,000				199,984				399,984
William F. Hipp			65,000				99,986				164,986
Catherine D. Rice			65,000				99,986				164,986
Einar A. Seadler			65,000				99,986				164,986
Rajath Shourie(3)			55,431				127,840				183,271
Quentin P. Smith, Jr.			80,000				99,986				179,986

 

(1)

All stock award amounts in this column reflect the aggregate grant date fair value of restricted stock calculated in accordance with FASB ASC Topic 718. For each director other than Mr. Fleischer, the number of shares of restricted stock granted in May 2019 was determined by dividing the grant date value of the award, $100,000, by $33.62 (the closing price of our common stock on May 30, 2019, the date of the grant), rounded down to the nearest whole share. Mr. Shourie’s total includes an additional $27,854 reflecting the prorated grant he received at the date he joined the Board in February 2019.

 

For Mr. Fleischer, the number of shares of restricted stock granted was determined by dividing the grant date value of the award, $200,000, by $31.87 (the closing price of our common stock on February 13, 2019, the date of the grant), rounded down to the nearest whole share.

 

(2)	As of December 31, 2019, our independent directors had the following aggregate numbers of unvested stock awards outstanding:

 

Name		Unvested Stock    Awards
Joseph M. Donovan				2,974
Morton H. Fleischer				6,275
William F. Hipp				2,974
Catherine D. Rice				2,974
Einar A. Seadler				2,974
Rajath Shourie(3)				—
Quentin P. Smith, Jr.				2,974

 

(3)	Mr. Shourie resigned from the Board, effective December 19, 2019. As a result, Mr. Shourie’s unvested restricted stock awards were forfeited in their entirety.

 

18		2020 Proxy Statement

DIRECTOR INDEPENDENCE AND RELATED PARTY TRANSACTIONS

Independence Determinations

Under the corporate governance listing standards of the NYSE and the Company’s Corporate Governance Guidelines, the Board must consist of a majority of independent directors. In making independence determinations, the Board observes NYSE and SEC criteria and considers all relevant facts and circumstances. Under NYSE corporate governance listing standards, to be considered independent:

 

•

the director must not have a disqualifying relationship, as defined in the NYSE standards; and

 

•

the Board must affirmatively determine that the director otherwise has no material relationship with the Company directly, or as an officer, stockholder or partner of an organization that has a relationship with the Company.

The Board, through its Nominating and Corporate Governance Committee, annually reviews all relevant business relationships any director and director nominee may have with the Company. As a result of its annual review, the Board has determined that none of the following director nominees has a material relationship with the Company and, as a result, such director nominees are independent: Joseph M. Donovan, Morton H. Fleischer, William F. Hipp, Tawn Kelley, Catherine D. Rice, Einar A. Seadler and Quentin P. Smith, Jr.

Christopher H. Volk, who serves as the Company’s President and Chief Executive Officer, and Mary Fedewa, who serves as the Company’s Chief Operating Officer, are executive officers of the Company and therefore are not independent directors.

All of the directors who serve as members of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee are independent as required by the NYSE corporate governance rules. Under these rules, our Audit Committee members also satisfy the separate SEC independence requirement and our Compensation Committee members also satisfy the additional NYSE independence requirement.

Certain Relationships and Related Party Transactions

Our Board has adopted a written statement of policy regarding transactions with related parties, which we refer to as our “related person policy.” Our related person policy requires that a “related person” (as defined in paragraph (a) of Item 404 of Regulation S-K under the Securities Act of 1933, as amended) must promptly disclose to our Chief Compliance Officer any transaction in which the amount involved exceeds $1,000 and in which any related person had or will have a direct or indirect material interest and all material facts with respect thereto. Following a determination of whether the proposed transaction is material to the Company (with any transaction in which the amount involved exceeds $50,000 being deemed material for purposes of the related person policy), the Chief Compliance Officer will report the transaction to the Audit Committee for its approval. No related party transaction will be executed without the approval or ratification of the Audit Committee. It is our policy that directors interested in a related party transaction will recuse themselves from any vote on a related party transaction in which they have an interest. The Audit Committee will consider all relevant facts and circumstances when deliberating such transactions, including whether such transactions are in, or not inconsistent with, the best interests of the Company and its stockholders.

The following is a summary of related party transactions since January 1, 2019. The related party transactions listed below were all approved by the Audit Committee and/or the Board.

 

•

Julie N. Bennett, who is our Senior Vice President—Tax Director, was the spouse of Michael T. Bennett, who was our former Executive Vice President—General Counsel, Chief Compliance Officer and Secretary. For 2019, STORE paid Mrs. Bennett total compensation of $497,893, comprised of salary, bonus, the value of restricted stock granted during 2019, and STORE contributions to the STORE 401(k) plan.

