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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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Filed by the Registrant ý |
Filed by a Party other than the Registrant o |
Check the appropriate box: |
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material under §240.14a-12
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CORESITE REALTY CORPORATION |
(Name of Registrant as Specified In Its Charter) |
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
Payment of Filing Fee (Check the appropriate box): |
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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Proposed maximum aggregate value of transaction:
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Total fee paid:
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing. |
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Form, Schedule or Registration Statement No.:
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1001 17th Street, Suite 500
Denver, Colorado 80202
(866) 777-2673
March 26, 2015
Dear
CoreSite Stockholder:
You
are cordially invited to the CoreSite Realty Corporation 2015 Annual Meeting of Stockholders (the "Annual Meeting") to be held on Wednesday, May 20, 2015, at 1:30 p.m.,
Mountain Time. The Annual Meeting will be held at the Four Seasons Hotel Denver, 1111 14th Street, Denver, Colorado 80202.
At
the Annual Meeting, you will be asked to (i) elect seven directors to our Board of Directors, (ii) ratify the appointment of KPMG LLP as our independent
registered public accounting firm for the fiscal year ending December 31, 2015, (iii) approve an advisory resolution on executive compensation and (iv) transact such other
business as may properly come before the meeting or any postponements or adjournments thereof.
The
accompanying Notice of 2015 Annual Meeting of Stockholders describes these matters. We have elected to provide access to our proxy materials on the Internet under the U.S. Securities
and Exchange Commission's "notice and access" rules. Our proxy materials are available at www.proxyvote.com. We have sent the Notice of 2015 Annual Meeting of Stockholders to each of our stockholders,
providing instructions on how to access our proxy materials and our 2014 Annual Report on the Internet. Please read the enclosed information carefully before submitting your proxy.
Please
join us at the meeting. Whether or not you plan to attend, it is important that you authorize your proxy promptly. If you do attend the meeting, you may revoke your proxy should
you wish to vote in person.
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Sincerely, |
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THOMAS M. RAY
President, Chief Executive Officer and Director |
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1001 17th Street, Suite 500
Denver, Colorado 80202
(866) 777-2673
NOTICE OF 2015 ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of CoreSite Realty Corporation:
NOTICE
IS HEREBY GIVEN that the 2015 Annual Meeting of Stockholders (the "Annual Meeting") of CoreSite Realty Corporation, a Maryland corporation, will be held at the Four Seasons Hotel
Denver, 1111 14th Street, Denver, Colorado 80202, on Wednesday, May 20, 2015, at 1:30 p.m., Mountain Time, for the following purposes:
- 1.
- To
consider and vote upon the election of seven directors to the Board of Directors to serve until the 2016 Annual Meeting of Stockholders and until their
successors have been duly elected and qualify;
- 2.
- To
consider and vote upon the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year
ending December 31, 2015;
- 3.
- To
consider and vote upon the advisory resolution to approve the compensation of our named executive officers, as described in the Proxy Statement; and
- 4.
- To
transact such other business as may properly come before the Annual Meeting and any postponements or adjournments thereof.
We
know of no other matters to come before the Annual Meeting. Only stockholders of record at the close of business on March 20, 2015, are entitled to notice of and to vote at the
Annual Meeting or at any postponements or adjournments thereof.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2015 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 20, 2015. Our
Proxy Statement and 2014 Annual Report are available at www.proxyvote.com.
Regardless of the number of shares of common stock you hold, as a stockholder your role is very important and the Board of Directors strongly encourages you to
exercise your right to vote.
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BY ORDER OF THE BOARD OF DIRECTORS |
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DEREK S. MCCANDLESS
Secretary |
Dated:
March 26, 2015
Denver, Colorado
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2015 PROXY STATEMENTSUMMARY
This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information you should consider. You should read the
entire Proxy Statement carefully before voting.
GENERAL INFORMATION
(see pages 1-4)
Meeting: 2015 Annual Meeting of Stockholders
Date: Wednesday, May 20, 2015
Time: 1:30 p.m., Mountain Time
Location: Four Seasons Hotel Denver, 1111 14th Street, Denver, Colorado 80202
Record Date: March 20, 2015
Record Date Shares Outstanding: 22,020,022 shares
Stock Symbol: COR
Exchange: NYSE
Registrar & Transfer
Agent: American Stock Transfer & Trust Company, LLC
State of Incorporation: Maryland
Year of Incorporation: 2010
Public Company
Since: September 2010
Corporate Headquarters: 1001 17th Street, Suite 500, Denver Colorado 80202
Corporate Website: www.coresite.com
Investor Relations Website: www.coresite.com/investors
Annual Report: www.coresite.com/investors/shareholder-
resources/annual-meetings-material
2014 BUSINESS HIGHLIGHTS
(see page 23)
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- Total shareholder return (assuming dividend reinvestment) in 2014 of 26.65%.
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- Revenue in 2014 grew by 16.0% over 2013, with data center revenue in 2014 growing 16.5% over 2013.
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- EBITDA (as defined herein) in 2014 grew by 25.5% versus 2013.
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- Funds from operations (FFO) (as defined herein) attributable to common shares and units in 2014 grew by 22.4% versus 2013.
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- Increased the quarterly common stock dividend by 20% to $0.42 per share, reflecting an annual rate of $1.68 per share.
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- Maintained six nines of uptime across our platform for fourth consecutive year.
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- Continued to expand our properties in New Jersey and Virginia.
EXECUTIVE COMPENSATION HIGHLIGHTS
(see pages 22-33)
2014 Say-on-Pay Vote: Approximately 97% of the votes cast at the 2014 Annual Meeting of Stockholders approved the advisory resolution to
approve the compensation of our named executive officers.
Performance-Based Restricted Stock Awards ("PSAs"): In 2014, in lieu of annual option grants and to further our pay-for-performance
objectives, we granted PSAs to our senior leadership team which vest based on the achievement of relative total shareholder return over a three-year period.
2014 Compensation Mix:
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CEO: |
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16% Fixed Salary
84% Performance or Stock Price Variable |
Other NEOs: |
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32% Fixed Salary
68% Performance or Stock Price Variable
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2014 Cash vs. Equity Compensation:
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CEO: |
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32% Cash
68% Long-Term Equity |
Other NEOs: |
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55% Cash
45% Long -Term Equity
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CORPORATE GOVERNANCE
(see pages 13-19)
Director Nominees: 7
Robert G. Stuckey (Independent)(Chairman)
Thomas M. Ray (Management)
James A. Attwood, Jr. (Independent)
Michael R. Koehler (Independent)
Paul E. Szurek (Independent)
J. David Thompson (Independent)
David A. Wilson (Independent)
Director Term: One year
Director Election Standard: Plurality
Board Meetings in
2014: 6
Executive Sessions: Yes
Standing Board Committees (Meetings in 2014): Audit (9), Compensation (4), Nominating/Corporate Governance (4)
Independent Board Committees: All
Stock Ownership Guidelines: Yes
Corporate Governance Materials:
www.coresite.com/investors/corporate-governance
ANNUAL MEETING AGENDA
(Board Recommendation)
Election of Seven Directors ("FOR")
Ratification of Appointment of KPMG LLP as Independent Registered Public Accounting Firm ("FOR")
Advisory Resolution to Approve Compensation of Named Executive Officers ("FOR")
Transact Other Business That May Properly Come Before the Meeting, Or Any Postponement or Adjournment Thereof
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1001 17th Street, Suite 500
Denver, Colorado 80202
(866) 777-2673
PROXY STATEMENT
GENERAL INFORMATION REGARDING SOLICITATION AND VOTING
General
This proxy statement will first be made available to stockholders on or about March 26, 2015. This proxy statement is furnished
by the Board of Directors (the "Board") in connection with its solicitation of proxies for CoreSite Realty Corporation's 2015 Annual Meeting of Stockholders (the "Annual Meeting") to be held on
Wednesday, May 20, 2015, at 1:30 p.m., Mountain Time, at the Four Seasons Hotel Denver, 1111 14th Street, Denver, Colorado 80202, and at any postponements or adjournments thereof.
Unless the context requires otherwise, references in this proxy statement to "CoreSite," "we," "our," "us" and "our company" refer to CoreSite Realty Corporation, a Maryland corporation, together with
its consolidated subsidiaries, including CoreSite, L.P., a Delaware limited partnership of which CoreSite Realty Corporation is the sole general partner (our "Operating Partnership").
Pursuant
to rules adopted by the U.S. Securities and Exchange Commission ("SEC"), we have elected to provide access to our proxy materials via the Internet. Accordingly, we are sending a
Notice of Internet Availability of Proxy Materials (the "Notice") to our stockholders entitled to notice of and to vote at the Annual Meeting and at any postponement or adjournment thereof. The Notice
is being mailed to stockholders on or about March 31, 2015. Stockholders will have the ability to access the proxy materials at www.proxyvote.com or request to receive a printed set of the
proxy materials by mail or an electronic set of materials by email. Instructions on how to access the proxy materials over the Internet or to request a printed copy may be found in the Notice. In
addition, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. We believe these rules allow us to provide our stockholders with
the information they need, while lowering the cost of delivery and reducing the environmental impact of our Annual Meeting.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2015 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 20, 2015. Our
Proxy Statement and 2014 Annual Report are available at www.proxyvote.com.
Certain
of our directors, officers and employees may solicit proxies by telephone, personal contact, or other means of communication. They will not receive any additional compensation
for these activities. We also have retained Alliance Advisors to assist in the solicitation of proxies for an estimated fee of $5,500, plus reimbursement of reasonable expenses. In addition, brokers,
banks and other persons holding common stock on behalf of beneficial owners will be requested to solicit proxies or authorizations from beneficial owners. We will bear all costs incurred in connection
with the preparation, assembly and mailing of the proxy materials and the solicitation of proxies and will reimburse brokers, banks and other nominees, fiduciaries and custodians for reasonable
expenses incurred by them in forwarding proxy materials to beneficial owners of our common stock.