 

•

We are a party to indemnification agreements with our directors and certain members of management. These agreements require us to indemnify these individuals to the fullest extent permitted under Maryland law and our charter against liabilities that may arise by reason of their service to us, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. Insofar as indemnification for liabilities arising under securities laws may be permitted to directors or executive officers, we have been informed that in the opinion of the SEC, such indemnification is against public policy and is therefore unenforceable. There is currently no pending material litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought.

 

			2020 Proxy Statement				19

•

Following a competitive bidding process conducted in the fall of 2018, we selected Berkshire Hathaway Specialty Insurance Company (“BHSIC”) to provide our primary layer of directors & officers liability insurance. For the policy period of December 31, 2019 through December 31, 2020, we paid a premium of $184,340 for such policy. In addition, we selected BHSIC to provide our employment practices liability insurance for the period of December 31, 2019 through December 31, 2020, and paid an additional premium of $10,750 for such policy. As of December 31, 2019, National Indemnity Company, a subsidiary of Berkshire Hathaway Inc. and the parent company of BHSIC, held approximately 7.8% of our outstanding common stock.

 

20		2020 Proxy Statement

EXECUTIVE COMPENSATION

PROPOSAL NO. 2 – ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

 

•

What am I voting on?

 

Stockholders are being asked to approve, on an advisory basis, the compensation of the named executive officers as disclosed in this Proxy Statement.

 

•

Voting recommendation:

“FOR” the advisory vote to approve the compensation of our named executive officers. The Compensation Committee takes very seriously its role in the governance of the Company’s compensation programs and will take into account the outcome of the advisory vote when considering future executive compensation decisions.

 

•

Vote Required:

The affirmative vote of a majority of the votes cast at the Annual Meeting is required to approve this non-binding advisory resolution. Broker non-votes or abstentions will have no effect on the results of this proposal.

In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and Rule 14a-21 under the Exchange Act, the Company requests that our stockholders cast an annual non-binding, advisory vote to approve the compensation of the Company’s named executive officers identified in the section titled “Compensation Discussion and Analysis” set forth below in this Proxy Statement. This proposal, commonly known as the “say-on-pay” proposal, gives our stockholders the opportunity to express their views on the compensation of our named executive officers. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this Proxy Statement. Accordingly, we ask our stockholders to vote “FOR” the following resolution at the Annual Meeting:

“RESOLVED, that the Company’s stockholders hereby approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosures.”

Details concerning how we implement our compensation philosophy and structure our plans to meet the objectives of our compensation program are provided in the section titled “Compensation Discussion and Analysis” set forth below in this Proxy Statement. In particular, we discuss how we design performance-based compensation programs and set compensation targets and other objectives to maintain a close correlation between executive pay and Company performance.

This vote is merely advisory and will not be binding upon the Company, the Board or the Compensation Committee, nor will it create or imply any change in the duties of the Company, the Board or the Compensation Committee. The Compensation Committee will, however, take into account the outcome of the vote when considering future executive compensation decisions. The Board values constructive dialogue on executive compensation and other significant governance topics with the Company’s stockholders and encourages all stockholders to vote their shares on this important matter.

Board Recommendation

The Board recommends that you vote “FOR” the resolution to approve, on an advisory

basis, the compensation of the Company’s named executive officers as disclosed

in this Proxy Statement.

 

			2020 Proxy Statement				21

EXECUTIVE OFFICERS

Set forth below is biographical information with respect to each of our executive officers as of the date of this Proxy Statement, except Mr. Volk, the Company’s President and Chief Executive Officer, and Ms. Fedewa, the Company’s Chief Operating Officer. Mr. Volk and Ms. Fedewa also serve as directors of the Company and their respective biographical information is available above in the section titled “Governance—Proposal No. 1—Election of Directors—2020 Director Nominees.”

 

Chad A. Freed    Age: 46
Officer Since:    2019		Mr. Freed joined STORE in August 2019 and has served as its Executive Vice President—General Counsel, Chief Compliance Officer and Secretary since that time. Prior to joining STORE Capital, Mr. Freed served as the General Counsel, Executive Vice President of Corporate Development of Universal Technical Institute (NYSE:UTI) from June 2015 to August 2019. Mr. Freed previously served as UTI’s General Counsel, Senior Vice President of Business Development from March 2009 to June 2015, as Senior Vice President, General Counsel from February 2005 to March 2009 and as inside legal counsel and Corporate Secretary since March 2004. Prior to joining UTI, Mr. Freed was a Senior Associate in the Corporate Finance and Securities department at Bryan Cave LLP. Mr. Freed received his Juris Doctor from Tulane University and a B.S. in International Business and French from Pennsylvania State University.

 

Catherine Long    Age: 63
Officer Since:    2011		Ms. Long was one of STORE’s founders in May 2011 and has served as its Executive Vice President-Chief Financial Officer, Treasurer and Assistant Secretary since its organization. Ms. Long has over 30 years of accounting, operating and financial management expertise. Prior to co-founding STORE Capital, Ms. Long was CFO, Senior Vice President and Treasurer of Spirit from its inception in August 2003 to February 2010. Prior to Spirit, Ms. Long served in various capacities with FFCA and its successor, GE Capital Franchise Finance. Ms. Long was also FFCA’s Principal Accounting Officer and actively participated in FFCA’s real estate limited partnership rollup, as well as numerous securitization transactions and business combinations. Prior to her employment with FFCA, Ms. Long was a senior manager specializing in the real estate industry with the international public accounting firm of Arthur Andersen in Phoenix, Arizona. She was named CFO of the Year in 2008 by the Arizona chapter of Financial Executives International. Ms. Long also serves on the board of directors and audit committee of Oaktree Real Estate Income Trust, Inc., a non-traded, externally-managed REIT, formed to invest in income-producing commercial real estate assets and debt, primarily in the office, multifamily and industrial sectors. She received a B.S. degree in accounting with high honors from Southern Illinois University and has been a certified public accountant since 1980.

 

Andrew L. Rosivach    Age: 46
Officer Since:    2019		Mr. Rosivach joined STORE in July 2019 and has served as its Executive Vice President—Underwriting since that time. In February 2020, Mr. Rosivach’s title was changed to Executive Vice President—Chief Credit Officer. Mr. Rosivach has a broad range of experience in credit, underwriting and financial analysis. Prior to joining STORE, Mr. Rosivach served as Vice President, Managing Director, REIT Team Leader and Deputy Financials Business Unit Leader (BUL) at Goldman Sachs from February 2012 to July 2019, and was responsible for managing a REIT research team across several locations with national coverage of 48 REITs and brokers, and worked with emerging analysts on upcoming rollouts, initiation reports and other marketing and analyst presentations. Prior to Goldman Sachs, Mr. Rosivach served as a Vice President and Director at Credit Suisse, leading research teams in New York from 2004–2005, Sydney, Australia from 2005–2009 and San Francisco from 2009–2012. Mr. Rosivach received a B.A. degree magna cum laude with distinction in both Economics and History from Yale University. Mr. Rosivach is also a CFA Charterholder.

 

22		2020 Proxy Statement

COMPENSATION DISCUSSION AND ANALYSIS

 

 

COMPENSATION DISCUSSION AND ANALYSIS			23
Executive Summary			23
Response to Advisory Vote on Executive Compensation			25
Compensation Philosophy and Objectives			26
How We Determine Compensation			26
Elements of 2019 Compensation			28
Results of 2017 Performance-Based RSU Grants			34

Status of Outstanding 2018 Performance-Based RSU Grants			35
401(k) Plan			35
Severance and Change in Control Arrangements			35
Perquisites and Other Personal Benefits			36
Other Compensation Policies			36
Tax and Accounting Considerations			36
Compensation Risk Assessment			37
Changes to Compensation Program Beginning in 2020			37

 

 

In this section, we describe the material components of our executive compensation program for our named executive officers (the “Named Executive Officers” or “NEOs”), whose compensation is set forth in the 2019 Summary Compensation Table and other compensation tables contained in this Proxy Statement. We also provide an overview of our executive compensation philosophy and our executive compensation program. In addition, we explain how and why the Compensation Committee of our Board arrived at the specific compensation decisions involving the NEOs for 2019.

For 2019, our NEOs were:

 

•

Christopher H. Volk, our President and Chief Executive Officer

 

•

Mary Fedewa, our Chief Operating Officer

 

•

Catherine Long, our Executive Vice President—Chief Financial Officer and Treasurer

 

•

Andrew L. Rosivach, our Executive Vice President—Chief Credit Officer

 

•

Chad A. Freed, our Executive Vice President—General Counsel, Chief Compliance Officer and Secretary

 

•

Michael T. Bennett, our Former Executive Vice President—General Counsel, Chief Compliance Officer and Secretary

Mr. Freed joined the Company in August 2019, and Mr. Rosivach joined the Company in July 2019. Mr. Bennett’s employment terminated in May 2019 for health-related reasons.

Executive Summary

Business Highlights

Our Business. We are an internally managed net-lease real estate investment trust (“REIT”), and a leader in the acquisition, investment and management of Single Tenant Operational Real Estate, which is our target market and the inspiration for our name. We are one of the largest and fastest-growing net-lease REITs and own a well-diversified portfolio that consists of investments in 2,504 property locations across 49 states as of December 31, 2019. Our customers operate across a wide variety of industries within the service, retail and manufacturing sectors of the U.S. economy, with restaurants, early childhood education centers, furniture stores, health clubs and movie theaters representing the top industries in our portfolio.

2019 Performance Highlights. 2019 was a successful year for STORE, as we posted new records in all key performance metrics in 2019, including real estate investment activity, AFFO and AFFO per share. We also delivered our fifth consecutive year of double-digit returns to our stockholders, in part due to our fifth dividend increase in as many years. During the year, we acquired 350 properties for a total of $1.7 billion at sector-leading average investment yields of 7.8%, further diversifying our tenant base to 478 customers across the United States. From a capital markets perspective, we strengthened our financing flexibility and reduced our cost of capital with the successful completion of our second public unsecured note offering, together with our second AAA rated real estate master funding debt issuance.