No
person is authorized to give any information or to make any representation not contained in this proxy statement, and, if given or made, you should not rely on that information or
representation
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as
having been authorized by us. The delivery of this proxy statement does not imply that the information herein has remained unchanged since the date of this proxy statement.
Purposes of the Annual Meeting
The purposes of the Annual Meeting are to: (1) consider and vote upon the election of seven members to the Board to serve until
the next meeting of stockholders and until their successors are duly elected and qualify (Proposal One); (2) consider and vote upon the ratification of the appointment of KPMG LLP as our
independent registered public accounting firm for the fiscal year ending December 31, 2015 (Proposal Two); (3) consider and vote upon the advisory resolution to approve the compensation
of our named executive officers (Proposal Three); and (4) transact such other business as may properly come before the Annual Meeting or any postponement or adjournment thereof. Our Board knows
of no other matters to be brought before the Annual Meeting.
Stockholders Entitled to Vote
The close of business on March 20, 2015, has been fixed as the record date (the "Record Date") for the determination of
stockholders entitled to receive notice of and to vote at the Annual Meeting. Only stockholders of record as of the close of business on the Record Date are entitled to receive notice of, to attend,
and to vote at the Annual Meeting. On the Record Date, our outstanding voting securities consisted of 22,020,222 shares of common stock. Each share of common stock is entitled to one vote. Votes may
not be cumulated in the election of directors.
How to Vote
If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust
Company, LLC, you are considered the stockholder of record with respect to those shares, and the Notice was sent directly to you by us. You may authorize your proxy via the Internet by
following the instructions provided in the Notice. If you request printed copies of the proxy materials by mail, you may also authorize your proxy by filling out the proxy card included with the
materials or by calling the toll-free number found on the proxy card.
If
your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in "street name," and the
Notice was forwarded to you by that organization. The organization holding your account is considered the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you
have the right to instruct that organization on how to vote the shares held in your account. Those instructions are contained in a "vote instruction form." If you request printed copies of the proxy
materials by mail, you will receive a vote instruction form. You should instruct your broker or nominee how to vote your shares by following the voting instructions provided by your broker or nominee.
In
addition, you may vote in person at the Annual Meeting as described below under the heading "Attending and Voting at the Annual Meeting."
Attending and Voting at the Annual Meeting
Only stockholders as of the Record Date, or their duly appointed proxies, may attend the Annual Meeting. Stockholders may be asked to
present valid picture identification such as a driver's license or passport and proof of stock ownership as of the Record Date. If you are not a stockholder of record but hold shares through a broker
or nominee (i.e., in street name), you should provide proof of beneficial ownership on the Record Date, such as your most recent account statement, a copy of the voting instruction card
provided by your broker, trustee or nominee, or other similar evidence of ownership. The use of cell phones, smartphones, pagers, recording and photographic equipment and/or computers is not permitted
in the meeting room at the Annual Meeting.
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Shares
held in your name as the stockholder of record may be voted in person at the Annual Meeting. If you are not a stockholder of record but hold shares through a broker or nominee
(i.e., in street name), you may vote your shares in person only if you obtain a legal proxy from the broker, trustee or nominee that holds your shares authorizing you to vote the shares. Even
if you plan to attend the Annual Meeting, we recommend that you also authorize your proxy or submit voting instructions prior to the meeting as described below so that your vote will be counted if you
later decide not to attend the meeting.
Voting Without Attending the Annual Meeting
Whether you hold shares directly as the stockholder of record or beneficially in street name, you may direct how your shares are voted
without attending the Annual Meeting. If you are a stockholder of record, you may authorize your proxy to vote your shares, either by mail or via the Internet, or by calling the toll-free number found
on the Notice and the proxy card.
Proxies
authorized properly via one of the methods discussed above will be voted in accordance with the instructions contained therein. If the proxy is authorized but voting directions
are not made, the
proxy will be voted "FOR" each of the seven director nominees, "FOR" the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year
ending December 31, 2015, "FOR" the advisory resolution to approve the compensation of our named executive officers as described in this proxy statement and in such manner as the proxy holders
named on the proxy (the "Proxy Agents"), in their discretion, determine upon such other business as may properly come before the Annual Meeting or any postponement or adjournment thereof.
If
your shares of common stock are held through a broker, bank or other nominee (collectively referred to as "brokers"), under applicable rules of the New York Stock Exchange (the
"NYSE") (the exchange on which our common stock is traded), the brokers will vote your shares according to the specific instructions they receive from you. If a broker that holds shares of our common
stock for a beneficial owner does not receive voting instructions from that owner, the broker may vote on the proposal if it is considered a "routine" matter under the NYSE's rules, including this
year's ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2015, or leave that owner's shares
unvoted. Pursuant to the rules of the NYSE, the election of directors and the vote on the advisory resolution to approve the compensation of our named executive officers are not "routine" matters as
to which brokerage firms may vote in their discretion on behalf of clients who have not furnished voting instructions.
The
proposals set forth in this proxy statement constitute the only business that the Board intends to present at the Annual Meeting. The proxy does, however, confer discretionary
authority upon the Proxy Agents or their substitutes, to vote on any other business that may properly come before the Annual Meeting. If the Annual Meeting is postponed or adjourned, the Proxy Agents
can vote your shares on the new meeting date as well, unless you have revoked your proxy.
Quorum
Holders of a majority of our outstanding common stock entitled to vote must be present, in person or by proxy, at the Annual Meeting
for a quorum to exist. If the shares present in person or by proxy at the Annual Meeting do not constitute a quorum, the Annual Meeting may be adjourned by the chairman of the Annual Meeting to a date
not more than 120 days after the Record Date without notice other than announcement at the Annual Meeting. Shares that are voted "FOR," "AGAINST," "ABSTAIN," or, with respect to the election of
directors, "WITHHOLD," will be treated as being present at the Annual Meeting for purposes of establishing a quorum. Accordingly, if you are a stockholder of record as of the Record Date and have
returned a valid proxy or attend the Annual Meeting in person, your shares will be counted for the purpose of determining whether there is a
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quorum,
even if you wish to abstain from voting on some or all matters at the Annual Meeting. "Broker non-votes" will also be counted as present for purposes of determining the presence of a quorum. A
broker non-vote occurs when a bank, broker or other person holding shares for a beneficial owner does not vote on a particular proposal because that holder does not have discretionary voting power for
that particular item and has not received voting instructions from the beneficial owner.
Required Vote
With respect to Proposal One, you may vote "FOR" all nominees, "WITHHOLD" your vote as to all nominees, or "FOR" all nominees except
those specific nominees from whom you "WITHHOLD" your vote. A properly executed proxy marked "WITHHOLD" with respect to the election of one or more directors will not be voted with respect to the
director or directors indicated. Members of the Board are elected by a plurality of votes cast, in person or by proxy, at the Annual Meeting. This means that the seven nominees who receive the
greatest number of "FOR" votes cast will be elected. Cumulative voting is not permitted. Neither broker non-votes nor votes marked "WITHHOLD" will have an effect with respect to the election of any
nominee.
You
may vote "FOR," "AGAINST" or "ABSTAIN" on Proposals Two and Three. To be approved, each of Proposals Two and Three must receive the affirmative vote of a majority of the votes cast,
in person or by proxy, at the Annual Meeting on the proposal. Abstentions and broker non-votes, if any, will not be counted as votes cast on Proposals Two and Three and will have no effect on the
result of this vote.
Board Recommendation
The Board recommends that you vote as follows:
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- "FOR" each of the seven director nominees set forth in Proposal One;
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- "FOR" Proposal Two, relating to the ratification of KPMG LLP as our independent registered public accounting firm for the
fiscal year ending December 31, 2015; and
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- "FOR" Proposal Three, relating to the advisory resolution to approve the compensation of our named executive officers.
Any
properly authorized proxy as to which no instructions are given will be voted in accordance with the foregoing recommendations.
Revocation of Proxies
You may revoke your proxy at any time prior to it being exercised by (i) delivering a written notice of revocation to our
Secretary, (ii) filing a duly executed proxy bearing a later date with us or (iii) attending the Annual Meeting and voting in person. Attendance at the Annual Meeting will not, by
itself, revoke a duly executed proxy.
Voting Results
The voting results will be tallied by the inspector of election appointed for the meeting and filed with the SEC in a Current Report on
Form 8-K within four business days following the Annual Meeting.
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PROPOSAL ONE: ELECTION OF DIRECTORS
Currently, there are seven directors on our Board. The seven persons named below, each of whom currently serves on our Board, have been
recommended by our Nominating/Corporate Governance Committee and nominated by our Board to serve on the Board until our 2016 Annual Meeting of Stockholders and until their respective successors are
elected and qualify. The Board has no reason to believe that any of the persons named below as a nominee for our Board will be unable, or will decline, to serve as a member of the Board if elected.
Each of the nominees has consented to being named in this proxy statement. In addition, the Board has determined that all of our directors, other than Mr. Ray, are independent under applicable
SEC and NYSE rules. In making their independence determination, the Board considered the relationship of Messrs. Attwood and Stuckey with The Carlyle Group L.P. ("Carlyle"), the majority
holder of our Operating Partnership. A plurality of votes cast is necessary for the election of a director. There is no cumulative voting in the election of directors.