 

			2020 Proxy Statement				23

The decisions made by the Compensation Committee and the Board on the compensation of our NEOs are reflective of the Company’s successes during the year, which include:

 

 

24		2020 Proxy Statement

To further these objectives, we adhere to the following compensation and corporate governance practices:

 

 

 

			2020 Proxy Statement				25

How We Determine Compensation

Role of the Compensation Committee. The Compensation Committee, operating pursuant to authority delegated to it by the Board, oversees the design, development and implementation of our executive compensation program. The Compensation Committee also administers our compensation plans and awards for the Company’s directors and Named Executive Officers and is primarily responsible for reviewing and approving our compensation policies and the compensation paid to our Named Executive Officers. The Compensation Committee’s responsibilities are set forth in its written charter and are more fully described in this Proxy Statement under the heading “Governance—Board and Committee Governance—Committees and Meetings of the Board.”

Role of Management. Certain of our Named Executive Officers, principally our President and Chief Executive Officer and our Chief Financial Officer, work closely with the Compensation Committee and its consultant to analyze relevant peer data and to provide input into the compensation program design. Management assists the Compensation Committee’s consultant in its survey of executive compensation by providing historical compensation information. Management makes recommendations of the program design for the Named Executive Officers for consideration by the Compensation Committee.

Role of Compensation Consultant. In 2019, the Compensation Committee engaged Korn Ferry as its independent compensation consultant to assist the Compensation Committee with the structure of our executive compensation program. Korn Ferry provided the Compensation Committee with market data and made recommendations regarding the compensation mix and levels with respect to the 2019 executive compensation program described herein. The Compensation Committee conducts independence assessments of its consultants and has determined that no conflict of interest exists that would require disclosure under SEC rules. Korn Ferry does not provide services to the Company in any other capacity.

Competitive Market Analysis. In 2017, we established a new peer group (the “2018 Peer Group”) for purposes of developing our 2018 executive compensation program. In developing the 2018 Peer Group, the Compensation Committee, with the assistance of Korn Ferry and management, focused primarily on the compensation practices, salary levels and target incentive levels of peer companies according to asset size (seeking a peer group with respect to which the Company’s asset size is close to median), revenue, growth in assets and funds from operations (“FFO”) per share (as a proxy for AFFO per share growth) and number of employees (with an emphasis on including REITs that have less than 250 employees). The 2018 Peer Group consisted of the following companies:

 

Acadia Realty Trust		Medical Properties Trust, Inc.
American Homes 4 Rent		National Health Investors*
CyrusOne, Inc.		National Retail Properties, Inc.*
Digital Realty Trust		Omega Healthcare Investors, Inc.*
Douglas Emmett, Inc.		Physicians Realty Trust
Education Realty Trust, Inc.		QTS Realty Trust, Inc.
EPR Properties*		STAG Industrial, Inc.*
Gaming and Leisure Properties, Inc.		W.P. Carey Inc.*
Gramercy Property Trust Inc.*

 

*	Denotes a net-lease oriented company.

 

26		2020 Proxy Statement

In reviewing potential compensation and incentive plan modifications to implement in 2019, the Compensation Committee, with the advice and input of Korn Ferry, began by evaluating the Company’s existing peer group, as described above. Since establishing the 2018 Peer Group, the Company continued to experience rapid growth in assets and AFFO per share, and a handful of the companies in the 2018 Peer Group have grown or been acquired through recent acquisitions. For this reason, the Compensation Committee opted to develop a new, slightly revised peer group for 2019 (the “2019 Peer Group”) that still includes both net-lease REITs and other REITs that have experienced significant asset growth and/or growth in per share FFO in recent years, many of which also have relatively small employee populations, and that accounts for recent acquisition activity in the REIT sector.

In assessing potential peers to include in the 2019 Peer Group, the Compensation Committee and Korn Ferry focused on the same considerations used in identifying appropriate peer companies in the 2018 Peer Group. Based on these considerations, Korn Ferry recommended, and the Compensation Committee approved, the 2019 Peer Group set forth below to review compensation levels for our NEOs and to evaluate market approaches to incentive design:

 

Acadia Realty Trust†		National Health Investors*†
Agree Realty Corporation*		National Retail Properties, Inc.*†
American Homes 4 Rent†		Omega Healthcare Investors, Inc.*†
CyrusOne, Inc.†		Physicians Realty Trust†
Douglas Emmett, Inc.†		QTS Realty Trust, Inc.†
EPR Properties*†		Spirit Realty Capital*
Gaming and Leisure Properties, Inc.†		STAG Industrial, Inc.*†
Liberty Property Trust		VEREIT*
Medical Properties Trust, Inc.†		W.P. Carey Inc.*†

 

*	Denotes a net-lease oriented company.

 

†	Included within 2018 Peer Group

The Compensation Committee reviews each compensation element and aggregate total direct compensation (the sum of base salary, short-term cash incentives and long-term equity incentives) for each of our Named Executive Officers compared to similarly situated employees of companies in the 2019 Peer Group, but does not target compensation to a specific percentile of the market data. In determining actual pay levels, the Compensation Committee considers peer group data as well as other factors that, in its collective judgment, it believes to be relevant, including the executive’s experience and performance, internal pay equity among the Company’s senior management team based on the executive’s respective scope of responsibilities and specific skills, the executive’s ability to impact business results, and other business events or conditions.

In the discussion below, we reference FFO and AFFO, which are metrics that are not included within the Financial Accounting Standards Board’s (“FASB”) generally accepted accounting principles (“GAAP”). FFO is used generally by management teams, investors and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers primarily because it excludes the effect of real estate depreciation and amortization and net gains on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions. Management believes that AFFO provides more useful information to investors and analysts because it modifies FFO to exclude certain additional non-cash revenues and expenses such as straight-line rents, including construction period rent deferrals, and the amortization of deferred financing costs, stock-based compensation and lease-related intangibles, as such items may cause short-term fluctuations in net income but have no impact on long-term operating performance. We believe that these costs are not an ongoing cost of the portfolio in place at the end of each reporting period and, for these reasons, the portion expensed is added back when computing AFFO. As a result, we believe AFFO to be a more meaningful measurement of ongoing performance that allows for greater performance comparability. Therefore, we disclose both FFO and AFFO and reconcile them to the most appropriate GAAP performance metric, which is net income, and we use AFFO as a component of both our short-term and long-term incentive programs. Our FFO and AFFO may not be comparable to similarly-titled measures employed by other companies. For a discussion of the manner in which we compute AFFO and for a table setting forth a reconciliation of our FFO and AFFO to our net income (as determined in accordance with GAAP), please see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures,” on page 51 of our Annual Report on Form 10-K filed with the SEC on February 21, 2020.

 

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Elements of 2019 Compensation

The Named Executive Officers’ 2019 compensation was set forth in an annual written compensation plan approved by the Compensation Committee. For 2019, the compensation of our Named Executive Officers consisted of three principal components:

 

Compensation Element		Purpose of Compensation Element		Key Features of Compensation Element
Base Salary		•  A stable means of cash compensation designed to provide competitive compensation that reflects the contributions and skill levels of each executive.		•  Paid in cash   •  The Compensation Committee, with assistance from its compensation consultant, generally reviews base salaries each year
Short-Term Incentive Compensation		•  An annual cash bonus program designed to motivate the Company’s executive officers to achieve performance goals established by the Compensation Committee that reinforce our annual business plan, to assist the Company in attracting and retaining qualified executives and to promote the alignment of the Named Executive Officers’ interests with those of the Company’s stockholders.		•  The threshold, target and maximum dollar amounts for short-term incentive compensation are established prior to the beginning of each year.   •  Paid in cash following the Compensation Committee’s determination of achievement of goals.
Long-Term Incentive Compensation		•  An equity-based compensation program involving awards of restricted stock and restricted stock units that are designed to align the long-term interests of the Named Executive Officers with those of our stockholders and to maintain the competitiveness of our total compensation package.		•  Restricted stock grants are subject to time-based vesting while restricted stock units vest over a three-year performance period.   •  Generally granted in February of each year.

The following chart presents the overall target mix of compensation elements for the CEO and all other NEOs as a group for 2019:

 

Name		Base Salary %					Target Bonus %					Target      LTI %
Christopher H. Volk				15	%				23	%				62	%
Mary Fedewa				18	%				23	%				59	%
Catherine Long				22	%				22	%				56	%
Andrew L. Rosivach				25	%				25	%				50	%
Chad A. Freed				31	%				22	%				47	%

 

(1)	The percentages for Mr. Freed are based on his base salary, target bonus, and target long-term incentive for a full year. For 2019, Mr. Freed received a prorated base salary and prorated bonus based on his employment start date.

Set forth below is a discussion of each of the principal components of 2019 compensation for our NEOs.

Base Salary. Base salary represents a stable means of cash compensation to our Named Executive Officers. Our goal in setting base salary amounts is to provide competitive compensation that reflects the contributions and skill levels of each executive. As shown above, however, consistent with our philosophy of tying pay to performance, our executives receive a relatively small percentage of their overall target compensation in the form of base salary. We generally implement any base pay increases on a calendar year basis, while reserving the ability to make mid-year increases to reflect a promotion, increased responsibilities or other factors.