The
Nominating/Corporate Governance Committee has not set forth minimum qualifications for Board nominees. However, pursuant to its charter, in identifying candidates to recommend for
election to the Board, the Nominating/Corporate Governance Committee considers the following criteria:
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- personal and professional integrity, ethics and values;
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- experience in corporate governance, including as an officer, board member or senior executive or as a former officer, board member or
senior executive of a publicly held company, and a general understanding of marketing, finance and other elements relevant to the success of a publicly traded company in today's business environment;
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- experience in our industry and taking into account the interests of our various stockholders;
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- experience as a board member of another publicly held company;
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- academic expertise in an area of our operations;
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- diversity of experience, profession, expertise, skill and background (including with respect to race and gender), both on an
individual level and in relation to the Board as a whole;
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- practical and mature business judgment, including the ability to make independent analytical inquiries; and
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- the nature of and time involved in a director's service on other boards of directors and/or committees.
Although
the Board does not have a formal policy specifying how diversity of background and personal experience should be applied in identifying or evaluating director candidates, to
help ensure that the Board remains aware of and responsive to the needs and interests of our customers, stockholders, employees and other stakeholders, the Board believes it is important to identify
otherwise qualified director candidates that would increase the gender, racial, ethnic and/or cultural diversity of the Board. Accordingly, the Nominating/Corporate Governance Committee makes an
effort when nominating new directors to ensure that the composition of the Board reflects a broad diversity of experience, profession, expertise, skill, and background, including gender, racial,
ethnic, and/or cultural diversity. The Nominating/Corporate Governance Committee does not assign a specific weight to the various factors it considers in evaluating potential new candidates to the
Board, and no particular criteria is necessarily applicable to all prospective nominees. In the evaluation of potential new candidates, the Nominating/Corporate Governance Committee considers each
candidate's qualifications in light of the then-current mix of Board attributes, including diversity. Continuing directors are evaluated by the Nominating/Corporate Governance Committee in the same
way, and including the continuing director's past contributions to the Board in such evaluation.
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In
identifying potential candidates for the Board, other than the director candidates nominated by Carlyle, the Nominating/Corporate Governance Committee generally relies on a variety of
resources to identify potential candidates, which, among other things and depending on the circumstances, may include its and the Board's network of contacts, corporate search resources, and, if the
Nominating/Corporate Governance Committee deems appropriate, a professional search firm. By utilizing a broad variety of resources as deemed appropriate by the Nominating/Corporate Governance
Committee in light of the then-current mix of Board attributes and any previously identified potential candidates, the Nominating/Corporate Governance Committee believes it will be able to identify,
evaluate and consider a diverse range of qualified candidates, including candidates that increase the gender, racial and/or cultural diversity of the Board.
Under
the partnership agreement governing our Operating Partnership (the "Operating Partnership Agreement"), Carlyle, which directly or indirectly holds 53.4% ownership of our Operating
Partnership, is currently entitled to nominate up to two directors for election to our Board. (See "Information about our Board of Directors and its Committees" for more information about the
circumstances under which Carlyle is entitled to appoint nominees to our Board.) Carlyle has exercised this right by nominating James A. Attwood, Jr. and Robert G. Stuckey for election at the Annual
Meeting.
Nominees for Election as Directors
The table below sets forth the names and biographical information of each of the directors nominated for election at the Annual
Meeting.
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Name
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Position With the Company |
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Age as of
the Annual
Meeting |
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Director
Since |
Robert G. Stuckey |
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Director and Chairman of the Board |
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53 |
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2010 |
Thomas M. Ray |
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Director and President and Chief Executive Officer |
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52 |
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2010 |
James A. Attwood, Jr. |
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Director |
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57 |
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2010 |
Michael R. Koehler |
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Director |
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48 |
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2010 |
Paul E. Szurek |
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Director |
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54 |
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2010 |
J. David Thompson |
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Director |
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48 |
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2010 |
David A. Wilson |
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Director |
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73 |
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2010 |
Directors
Robert G. Stuckey has served as a director since September 2010. Mr. Stuckey is
a Managing Director and Fund Head, US Real Estate, at Carlyle. Prior to joining Carlyle in 1998, Mr. Stuckey was Chief Investment Officer at CarrAmerica Realty Corporation ("CarrAmerica"), a
real estate investment trust ("REIT"). Prior to that, he was Senior Vice President of Prologis, Inc. ("Prologis"), a REIT which is an owner, operator and developer of industrial real estate,
and Chief Financial Officer for Trammel Crow Company, N.E., a developer of, and investor in, commercial real estate. Mr. Stuckey was twice an Academic All-American in football at the University
of Nebraska and received an M.B.A. from Harvard University. In determining Mr. Stuckey's qualifications to serve on our Board, the Board considered, among other things, Mr. Stuckey's
significant experience concerning the acquisition, disposition, financing, operations and market opportunities of data center properties and private and publicly traded REITs, which provides us with
valuable insight into commercial real estate, REIT and data center industry trends that affect our business.
Thomas M. Ray is our President and Chief Executive Officer and a member of our Board since September 2010. Mr. Ray has been
responsible for our company's activities since its founding in 2001. From 1998 to September 2010, Mr. Ray served in roles of increasing responsibility, including Managing
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Director,
at Carlyle, focusing upon opportunities for the firm's real estate funds and leading those funds' activities in the data center sector. He brings over 25 years of experience making
and managing investments and businesses throughout the U.S., Europe and Asia. Prior to joining Carlyle, Mr. Ray held management-level roles at companies such as Prologis, CarrAmerica and
predecessors to Archstone-Smith, an apartment REIT. Prior thereto, he practiced real estate and transactional law. Mr. Ray received his M.B.A. from the University of Texas at Austin Graduate
School of Business, where he was a Longhorn Scholar. He also received a J.D. from the University of Colorado at Boulder School of Law and a B.S. in Business Administration with emphasis in Finance
from the University of Denver, where he was a Hornbeck Scholar. In determining Mr. Ray's qualifications to serve on our Board, the Board considered, among other things, Mr. Ray's
significant experience with publicly traded REITs and in the acquisition, finance and operation of commercial real estate, as well as over a decade of experience in the data center industry, which
provide us with insight into commercial real estate, REIT and data center trends that affect our business.
James A. Attwood, Jr. has served as a director since September 2010. Mr. Attwood is a Managing Director and Head of the Global
Telecommunications and Media Group at Carlyle. Prior to joining
Carlyle in 2000, Mr. Attwood served as Executive Vice President for Strategy, Development and Planning at Verizon Communications, Inc. ("Verizon"), a telecommunications provider, and GTE
Corporation (prior to its merger with Bell Atlantic to form Verizon). Prior to his four years at Verizon and GTE Corporation, Mr. Attwood served as an investment banker at Goldman,
Sachs & Co. for 11 years. Mr. Attwood graduated summa cum laude from Yale University with a B.A. in applied mathematics and an M.A. in statistics. He also received J.D. and
M.B.A. degrees from Harvard University. Mr. Attwood currently serves as a member of the boards of directors of Syniverse Holdings, Inc., a provider of business and technology services
for the mobile telecommunications industry, Nielsen Holdings N.V., a global information and measurement company, and Getty Images Inc., a global creator and distributor of still imagery,
video and multimedia products, which is privately held. Mr. Attwood has gained significant knowledge of the telecommunications industry through his work with Verizon and Carlyle. In determining
Mr. Attwood's qualifications to serve on our Board, the Board considered, among other things, Mr. Attwood's private equity experience, together with the experience gained by having
served as an officer and on the boards of directors of various telecommunications companies, which provide us with a valuable perspective in monitoring and evaluating our business.
Michael R. Koehler has served as a director since September 2010. Mr. Koehler currently serves as Senior Vice President, Global
Services, of EMC Corporation, a provider of IT consulting services and hardware, a position he has held since August 2011. During 2008 and 2009, Mr. Koehler served as Senior Vice President,
Americas Region, of Electronic Data Systems Corporation ("EDS"), a division of the Hewlett-Packard Company ("HP"). EDS, a global provider of information technology and business processing outsourcing
services, was acquired by HP in 2008. Prior to HP's acquisition of EDS, Mr. Koehler served as Executive Vice President, Global ITO Services and as Senior Vice President, Infrastructure
Technology and Business Process Outsourcing at EDS. During 2007, Mr. Koehler served as Regional Senior Vice President, Europe, Middle East and Africa Operations at EDS, and, from 2006 to 2008,
as Enterprise Client Executive, Navy Marine Corps Intranet Account at EDS. From 2004 to 2006, Mr. Koehler served as Chief Operating Officer of The Feld Group, a management information
technology consulting firm that was acquired by EDS in 2004. From 1994 to 2001, he held management positions of increasingly greater responsibility at The Feld Group. Mr. Koehler received his
B.S. in Industrial Engineering from Texas Tech University. In determining Mr. Koehler's qualifications to serve on our Board, the Board considered, among other things, Mr. Koehler's
significant experience in the technology consulting and outsourcing industries and extensive operational and strategic planning experience in complex global companies, which provide us with valuable
insight into the technology trends that affect our business.
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Paul E. Szurek has served as a director since September 2010. Mr. Szurek has been Chief Financial Officer of Biltmore
Farms, LLC, a residential and commercial real estate development and operating company, since 2003. Prior to joining Biltmore Farms, LLC, Mr. Szurek served as Chief Financial
Officer of Security Capital Group Incorporated, a publicly traded real estate investment, development and operating company with extensive REIT engagement. Mr. Szurek is currently a director of
the Charlotte, North Carolina branch of the Federal Reserve Bank of Richmond. He has also previously served as a director to two publicly traded real estate companies, Regency Centers and Security
Capital U.S. Realty. Mr. Szurek received a J.D. with honors from Harvard Law School and a B.A. in
Government, magna cum laude, from the University of Texas at Austin. In determining Mr. Szurek's qualifications to serve on our Board, the Board considered, among other things,
Mr. Szurek's significant experience concerning the acquisition, disposition, financing, operations and market opportunities of private and publicly traded REITs, which provide us with valuable
insight into REIT-industry trends that affect our business.
J. David Thompson has served as a director since September 2010. Mr. Thompson has been Executive Vice President and Chief
Information Officer of The Western Union Company, a global payment services company, since April 2012. From 2006 to April 2012, Mr. Thompson was Group President of the Symantec Services Group
and Chief Information Officer of Symantec Corporation, a global provider of security, storage, and systems management solutions. From 2004 to 2006, Mr. Thompson served as Senior Vice President
and Chief Information Officer for Oracle Corporation. Mr. Thompson was Senior Vice President and Chief Information Officer at PeopleSoft, Inc. from 1998 to 2005, prior to its acquisition
by Oracle Corporation. Mr. Thompson began his career as an officer in the U.S. Air Force as an Intelligence Systems Officer. Mr. Thompson studied computer science at American University.
In determining Mr. Thompson's qualifications to serve on our Board, the Board considered, among other things, Mr. Thompson's significant experience in the technology industry and
extensive operational experience in information technology systems optimization, which provide us with valuable insights into the information technology trends that affect our business.
David A. Wilson has served as a director since September 2010. Mr. Wilson served as President and Chief Executive Officer of the
Graduate Management Admission Council (the "Council") from 1995 until his retirement in December 2013. The Council is a $100.0 million enterprise that is the owner of the Graduate Management
Admission Test, the GMAT. Prior to 1995, he was a Managing Partner and National Director for Professional Development at Ernst & Young LLP, a public accounting firm. From 1968 to 1978,
Mr. Wilson held faculty positions at the University of Texas at Austin, where he was awarded tenure, and at Harvard Business School. Mr. Wilson completed his undergraduate studies at
Queen's University in Canada, received his M.B.A. at the University of California, Berkeley, and received his doctorate at the University of Illinois. He is a Chartered Accountant in Canada and a
Certified Public Accountant in the United States. Mr. Wilson served on the board of directors of Laureate Education, Inc. ("Laureate"), a company which provides access to high-quality,
innovative institutions of higher education, from 2002 to 2007, and of Terra Industries, Inc. ("Terra"), a producer and marketer of nitrogen products for the agricultural and industrial
markets, from 2009 to 2010. At Laureate, he chaired the Audit Committee and served as a member of the Nominating and Governance Committee and the Conflicts Committee. He served on the Audit Committee
of Terra. He has served on the Worldwide Board of Junior Achievement, the Conseil d'Administration de la Confrérie de la Chaîne des Rôtisseurs (Paris) and
The Wolf Trap Foundation. He presently serves on the board of directors of Barnes and Noble, Inc., a book retailer and content, commerce and technology company, and as chair of its Audit
Committee. In determining Mr. Wilson's qualifications to serve on our Board, the Board considered, among other things, Mr. Wilson's significant industry experience in the areas of
accounting policy, internal controls and risk management.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ELECTION OF EACH OF MESSRS. STUCKEY, RAY, ATTWOOD, KOEHLER, SZUREK, THOMPSON AND WILSON.
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PROPOSAL TWO: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of our Board, which is composed entirely of independent directors, has appointed KPMG LLP as our company's
independent registered public accounting firm for the fiscal year ending December 31, 2015. KPMG LLP has been our independent registered public accounting firm since our initial public
offering in 2010. Although stockholder approval is not required, we desire to obtain from our stockholders an indication of their approval or disapproval of the Audit Committee's action in appointing
KPMG LLP as the independent registered public accounting firm of our company for 2015. If our stockholders do not ratify and approve this appointment, the appointment will be reconsidered by
the Audit Committee and our Board.
A
representative of KPMG LLP will be present at our Annual Meeting, where the representative will be afforded an opportunity to make a statement and to respond to appropriate
questions.
The
affirmative vote of a majority of all votes cast on the proposal is necessary to ratify the appointment of KPMG LLP as our independent registered public accounting firm for
the fiscal year ending December 31, 2015.
Principal Accountant Fees and Services
The following table summarizes the fees billed by KPMG LLP for professional services rendered to us for fiscal years 2014 and
2013.
|
|
|
|
|
|
|
|
|
|
2014 |
|
2013 |
|
Audit Fees |
|
$ |
791,000 |
|
$ |
737,000 |
|
Audit-Related Fees |
|
|
5,000 |
|
|
5,000 |
|
Tax Fees |
|
|
|
|
|
|
|
All Other Fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
796,000 |
|
$ |
742,000 |
|
Audit Fees. Audit fees consisted of aggregate fees billed for professional services rendered for the audit of our
consolidated annual financial statements, review of interim consolidated financial statements, consultations on accounting matters directly related to the audit, or services that are normally provided
by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements.
Audit-Related Fees. Audit-related fees consists of aggregate fees billed for accounting consultations and other services
that were reasonably related to the performance of audits or reviews of our financial statements and were not reported above under "Audit Fees." The amount for 2014 related to services provided in
connection with our Registration Statement on Form S-3, and the amount for 2013 related to services provided in connection with registering shares under our equity compensation plan.
Pre-Approval Policies and Procedures
The Audit Committee pre-approves all audit and non-audit services provided by our independent registered public accounting firm.
Requests to provide services requiring pre-approval by the Audit Committee are submitted to the Audit Committee with a description of the services to be provided and an estimate of the fees to be
charged in connection with such services. The Audit Committee pre-approved all services performed by, and audits fees paid to, our independent registered accounting firm during fiscal years 2013 and
2014.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2015.
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AUDIT COMMITTEE REPORT
The Audit Committee (the "Audit Committee") of the Board of Directors (the "Board") of CoreSite Realty Corporation (the "Company")
assists the Board with its oversight responsibilities regarding the Company's financial reporting process. The Company's management is responsible for the preparation, presentation and integrity of
the Company's financial statements and the reporting process, including the Company's accounting policies, internal audit function, internal control over financial reporting and disclosure controls
and procedures. KPMG LLP, the Company's independent registered public accounting firm, is responsible for performing an audit of the Company's financial statements.
With
regard to the fiscal year ended December 31, 2014, the Audit Committee (i) reviewed and discussed with management our audited consolidated financial statements as of
December 31, 2014, and
for the year then ended; (ii) discussed with KPMG LLP, the independent auditors, the matters required by PCAOB AU Section 380, Communications with Audit
Committees; (iii) received the written disclosures and the letter from KPMG LLP required by applicable requirements of the PCAOB regarding KPMG LLP's
communications with the Audit Committee regarding independence; and (iv) discussed with KPMG LLP their independence.
Based
on the review and discussions described above, the Audit Committee recommended to our Board that our audited financial statements be included in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2014, for filing with the Securities and Exchange Commission.
The
Audit Committee:
David
A. Wilson
Paul E. Szurek
Michael R. Koehler
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PROPOSAL THREE: ADVISORY RESOLUTION TO APPROVE THE COMPENSATION OF OUR
NAMED EXECUTIVE OFFICERS
Pursuant to Section 14A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), our stockholders are entitled
to cast an advisory vote at the Annual Meeting to approve the compensation of our named executive officers, as disclosed pursuant to the SEC's compensation disclosure rules, including the
"Compensation Discussion and Analysis" section of this proxy statement, or "CD&A," the compensation tables and accompanying narrative disclosures. While this stockholder vote on executive compensation
is an advisory vote that is not binding on the company or the Board, we value the opinions of our stockholders and will consider the outcome of the vote when making future compensation decisions. The
vote on the advisory resolution to approve the compensation of our named executive officers requires the affirmative vote of a majority of all the votes cast on the proposal. Our current policy is to
provide stockholders with an opportunity to
approve the compensation of our named executive officers each year at the annual meeting of stockholders until the next required stockholder vote on the frequency of such votes. We expect that the
next such frequency vote will occur at the 2017 annual meeting of stockholders.
As
described more fully in the CD&A, our executive compensation program is designed to attract, motivate and retain individuals with the skills required to formulate and drive our
strategic direction and achieve the annual and long-term performance necessary to create stockholder value. The program also seeks to align executive compensation with stockholder value on an annual
and long-term basis through a combination of base pay, annual incentives and long-term incentives. Our practice of placing a significant portion of each executive's compensation at risk demonstrates
this pay-for-performance philosophy.
We
actively review and assess our executive compensation program in light of the industry in which we operate, the marketplace for executive talent in which we compete, and evolving
compensation governance and best practices. We are focused on compensating our executive officers fairly and in a manner that promotes our compensation philosophy and is consistent with our annual and
longer-term performance. Specifically, our compensation program for executive officers focuses on the following principal objectives:
-
- align executive compensation with stockholder interests;
-
- attract and retain talented personnel by offering competitive compensation packages;
-
- motivate employees to achieve strategic and tactical corporate objectives and the profitable growth of our company; and
-
- reward employees for individual, functional and corporate performance.
Our
Board believes that our executive compensation program satisfies these objectives, properly aligns the interests of our executive officers with those of our stockholders, and is
worthy of stockholder support. In determining whether to approve this proposal, we believe that stockholders should consider the following:
-
- Independent Compensation Committee. Executive
compensation is reviewed and established by a Compensation Committee of the Board consisting solely of independent directors. The Compensation Committee meets in executive session in determining
annual compensation. The Compensation Committee receives data, analysis and input from an independent compensation consultant that is not permitted to perform any additional services for CoreSite
management without the Compensation Committee's approval.
-
- Performance-Based Incentive Compensation. Elements of
performance-based, incentive compensation are largely aligned with financial and operational objectives established in the Board-approved annual operating plan.