Short-Term Incentives. Payment opportunities for cash awards under the annual cash bonus program administered pursuant to the STORE Capital Corporation 2015 Omnibus Equity Incentive Plan (the “2015 Incentive Plan”) are expressed as a percentage of base salary and reflect each individual’s contributions to the Company and the market level of compensation for such position. We have designed our annual cash bonus program to motivate the Company’s executive officers to achieve performance goals established by the Compensation Committee that reinforce our annual business plan, to assist the Company in attracting and retaining qualified executives and to promote the alignment of the Named Executive Officers’ interests with those of the Company’s stockholders.

 

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In administering the annual cash bonus program, the Compensation Committee may make adjustments to the performance goals in recognition of unusual or non-recurring events affecting the Company’s corporate performance metrics or to reflect modifications made to our annual business plan. For example, in August 2017, the Company announced updated AFFO per share guidance that reflected the impact of the June 2017 stock sale to a subsidiary of Berkshire Hathaway Inc. (“Berkshire Hathaway”). The Berkshire Hathaway investment meaningfully accelerated the timing of the Company’s planned equity issuances for 2017, reducing expected AFFO per share for the year by approximately $0.043 per share. Given this unique opportunity, the determination of the Board to consummate the Berkshire Hathaway investment and the meaningful value that the relationship with Berkshire Hathaway provided to the Company and its stockholders, the Compensation Committee exercised its authority to make adjustments to the performance goals in recognition of unusual or non-recurring events affecting the Company or to reflect modifications made to its annual business plan and, accordingly, adjusted the original AFFO per share performance goal for the 2017 annual cash bonus program by a like amount. No such adjustments were made in 2018 or 2019.

For 2019, the Compensation Committee approved the following threshold, target and maximum cash bonus award opportunities, expressed as a percentage of base salary, which the executives are eligible to receive under the annual cash bonus program. Straight line interpolation is used to determine awards for results in between performance levels:

 

		Payout Opportunities (as a percentage of base salary)
Name		Threshold					Target					Maximum
Christopher H. Volk				75%					150%					300%
Mary Fedewa				65%					130%					260%
Catherine Long				50%					100%					200%
Andrew L. Rosivach				50%					100%					200%
Chad A. Freed				35%					70%					140%

As illustrated in the chart below, all of the Named Executive Officers were eligible to earn annual cash bonuses based 75% on the Company’s achievement of identified corporate performance metrics (as described in more detail below) and 25% on each individual officer’s achievement of personal goals specifically developed for each Named Executive Officer and approved by the Compensation Committee. The Compensation Committee weights corporate metrics more heavily than individual performance metrics because such metrics represent the primary drivers of the Company’s financial performance and thus serve to better align our NEOs with our stockholders.

2019 Annual Incentive Program Design

 

 

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Corporate Performance. As stated above, the Compensation Committee based 75% of the 2019 annual cash bonus opportunity on corporate performance metrics. For 2019, the Compensation Committee identified the following three primary quantitative measures (and assigned the associated weightings out of the 75% total) to evaluate corporate performance:

 

•

AFFO per share is defined as AFFO divided by the number of shares used to calculate our earnings per share and is used because it is considered a meaningful measure of a REIT’s operating performance and an indicator of its continued ability to pay dividends. For 2019, the AFFO per share metric represented 40% of the weighting of the corporate performance metrics and 30% of the total bonus opportunity. AFFO per share is the most weighted corporate performance metric because it is reflective of portfolio performance and accretive annual investment activity. AFFO per share growth enables our dividend growth and, over the long term, has the highest impact upon our share price.

 

•

Debt to EBITDA is defined as net debt divided by EBITDA calculated on a run rate basis and is used because this measure encourages management to focus on growth in operating results while maintaining appropriate levels of debt. For 2019, the debt to EBITDA metric represented 33.33% of the weighting of the corporate performance metrics and 25% of the total bonus opportunity. The inclusion of leverage as a corporate performance metric reflects the importance to STORE of borrowing efficiency as a component of our cost of capital, promoting AFFO per share growth, but within preferred leverage ranges.

 

•

Origination Volume is defined as the aggregate of the gross purchase prices of property paid to sellers or the face amount of notes receivable originated and is used because income generated from new investment volume impacts not only current period results but also contributes to income in future years. For 2019, the origination volume metric represented 26.67% of the weighting of the corporate performance metric and 20% of the total bonus opportunity. The inclusion of Origination Volume as a corporate performance metric reflects its importance to current and future AFFO per share growth and also to the importance of investment diversity and balance sheet size to mitigate long-term risk.

The illustrations below set forth the 2019 corporate performance goal levels, as well as actual results for each performance metric. To the extent actual performance falls between two performance goal levels, linear interpolation is applied:

 

AFFO per share(1)				Origination Volume(2)

 

Debt to EBITDA(3)

 

30		2020 Proxy Statement

(1)

AFFO is a non-GAAP measure. For a discussion of the manner in which we compute AFFO and for a table setting forth a reconciliation of our AFFO to our net income (as determined in accordance with GAAP), please see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures,” on page 51 of our Annual Report on Form 10-K filed with the SEC on February 21, 2020. AFFO per share is calculated by dividing AFFO by our weighted-average common shares outstanding on a fully diluted basis.