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-
- Limited Perquisites. Our executive officers do not
receive any perquisites other than those that are offered to non-executive, salaried employees.
-
- Equity Plans. Grants under our equity plans generally
include time-based and performance-based vesting periods, and our plan prohibits repricing or exchange of outstanding option awards without consent of stockholders, and requires that options be
granted with exercise prices at fair market value.
Accordingly,
we ask our stockholders to vote "FOR" the following resolution at the Annual Meeting:
"RESOLVED,
that the stockholders approve, on an advisory basis, the compensation of our named executive officers, as disclosed pursuant to Item 402 of Regulation S-K,
including the Compensation Discussion and Analysis, the compensation tables and narrative discussion in this proxy statement."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADVISORY RESOLUTION TO
APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
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INFORMATION ABOUT OUR BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Our Board currently consists of seven directors. Our charter and bylaws provide that the number of directors constituting our Board may
be increased or decreased by a majority vote of our entire Board, provided the number of directors may not be decreased to fewer than one, the minimum number required under the Maryland General
Corporate Law nor, unless our bylaws are amended, more than 15 directors.
Our
bylaws require that nominees for director, whether for election by the stockholders or by the Board, shall include such individuals as are entitled to be nominated pursuant to the
Operating Partnership Agreement. The Operating Partnership Agreement provides that, for so long as the number of Operating Partnership units and shares of common stock held collectively by the real
estate funds affiliated with Carlyle (the "Funds") is equal to or greater than 50% of the total number of shares of outstanding common stock (assuming all Operating Partnership units are exchanged for
common stock), certain of the Funds shall have the right to nominate the number of directors that is one less than the lowest whole number that would exceed one-third of the directors, but not less
than one director. With the Board having seven members, the Funds presently are entitled to nominate two directors. Such rights to nominate directors are subject to decrease as follows (in each case
assuming all Operating Partnership units are exchanged for common stock):
-
- If the Funds collectively own less than 50% but at least 10% of the outstanding common stock, then the Funds will be entitled to
nominate the number of directors that is one less than the lowest whole number that would exceed 20% of the directors, but not less than one director. Assuming that the Board still had seven
directors, then the Funds would be entitled to nominate only one director under this scenario.
-
- If the Funds collectively own less than 10% of the outstanding common stock, then the Funds will no longer be entitled to nominate any
directors.
During
2014, the Board held six meetings. Each member of the Board attended or participated in 75% or more of the aggregate of (i) the total number of meetings of the Board (held
during the period for which such person has been a director) and (ii) the total number of meetings held by all committees of the Board on which such person served (during the periods that such
person served).
There
are no family relationships among our executive officers and directors.
Board Leadership Structure
The Board does not have a policy regarding separation of the roles of Chief Executive Officer and Chairman of the Board. The Board
believes it is in our best interests to make that determination based on current circumstances. The Board has determined that an independent director serving as Chairman is in our best interests at
this time. The current Chairman of the Board is Robert G. Stuckey. This structure ensures a greater role of independent directors in the active oversight of our business, including risk management
oversight, and in setting agendas and establishing Board priorities and procedures. This structure also allows the Chief Executive Officer to focus to a greater extent on the management of our
day-to-day operations. In addition to an independent chairman, our bylaws also require us to have a lead independent director, who may preside over meetings of independent directors in the event of a
potential conflict of interest that precludes our chairman from participating. The current lead independent director is Paul E. Szurek.
Executive Sessions
Our non-employee directors met in a special executive session without management at each regularly scheduled Board meeting in 2014. Our
non-employee directors also held a separate meeting of non-employee directors in December 2014. Robert G. Stuckey, as Chairman of the Board, chaired the non-employee director executive sessions held
during 2014 and generally chairs any executive
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sessions
held by non-employee directors. The Board expects to continue to conduct an executive session limited to non-employee directors at least annually and our non-employee directors may schedule
additional executive sessions in their discretion.
Committees of the Board of Directors
Our Board has a standing Audit Committee, Compensation Committee and Nominating/Corporate Governance Committee. Each of these
committees must be composed exclusively of independent directors. The Audit Committee and the Nominating/Corporate Governance Committee must each have at least three directors; the Compensation
Committee must have at least two directors. Our Board may from time to time establish other committees to facilitate the management of our company. The Operating Partnership Agreement currently
requires that, so long as the Funds collectively own at least 10% of the outstanding common stock (assuming all Operating Partnership units are exchanged for common stock), the Funds shall have the
right to have at least one of their nominees on each committee, unless prohibited by law or the rules of the NYSE, other than any committee whose purpose is to evaluate or negotiate any transaction
with the Funds. The Funds have exercised this right by requesting that Mr. Stuckey be appointed to the Nominating/Corporate Governance Committee, but have not requested that either of its two
nominees be appointed to either the Audit Committee or the Compensation Committee.
The
following table is a summary of our committee structure and members on each of our committees:
The
Audit Committee, Compensation Committee and Nominating/Corporate Governance Committee each operate under written charters adopted by the Board. These charters are available on our
website at www.coresite.com.
The Audit Committee assists the Board with its oversight responsibilities regarding the integrity of our financial statements, the
qualifications and independence of our independent auditor and the performance of our internal audit function and independent auditors. The Audit Committee selects, appoints, assists and meets with
the independent auditor, oversees each annual audit and quarterly review, establishes and maintains our internal audit controls and prepares an annual report for inclusion in our annual proxy
statement pursuant to federal securities laws. The Audit Committee also works with management regarding risk assessment and risk management (including cybersecurity and other risks relevant to our
computerized information system controls and security), and discusses with management our leverage and any issues that arise with respect to our leverage. The Board has determined that each member of
the Audit Committee is "financially literate" as defined under the NYSE rules, that Mr. Wilson and Mr. Szurek each qualify as an "Audit Committee Financial Expert"
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as
defined under SEC rules, and that each member of the Audit Committee is independent under applicable NYSE and SEC rules for purposes of membership on the Audit Committee. The Audit Committee met
nine times in 2014.
The Nominating/Corporate Governance Committee assists the Board in identifying qualified individuals to become directors, makes
recommendations to the Board concerning the size, structure and composition of the Board and its committees, monitors the process to assess the Board's effectiveness and is primarily responsible for
oversight of corporate governance, including implementing our Corporate Governance Guidelines. In evaluating potential nominees to the Board, the Nominating/Corporate Governance Committee considers,
among other things, independence, character, ability to exercise sound judgment, demonstrated leadership, skills, including financial literacy, and experience in the context of the needs of the Board,
as well as criteria for Board nominees set forth under "Proposal One: Election of Directors" above. The Nominating/Corporate Governance Committee considers candidates proposed by stockholders and
evaluates them using the same criteria as for other candidates. The Nominating/Corporate Governance Committee considers all recommended director candidates submitted to it in accordance with the
established procedures, though it will only recommend to the Board as potential nominees those candidates it believes are most qualified. However, the Nominating/Corporate Governance Committee will
not consider any director candidate if the candidate's candidacy or, if elected, Board membership, would violate controlling state or federal law.
The
Board has determined that each member of the Nominating/Corporate Governance Committee is independent under applicable NYSE rules. The Nominating/Corporate Governance Committee met
four times in 2014.
At
least annually, the Nominating/Corporate Governance Committee evaluates the performance of each current director and considers the results of such evaluation when determining whether
to recommend the nomination of such director for an additional term. At an appropriate time prior to each annual meeting at which directors are to be elected or re-elected, the Nominating/Corporate
Governance Committee recommends to the Board for nomination by the Board such candidates as the Nominating/Corporate Governance Committee, in the exercise of its judgment, has found to be well
qualified and willing and available to serve.
At
an appropriate time after a vacancy arises on the Board or a director advises the Board of his or her intention to resign, the Nominating/Corporate Governance Committee will recommend
to the Board for election by the Board to fill such vacancy, such prospective member of the Board as the Nominating/Corporate Governance Committee, in the exercise of its judgment, has found to be
well qualified and willing and available to serve. In determining whether a prospective member is qualified to serve, the Nominating/Corporate Governance Committee will consider the factors listed
above.
The
foregoing notwithstanding, if we are legally required by contract or otherwise to permit a third party to designate one or more of the director nominees to be elected (for example,
pursuant to rights
contained in the Operating Partnership Agreement), then the nomination or election of such directors will be governed by such requirements.
The Compensation Committee reviews and approves the compensation and benefits of our executive officers, administers and makes
recommendations to the Board regarding our compensation and stock incentive plans, produces an annual report on executive compensation for inclusion in our annual proxy statement and publishes an
annual committee report for our stockholders. The Board has determined that each member of the Compensation Committee is independent under applicable NYSE and SEC rules for purposes of membership on
the Compensation Committee. The Compensation
15
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Committee
met four times in 2014. For a description of the Compensation Committee's processes and procedures, including the roles of our executive officers and independent compensation consultants in
the Compensation Committee's decision-making process, see the section titled "Compensation Discussion and Analysis."
Board Oversight of Risk Management
The Board believes that overseeing how the executive team manages the various risks confronting the company is one of its most
important areas of oversight. In carrying out this critical responsibility, the Board has designated the Audit Committee with primary responsibility for overseeing enterprise risk management
(including cybersecurity and other risks relevant to our computerized information system controls and security). While the Audit Committee has primary responsibility for overseeing enterprise risk
management, each of the other Board committees also considers risk within its area of responsibility. For example, the Nominating/Corporate Governance Committee reviews risks related to legal and
regulatory compliance as they relate to corporate governance structure and processes, and the Compensation Committee reviews risks related to compensation matters. The Board is apprised by the
committee chairs of significant risks and management's response to those risks via periodic reports. While the Board and its committees oversee
risk management strategy, management is responsible for implementing and supervising day-to-day risk management processes and reporting to the Board and its committees on such matters.