 

(2)	Represents our annual investment volume excluding non-cash items and investments meant to be temporary in nature.

 

(3)

Represents outstanding net debt divided by adjusted EBITDA calculated on a run-rate basis, as an average of the four quarterly periods. Adjusted EBITDA is a non-GAAP measure, which we calculate by adding back to our net income amounts in respect of interest, depreciation and amortization and interest expense, and adjusting for the impact of gain or loss on sale or impairment of real estate investments.

Individual Performance. The Compensation Committee based the remaining 25% of the 2019 annual cash bonus opportunity on individual goals specifically developed for each Named Executive Officer that were designed to enhance the efficiency of each NEO’s department and the processes he or she oversees in ways that are meaningful to the Company’s competitive market position and the implementation of long-term strategic initiatives. In the case of the NEOs other than our CEO, the individual performance goals generally included the completion or implementation of identified projects, improvements and/or processes supplementary to each of their primary executive management roles within the Company. In 2019, these goals included the following:

 

•

For Ms. Fedewa: identifying a lead generation and marketing and calling system, and developing a proof of concept for a business intelligence system.

 

•

For Ms. Long: completing the conversion of the Company’s accounting system to the cloud and assisting tenants with the implementation of new lease accounting standards.

 

•

For Mr. Rosivach: reorganizing the credit department and improving the content of credit memoranda.

 

•

For Mr. Freed: developing an updated form of lease and recommending appropriate changes to our corporate records system.

Mr. Volk, our CEO, achieves his individual performance goal only to the extent the other executive officers achieve their individual goals. The 2019 goals for Messrs. Rosivach and Freed reflect that they joined the Company in July 2019 and August 2019, respectively.

The Compensation Committee determines the achievement of these personal goals in its discretion and, in doing so, it does not rank the individual goals in order of importance, nor does it assign individual values for each goal with respect to the overall bonus opportunity.

2019 Payouts. For 2019, each Named Executive Officer successfully completed his or her individual goals. Accordingly, each earned a cash bonus based on the weighted achievement of the corporate performance metrics and the successful completion of individual goals. The following table shows the actual payouts for each NEO under the annual cash bonus program for 2019:

 

NEO		Actual Payout					% of Maximum Bonus  Opportunity
Christopher H. Volk			$	2,400,000					100	%
Mary Fedewa				1,560,000					100	%
Catherine Long				960,000					100	%
Andrew L. Rosivach(1)				800,000					100	%
Chad A. Freed(2)				192,500					100	%

 

(1)

In accordance with the terms of his employment agreement, and in consideration for certain compensation that Mr. Rosivach forfeited when leaving his former employer, the Compensation Committee agreed that, for 2019, Mr. Rosivach would receive the incentive bonus that he would have received had he been employed by the Company for the full year.

 

(2)	Mr. Freed’s incentive bonus reflects an amount equal to the bonus that he would have received had he been employed at the Company for the full year, prorated based on his employment start date of August 19, 2019.

Long-Term Incentives. Pursuant to our 2015 Incentive Plan, the Compensation Committee makes awards of restricted shares of the Company’s common stock and other awards and performance-based grants to officers, directors and key employees of the Company, including our Named Executive Officers. We expect to make equity grants to our NEOs as part of our annual compensation program to align their long-term interests with those of our stockholders and to maintain the competitiveness of our total compensation package. It is the Compensation Committee’s policy to review and approve all annual equity compensation awards to directors, officers and all other eligible key employees at its first regularly scheduled meeting of each year, which typically occurs in the first quarter of each year.

 

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During 2019, as in prior years, we granted time-based restricted stock and performance-based restricted stock units (“RSUs”) to our Named Executive Officers. The Compensation Committee believes restricted stock and performance-based RSUs are a more meaningful tool for compensating our Named Executive Officers as compared to other equity-based awards, such as stock options, because a significant component of returns on the common stock of REITs generally takes the form of dividends as opposed to being limited solely to price appreciation. While the Company has never issued stock options or other forms of equity compensation to its employees other than restricted stock and performance-based RSUs, the Compensation Committee intends to monitor equity compensation trends in the REIT industry and may use other forms of equity compensation, including stock options, in the future to achieve our desired compensation objectives. The Compensation Committee believes that the equity awards granted in 2019 appropriately align the long-term interests of our Named Executive Officers with those of our stockholders.

During 2019, the Compensation Committee approved the target equity grants shown in the table below, expressed as a percentage of base salary, to the NEOs, of which:

 

(i)

75% were granted in the form of performance-based RSUs that are eligible for vesting at the end of a three-year performance period ending December 31, 2021, with 50% of the RSUs vesting based on achieving specified Compounded AFFO Per Share Growth during the performance period and 50% of the RSUs vesting based on the ranking of STORE’s Compounded Annual TSR over the performance period as compared to the Compounded Annual TSR over the performance period of the other component companies included within, and ranked by, the MSCI Index. If earned, shares of common stock representing 100% of the earned amount of RSUs will vest on December 31, 2021 and will be settled following the completion of our audited financial statements for the fiscal year then ended. To the extent actual performance falls between two performance goal levels, linear interpolation is applied. For purposes of the foregoing:

 

 

(ii)	25% were granted in the form of time-based restricted stock that vests in annual increments over a four-year period assuming continued employment of the NEO.

 

NEO		2019 Target Value of  Equity Grant (as a percentage of base salary)
Christopher H. Volk				400%
Mary Fedewa				325%
Catherine Long				250%
Andrew L. Rosivach(1)				200%
Chad A. Freed				150%

 

(1)

In accordance with the terms of his employment agreement, and in consideration for certain compensation that Mr. Rosivach forfeited when leaving his former employer, the Compensation Committee determined that, for Mr. Rosivach’s initial grant of restricted stock made upon the commencement of his employment, such grant would vest over three years, rather than the four-year period over which grants of restricted stock made by the Company customarily vest.

 

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The actual number of shares of time-based restricted stock and RSUs awarded to each NEO was determined by dividing the applicable grant amount (in dollars) by the average closing market price of STORE’s common stock on the NYSE for the 20-day trading period ending December 31, 2018, except that, for both Messrs. Rosivach and Freed, the number of shares of time-based restricted stock awarded was determined by dividing the applicable grant amount (in dollars) by the closing market price of STORE’s common stock on the date each commenced their employment with the Company (Messrs. Rosivach and Freed joined the Company on July 8, 2019 and August 19, 2019, respectively, and the number of shares of restricted stock they were awarded was determined according to the closing market price of STORE’s common stock on July 8, 2019 ($34.24) and August 19, 2019 ($36.62), respectively). The table below reflects the number of shares of time-based restricted stock and performance-based RSUs (at target) granted to each of our NEOs in 2019 as part of our 2019 executive compensation program, as well as the target value of those awards:

 

Name		# of Restricted Shares				# of  Performance-Based RSUs (at Target)				Target Value of Restricted  Shares and RSUs
Christopher H. Volk			26,901				80,702				$3,200,100
Mary Fedewa			16,393				49,178				$1,950,100
Catherine Long			10,088				30,263				$1,200,000
Andrew L. Rosivach			5,841				20,176				$   800,000
Chad A. Freed			3,840				14,186				$   562,500

As with other elements of compensation, the Compensation Committee based individual equity-based incentive awards on each individual’s contributions to STORE and the market level of compensation for the officer’s position without benchmarking against a specific percentile. Holders of time-based restricted stock are entitled to dividends when paid by the Company and performance-based RSUs accrue a dividend equivalent that is paid in cash when and, solely to the extent, the underlying RSUs vest.

Absolute Compounded AFFO Per Share Growth Component. With respect to the 50% of the performance-based RSUs that may be earned and become vested based on STORE’s absolute Compounded AFFO Per Share Growth over the performance period, the actual number of performance-based RSUs that may be earned and become vested will be between 0% and 300% of the target number, depending on our level of achievement of Compounded AFFO Per Share Growth over the performance period. The specific targets and corresponding award levels are contained in the table below:

 

Performance Level		Absolute Compounded AFFO Per Share Growth		RSUs Earned as a  Percentage of Target
Threshold		3.0%				33.33	%
Target		4.5%				100.00	%
Maximum		6.5% or greater				300.00	%

As shown in the table above, threshold, target and maximum performance result in the Named Executive Officers earning 33.33%, 100% or 300% of the target number of performance-based RSUs associated with each performance level, with linear interpolation between specified levels. No performance-based RSUs under the Compounded AFFO Per Share Growth component are earned for performance below the threshold level, and payout is capped at 300.00% of the target number even if performance exceeds the maximum level.

Relative Compounded Annual TSR Component. With respect to the 50% of the performance-based RSUs that may be earned and become vested based on STORE’s Compounded Annual TSR over the performance period, the actual number of performance-based RSUs that may be earned and become vested will be between 0% and 300% of the target number depending on the ranking of STORE’s Compounded Annual TSR as compared to the Compounded Annual TSR of the other component companies included within, and ranked by, the MSCI Index over the performance period. The specific requirements and corresponding award levels are contained in the table below.

 

Performance Level		STORE’s Compounded Annual TSR Ranking vs. Other Companies in the MSCI Index		RSUs Earned as  a Percentage of Target
Threshold		STORE’s Compounded Annual TSR must rank at a level at least equal to the 35th percentile of ranked component companies in the MSCI Index		33.33%
Target		STORE’s Compounded Annual TSR must rank at a level at least equal to the 50th percentile of ranked component companies in the MSCI Index		100.00%
Maximum		STORE’s Compounded Annual TSR must rank at a level at least equal to the 75th percentile of ranked component companies in the MSCI Index		300.00%

 

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