With
respect to risk related to compensation matters, the Compensation Committee considers, in establishing and reviewing our executive compensation program, whether the program
encourages unnecessary or excessive risk taking and has concluded that it does not. Executives' base salaries are fixed in amount and thus do not encourage risk-taking. Bonuses are capped and are tied
to overall corporate performance. Any other compensation provided to the executive officers is primarily in the form of long-term equity awards that are important to help further align executives'
interests with those of our stockholders. The Compensation Committee believes that these awards do not encourage unnecessary or excessive risk-taking because the ultimate value of the awards is tied
to our stock price and because awards are staggered and subject to long-term vesting schedules to help ensure that executives have significant value tied to long-term stock price performance.
The
Compensation Committee also has reviewed our compensation programs for employees generally and has concluded that these programs do not create risks that are reasonably likely to
have a material adverse effect on the company. The Compensation Committee believes that the design of our annual cash and long-term equity incentives provides an effective and appropriate mix of
incentives to help ensure our performance is focused on long-term stockholder value creation and does not encourage the taking of short-term risks at the expense of long-term results. In general,
bonus opportunities for our employees are capped, and we have discretion to reduce bonus payments (or pay no bonus) based on individual performance and any other factors we may determine to be
appropriate in the circumstances.
Corporate Governance Guidelines
The Board has adopted a set of governance guidelines, the CoreSite Realty Corporation Corporate Governance Guidelines, which are
designed to promote the continued vitality of the Board and excellence in the execution of its duties. Our Corporate Governance Guidelines establish the practices and procedures of the Board with
respect to Board composition and member selection, Board independence, Board meetings and involvement of senior management, management succession planning, Board committees, stock ownership guidelines
and the evaluation of senior management and the Board. The Board reviews our Corporate Governance Guidelines at least annually and updates them as necessary to reflect improved corporate governance
practices and changes in regulatory requirements. A copy of the Corporate Governance Guidelines is available on our website at www.coresite.com.
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Stock Ownership Guidelines
Effective January 1, 2014, the Board adopted stock ownership and retention guidelines for all of our executive officers and
non-employee directors who are also not employees of Carlyle ("Non-Employee Directors") to further align their interests with our stockholders. The stock ownership and retention guidelines do not
apply to directors who are employed by Carlyle because those directors do not receive compensation for their service as directors. Under these stock ownership and retention guidelines, each of our
executive officers is expected to own common stock of the Company with a market value equal to the following amounts for as long as he or she remains an executive officer: Chief Executive
OfficerFive times (5.0x) base salary; Other C-Level Executives (CFO, General Counsel)Three times (3.0x) base salary; and Senior Vice PresidentsOne and One-Half
times (1.5x) base salary. Non-Employee Directors are expected to own common stock of the Company with a market value equal to five times (5.0x) the value of each Non-Employee Director's annual cash
retainer (excluding any annual cash retainer for committee membership or chairmanship). Each executive officer and Non-Employee Director must hold 50% of all net settled shares received from the
vesting, delivery or exercise of equity awards from the Company until such executive officer's or Non-Employee Director's stock ownership equals or exceeds the applicable ownership threshold.
Executive officers and Non-Employee Directors have until the later to occur of (i) January 1, 2019 or (b) the fifth anniversary of his or her first appointment or
election as an executive officer or Non-Employee Director, as applicable, to meet the requirements of these stock ownership guidelines. These stock ownership guidelines were based on analysis of peer
and market practices, as prepared by our independent compensation consultant. Each of our Non-Employee Directors and executive officers is currently in compliance with our stock ownership guidelines.
Code of Ethics
Our Code of Business Conduct and Ethics applies to all of our employees, including our principal executive officer, principal financial
officer and principal accounting officer, and the Board. A copy of the Code of Business Conduct and Ethics is available on our website at www.coresite.com. We intend to disclose any changes in or
waivers from the Code of Business Conduct and Ethics that are required to be disclosed by posting such information on our website.
Prohibition on Short Sales, Hedging and Margin Accounts
Our Insider Trading Policy prohibits our officers, directors and all other employees from (i) engaging in short sales,
(ii) buying or selling put or call positions in our securities, (iii) buying financial instruments designed to hedge or offset any decrease in the market value of our securities, and
(iv) frequent trading of our securities to take advantage of fluctuations in share price. In addition, all of our officers and directors are prohibited from purchasing or selling our securities
in margin accounts.
2014 Director Compensation
The Board determines the form and amount of director compensation after its review of recommendations made by the Compensation
Committee. A substantial portion of each Non-Employee Director's annual retainer is in the form of equity. After consultation with the Compensation Committee's independent compensation consultant, in
order to bring our non-employee director compensation in line with market compensation, including the non-employee director compensation of our competitors, the Board approved an Amended and Restated
Non-Employee
Director Compensation Policy (the "Amended Directors Plan") effective January 1, 2014. Directors who are employees of our company or our subsidiaries and those directors nominated by Carlyle do
not receive compensation for their service as directors.
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Pursuant
to the Amended Directors Plan, Non-Employee Directors receive an annual grant of restricted stock units ("RSUs") under our 2010 Equity Incentive Award Plan (As Amended and
Restated) (the "2010 Plan") having a fair market value as of the date of grant equal to $75,000 (each, an "Annual RSU Award") and an equal number of tandem dividend equivalents on the date of the
annual meeting of stockholders. Dividend equivalents give holders the right to receive, upon payment of any ordinary cash dividend paid to holders of our common stock, an equivalent payment in the
form of additional RSUs and dividend equivalents. The Annual RSU Award and corresponding dividend equivalents vest one year from the grant date, subject to such Non-Employee Director's continued
service as of the vesting date. Each RSU entitles the director to one share of our common stock, and will be payable and settled at the time of vesting, unless a deferral election is made by a
Non-Employee Director.
In
addition, under the Amended Directors Plan, each Non-Employee Director receives an annual cash retainer of $75,000 for services as a director. Non-Employee Directors who serve on our
Audit, Nominating/Corporate Governance and/or Compensation Committees other than as chair of the committee receive an additional annual cash retainer fee of $10,000 for each committee on which they
serve. Non-Employee Directors who serve as the chair of our Audit Committee or Compensation Committee receive an additional annual cash retainer of $20,000, and Non-Employee Directors who serve as the
chair of our Nominating/Corporate Governance Committee receive an additional annual cash retainer of $15,000. All annual cash retainers are paid in quarterly installments subject to such Non-Employee
Director's continued service on the Board on each applicable payment date.
The
following table presents information regarding the compensation paid during 2014 to Non-Employee Directors who served on the Board during the year. The compensation paid to
Mr. Ray is presented below under "Compensation Discussion and Analysis" in the table titled "2014 Summary Compensation Table" and the related explanatory tables. Messrs. Stuckey, Attwood
and Ray do not receive any compensation for their services as members of the Board.
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Fees Earned
or Paid
in Cash ($) |
|
Stock
Awards ($)(1) |
|
Total ($) |
|
Michael Koehler |
|
|
105,000 |
|
|
75,000 |
|
|
180,000 |
|
Paul E. Szurek |
|
|
100,000 |
|
|
75,000 |
|
|
175,000 |
|
J. David Thompson |
|
|
95,000 |
|
|
75,000 |
|
|
170,000 |
|
David A. Wilson |
|
|
105,000 |
|
|
75,000 |
|
|
180,000 |
|
- (1)
- The
amounts included under the "Stock Awards" column reflect the aggregate grant date fair value of the restricted stock unit awards granted to each
Non-Employee Director, computed in accordance with FASB ASC Topic 718, excluding the effect of any estimated forfeitures. Assumptions used to calculate these amounts are described in Note 12,
"Equity Incentive Plan" to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2014.
18
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The
following table presents the number of outstanding and unexercised option awards and the number of outstanding RSUs held by each of the Non-Employee Directors as of
December 31, 2014.
|
|
|
|
|
|
|
|
Director
|
|
Number of Shares
Subject to
Outstanding
Options as of
December 31, 2014(1) |
|
Number of Shares
Subject to
Outstanding
RSUs as of
December 31, 2014(2) |
|
Michael Koehler |
|
|
2,500 |
|
|
10,987 |
|
Paul E. Szurek |
|
|
2,500 |
|
|
10,987 |
|
J. David Thompson |
|
|
2,500 |
|
|
10,987 |
|
David A. Wilson |
|
|
2,500 |
|
|
10,987 |
|
- (1)
- The
stock options are fully vested.
- (2)
- The
restricted stock units for each director are fully vested, except for 2,423 restricted stock units for each director which will vest on May 29,
2015.
Communications with the Board
Any stockholder or other interested party may contact the Board, including any non-employee director or the non-employee directors as a
group, or any individual director or directors, by writing to our Corporate Secretary at 1001 17th Street, Suite 500, Denver, Colorado 80202, with a request to forward the communication
to the intended recipient or recipients. In general, any stockholder communication delivered to our Corporate Secretary for forwarding to the Board or specified Board member or members will be
forwarded in accordance with the stockholder's instructions. However, our Corporate Secretary reserves the right not to forward to Board members any abusive, threatening or otherwise inappropriate
materials. Information regarding the submission of comments or complaints relating to our accounting, internal accounting controls or auditing matters can be found on our website at www.coresite.com.
Attendance of Directors at 2014 Annual Meeting of Stockholders
While we do not have a formal policy requiring our directors to attend stockholder meetings, directors are invited and encouraged to
attend all meetings of stockholders. Six of our directors attended the 2014 Annual Meeting of Stockholders. Mr. Koehler was unable to attend the 2014 Annual Meeting of Stockholders due to
family obligations.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee is or has ever been an executive officer of the company, and no member of the Compensation
Committee had any relationships requiring disclosure by us under the SEC's rules requiring disclosure of certain relationships and related-party transactions. None of our executive officers served on
any compensation committee (or its equivalent) of any other entity, the executive officers of which served as a director of the company or a member of our Compensation Committee.
19
Table of Contents
EXECUTIVE OFFICERS AND COMPENSATION
The following table sets forth certain information as of March 26, 2015, regarding our executive officers.
|
|
|
|
|
|
|
Name
|
|
Position With the Company |
|
Age |
|
Thomas M. Ray |
|
President and Chief Executive Officer |
|
|
52 |
|
Jeffrey S. Finnin |
|
Chief Financial Officer |
|
|
51 |
|
Billie R. Haggard |
|
Senior Vice President, Data Centers |
|
|
49 |
|
Derek S. McCandless |
|
Senior Vice President, Legal, General Counsel and Secretary |
|
|
43 |
|
Steven J. Smith |
|
Senior Vice President, Sales and Sales Operations |
|
|
50 |
|
Dominic M. Tobin |
|
Senior Vice President, Operations |
|
|
61 |
|
Please
see "Proposal One: Election of DirectorsDirectors" starting on page 6 for information regarding Thomas M. Ray.
Jeffrey S. Finnin has served as our Chief Financial Officer since January 2011. Before joining us in January 2011, Mr. Finnin
served as Managing Director and Chief Accounting Officer of Prologis, a publicly held REIT, for over five years. Prior to his tenure at Prologis, Mr. Finnin spent 18 years in public
accounting as a partner with KPMG LLP and Arthur Andersen LLP, where he served as the Industry Lead Partner in charge of Real Estate and Financial Services Practices in Denver, Colorado.
Mr. Finnin received his B.S. in Business Administration from Colorado State University.
Billie R. Haggard has served as our Senior Vice President, Data Centers since March 2009. In this role, Mr. Haggard is responsible
for the design, construction, maintenance, facilities staffing and ultimately uptime, reliability and energy efficiency of our data centers. Mr. Haggard served as our Vice President of
Facilities from 2009 to 2010. Prior to joining us in March 2009, Mr. Haggard was the Senior Technical Manager at Switch and Data Facilities Company, Inc. ("Switch and Data"), a provider
of network-neutral data centers, where he oversaw all aspects of data center design and management for more than 40 data centers across North America. Prior to joining Switch and Data in 2003,
Mr. Haggard held the position of Technical Manager for Lee Technologies, a data center solutions provider, focused upon data center and mission-critical facilities. Mr. Haggard studied
Engineering at Louisiana State University and Louisiana Tech University. Additionally, Mr. Haggard held positions of increasing responsibility focused upon nuclear power technology and
maintenance during his 14-year career as an officer in the United States Navy. Mr. Haggard was recognized with four Naval Achievement Medals and numerous letters of commendation stemming from
his work and teachings concerning highly sensitive, mission-critical facilities.
Derek S. McCandless has served as our Senior Vice President, Legal, General Counsel and Secretary since March 2011. Prior to joining us in
March 2011, Mr. McCandless served as Senior Vice President and Assistant General Counsel at Apartment Investment and Management Company, a REIT focused on apartment properties, which he joined
in 2003. Prior to his tenure with Apartment Investment and Management Company, Mr. McCandless was in private practice with the law firms of Holme Roberts & Owen LLP (since
combined with Bryan Cave LLP) and Cooley LLP. Mr. McCandless received a J.D. from The University of Chicago and a B.S., cum laude, from Brigham Young University.
Steven J. Smith has served as our Senior Vice President, Sales and Sales Operations since January 2014. Mr. Smith is responsible
for the success of our customer engagement, market expansion and overall revenue growth. Prior to joining us in January 2014, Mr. Smith was a Regional Vice President for SAP AG, a business
software company, from March 2008 to January 2013, where he led large enterprise sales across application portfolios, including enterprise resource planning, big data, customer relationship management
(CRM), cloud and mobile. From December 2002 to March 2008, he held various roles with Avaya, Inc., a global provider of business communications and collaboration systems,
20
Table of Contents
software
and services, most recently as Vice President and General Manager of U.S. Channel Sales. Mr. Smith received a B.A. in Marketing and Economics from the University of New Mexico.
Dominic M. Tobin has served as our Senior Vice President, Operations since January 2007. Mr. Tobin is responsible for our company's
operations activities, including our Any2 Exchange® related initiatives. Mr. Tobin served as our Field Operations Director from 2007 to 2009 and Vice President of
Operations from 2009 to 2010. Prior to joining us in January 2007, Mr. Tobin spent 15 combined years at First Level Technology and AT&T, where he held roles of increasing responsibility,
including Field Operations Director and District Manager. Mr. Tobin obtained his B.S. in Telecommunications Management, magna cum laude, from Golden Gate University. He also received a Network
Management Certificate from U.C. Santa Cruz Extension and was a First Class Electronics Technician in the U.S. Coast Guard.
21
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis is designed to provide our stockholders with a clear understanding of our compensation
philosophy and objectives, compensation-setting process, and the 2014 compensation of our named executive officers, or NEOs. For 2014, our NEOs were:
|
|
|
Thomas M. Ray |
|
President and Chief Executive Officer |
Jeffrey S. Finnin |
|
Chief Financial Officer |
Derek S. McCandless |
|
Senior Vice President, Legal, General Counsel and Secretary |
Steven J. Smith |
|
Senior Vice President, Sales and Sales Operations |
Dominic M. Tobin |
|
Senior Vice President, Operations |
Executive Summary
Our compensation program for our NEOs and other executive officers is designed to meet the following primary
objectives:
-
- Management Development and Continuity. Attract, retain
and motivate individuals of superior ability and managerial talent to develop, grow and manage our business by offering competitive compensation opportunities with a significant long-term component;
-
- Pay-for-Performance. Align executive officer compensation
with the achievement of our short- and long-term corporate strategies and business objectives and with the long-term interests of our stockholders through the use of performance-based and variable
compensation elements; and
-
- Long-Term Focus on Stockholder Value. Align executives
with stockholder value creation by delivering a significant portion of our executive officers' compensation in the form of equity-based awards that vest over multiple years.
We
believe compensation should be structured to ensure that a significant portion of the total compensation opportunity for our named executive officers is directly related to our
performance and
other factors that directly and indirectly influence stockholder value. For 2014, our fixed compensation versus targeted variable compensation was structured as follows for our CEO and other named
executive officers:
Our
2014 named executive officer compensation reflects the performance of our company in 2014. Our 2014 annual cash incentive program payouts were based on our at-or-above target
performance in 2014 revenue, EBITDA and funds from operations. In addition, to further our commitment to a pay-for-performance compensation program, in March 2014, the Compensation Committee granted
performance-based restricted stock to our senior leadership team (in lieu of annual stock option grants), which vest based on the achievement of relative total shareholder return over a three-year
period.
22
Table of Contents
We
also believe our executive compensation should be structured to appropriately balance annual cash compensation with long-term equity-based compensation. For 2014, our target annual
cash versus long-term equity-based compensation was structured as follows for our CEO and other named executive officers:
Selected 2014 Company Performance Highlights
Performance for our company was strong in 2014, highlighted by the following:
-
- Total shareholder return (assuming dividend reinvestment) in 2014 was 26.65%;
-
- Revenue in 2014 grew by 16.0% over 2013, with data center revenue in 2014 growing 16.5% over 2013;
-
- EBITDA (as defined below) in 2014 grew by 25.5% versus 2013;
-
- Funds from operations (FFO) (as defined below) attributable to common shares and units in 2014 grew by 22.4% versus 2013; and
-
- Increased the quarterly common stock dividend by 20% to $0.42 per share, reflecting an annual rate of $1.68 per share. This represents
the fourth consecutive year of double-digit growth in the quarterly dividend rate and 34% compound annual growth since our initial public offering.
In
addition to the financial highlights above, we achieved the following in 2014:
-
- Maintained six nines of uptime across our platform for fourth consecutive year;
-
- Completed Statement on Standards for Attestation Engagements (SSAE) 16 Type 2 examinations covering 15 operational data centers
across our portfolio;
-
- Maintained our focus on operational excellence, executing over 8,000 service orders, including a record number of fiber cross-connect
installations;
-
- Executed 466 new and expansion leases totaling $33.2 million in annualized GAAP rent, representing an increase of 81.3% in
annualized GAAP rent relative to leases signed in 2013; and
-
- Opened Phase 1 of NY2 in Secaucus, New Jersey, which was 75% leased at the end of 2014, and opened Phase 1 of VA2 in
Reston, Virginia, which was 100% pre-leased to a single anchor tenant.
At
our annual meeting of stockholders in May 2014, we held our annual vote on an advisory resolution to approve the compensation of our named executive officers ("say-on-pay"). The
compensation of our named executive officers reported in our 2014 proxy statement was approved by approximately 97% of the votes cast at the 2014 annual meeting. Our Compensation Committee believes
this affirms our stockholders' support of our approach to executive compensation. The
23
Table of Contents
Compensation
Committee will continue to consider the outcome of our say-on-pay votes when making future compensation decisions for our named executive officers.
Role of the Board of Directors, the Compensation Committee, Management and Consultant
Our Compensation Committee is charged with, among other things, the responsibility of reviewing executive officer compensation policies
and practices to ensure adherence to our compensation philosophy and objectives and that the total compensation paid to our executive officers is consistent with our performance, fair, reasonable and
competitive with companies within our industry. The Compensation Committee's primary responsibilities with respect to determining executive compensation are (i) setting performance targets
under all annual bonus and long-term and management incentive compensation plans, including our 2010 Plan; (ii) verifying that performance targets used for any performance-based equity
compensation plans have been met before payment of any executive bonus or compensation; (iii) approving all amendments to, and terminations of, all compensation plans and any awards under such
plans; (iv) granting any awards under any performance-based annual bonus, long-term incentive compensation and equity compensation plans to executive officers; (v) approving which
executive officers and other employees receive awards under our equity and incentive compensation plan(s), including the 2010 Plan; and (vi) conducting an annual review of all compensation
plans. All plan reviews include reviewing the plan's administrative costs, reviewing current plan features relative to any proposed new features, and assessing the performance of the plan's internal
and external administrators if any duties have been delegated.
The
Compensation Committee reviews and considers our Chief Executive Officer's recommendations with respect to compensation decisions for our named executive officers other than himself.
The Compensation Committee believes it is valuable to consider the recommendations of our Chief Executive Officer with respect to these matters because, given his knowledge of our operations, the data
center industry and the day-to-day responsibilities of our executive officers, he is in a unique position to provide the Compensation Committee perspective into the performance of our executive
officers in light of our business at a given point in time. The Compensation Committee makes all compensation decisions with regard to our Chief Executive Officer.
As
part of the 2014 compensation process, the Compensation Committee retained W.T. Haigh & Company, Inc. ("W.T. Haigh") as its independent compensation consultant. W.T.
Haigh provides us advisory services only with respect to executive compensation, and works with management only with the approval and under the direction of the Compensation Committee. W.T. Haigh
reviewed the compensation components of our 2014 program for our named executive officers and advised the Compensation Committee regarding the components and levels of the executive compensation
program,
including our incentive and equity-based compensation plans. A representative of W.T. Haigh attended the meetings of the Board in March 2014 and the Compensation Committee in February, March and
December 2014 and March 2015, and continues to make himself available on an ongoing basis to provide guidance to the Compensation Committee on compensation issues as they arise. The Compensation
Committee has reviewed its and our company's relationships with W.T. Haigh and has not identified any conflicts of interest.
Peer Companies
The Compensation Committee uses peer company data to guide its review of the total compensation of our executive officers and generally
reviews the compensation data of our peer companies and industry to understand market competitive compensation. The Compensation Committee focuses on ensuring that the elements of our executive
compensation program are consistent with peer and industry trends. However, the Compensation Committee does not benchmark compensation to a specific percentile target or range of the compensation of
peer companies.
24
Table of Contents
For
purposes of the 2014 compensation decisions, the Compensation Committee approved a peer group based on analysis and recommendations by W.T. Haigh. This peer group is comprised of
13 companies in the data center, special purpose real estate, hosting and colocation industries. The peer group was selected based primarily on similarity to our core business as well as a
number of other criteria, including each company's revenue, market capitalization, number of employees and other key financial metrics. We believe these companies are broadly comparable to us, and
appropriately reflect our size, complexity, growth prospects, operations, and labor market for key leadership positions. Our peer group for 2014 was refined versus a broader group of peer companies in
2013 to focus more exclusively on data center, special purpose real estate investment trusts and technology companies that reflect our core business.
The
2014 peer companies are listed below:
|
|
|
|
|
Akamai Technologies, Inc. |
|
Alexandria Real Estate Equities, Inc. |
|
BioMed Realty Trust, Inc. |
Cogent Communications Group, Inc. |
|
CyrusOne Inc. |
|
Digital Realty Trust, Inc. |
DuPont Fabros Technology, Inc. |
|
Equinix, Inc. |
|
Internap Network Services Corp. |
InterXion Holding N.V. |
|
QTS Realty Trust, Inc. |
|
Rackspace Hosting, Inc. |
TelecityGroup plc |
|
|
|
|
In
addition to the select peer companies above, compensation data was used that covers substantially all of the companies in the MSCI US REIT Index and the NASDAQ Internet Total Return
Index.
The
Compensation Committee reviews our peer group annually to determine whether changes are necessary to ensure that the peer companies continue to be comparable to us based on changing
scope and growth characteristics.
Elements of 2014 Compensation
Our compensation program is made up of the following direct compensation elements:
|
|
|
|
|
Element
|
|
Fixed or
Variable |
|
Purpose |
Base Salary |
|
Fixed |
|
To attract and retain executives by offering fixed compensation that is competitive with market opportunities and that recognizes each executive's position, role, responsibility and experience. |
Annual Incentive |
|
Variable |
|
To motivate and reward the achievement of our annual performance, including objectives related to revenue, EBITDA and FFO. |
Equity Awards |
|
Variable |
|
To align executives' interests with the interests of stockholders through equity-based compensation with performance-based and time-based vesting periods, and to promote the long-term retention of our executives and
key management personnel. |
25
Table of Contents
For
2014, the following was the targeted mix of compensation:
2014 Compensation Decisions
Base Salaries. After the end of 2013, base salaries were reviewed to ensure that they generally were competitive with
market levels and generally reflected our level of financial performance during the previous year. No formulaic base salary increases are provided to the NEOs; however, annual merit increases are
provided when the Compensation Committee determines that such increases are warranted in light of national salary increase levels, salary levels within our peer companies, individual performance
and/or overall company performance.
The
base salaries of our named executive officers in 2014, which were effective as of April 1, 2014, were as follows:
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
2014
Base Salary |
|
Increase Over
2013 Base Salary |
|
Thomas M. Ray |
|
$ |
525,000 |
|
|
12.9 |
% |
Jeffrey S. Finnin |
|
$ |
375,000 |
|
|
2.7 |
% |
Derek S. McCandless |
|
$ |
282,500 |
|
|
5.5 |
% |
Steven J. Smith |
|
$ |
300,000 |
|
|
|
|
Dominic M. Tobin |
|
$ |
217,000 |
|
|
5.9 |
% |
For
Messrs. Ray, McCandless and Tobin, 2014 salary increases were driven in large part by each named executive officer's relative position to mid-market salary levels when
compared to the peer companies and broader market comparisons. The base salary for Mr. Smith for 2014 was negotiated upon his commencement of employment with us in January 2014.
Annual Cash Incentive Awards. An important component of our total compensation program is the annual cash incentive
based on the achievement of preset, annual company performance objectives and individual executive performance, which is determined in the Compensation Committee's discretion.
26
Table of Contents
In
March 2014, the Compensation Committee established the following 2014 target annual incentive amounts for each of our named executive officers under our 2014 annual cash incentive
program (the "2014 Bonus Plan"):
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
2014
Base Salary |
|
Target Bonus
as a
Percentage of
Salary |
|
Target Bonus |
|
Thomas M. Ray |
|
$ |
525,000 |
|
|
100 |
% |
$ |
525,000 |
|
Jeffrey S. Finnin |
|
$ |
375,000 |
|
|
60 |
% |
$ |
225,000 |
|
Derek S. McCandless |
|
$ |
282,500 |
|
|
60 |
% |
$ |
169,500 |
|
Steven J. Smith |
|
$ |
300,000 |
|
|
35% |
* |
$ |
105,000 |
|
Dominic M. Tobin |
|
$ |
217,000 |
|
|
50 |
% |
$ |
108,500 |
|
- *
- Mr. Smith
receives additional incentive compensation under our quarterly sales incentive program. See "Quarterly Sales Incentive Compensation" below.
In
setting the 2014 target bonus amounts for each of our named executive officers, the Compensation Committee considered the following factors: (i) organizational level and
expected impact on our annual operating results; (ii) the scope, level of expertise and experience required for the named executive officer's position; and (iii) competitive levels of
target annual incentive opportunity. The 2014 target bonus percentages were unchanged from the target bonus percentages in 2013, except for Mr. McCandless whose target bonus percentage was
reduced by the Compensation Committee taking into account the increase in his base salary over 2013 and to set all target bonus amounts as a percentage of salary versus fixed dollar amounts.
Mr. Smith was not hired until January 2014 and his target bonus percentage for 2014 was set by the Compensation Committee considering the various compensation elements negotiated in connection
with his hiring. Participants under the 2014 Bonus Plan were eligible to receive between 0% and 175% of each participant's respective target bonus based on actual performance as discussed below.
Actual
bonus amounts earned for 2014 were based on the level of company-wide achievement of revenue, earnings before interest, taxes, depreciation and amortization (EBITDA) and funds
from operations (FFO) in 2014 versus targets established by the Compensation Committee at the beginning of the year. The total incentive bonus actually paid to each named executive officer is
determined based on the extent to which specified weighted objective company performance goals are achieved,
27
Table of Contents
multiplied
by a weighting and bonus factor. The bonus factors for each performance factor used to calculate the total incentive bonuses as approved by the Compensation Committee were as follows:
|
|
|
|
|
|
|
|
|
Results as a Percentage of Target |
|
|
|
Revenue |
|
EBITDA |
|
FFO |
|
Multiplier |
|
0% - 89.99% |
|
0% - 87.99% |
|
0% - 84.99% |
|
|
0 |
% |
90.00% - 90.99% |
|
88.00% - 88.99% |
|
85.00% - 85.99% |
|
|
25 |
% |
91.00% - 91.99% |
|
89.00% - 89.99% |
|
86.00% - 87.99% |
|
|
30 |
% |
92.00% - 92.99% |
|
90.00% - 90.99% |
|
88.00% - 88.99% |
|
|
35 |
% |
93.00% - 93.99% |
|
91.00% - 92.99% |
|
89.00% - 90.99% |
|
|
40 |
% |
94.00% - 94.99% |
|
93.00% - 93.99% |
|
91.00% - 91.99% |
|
|
45 |
% |
95.00% - 95.99% |
|
94.00% - 94.99% |
|
92.00% - 93.99% |
|
|
50 |
% |
96.00% - 96.99% |
|
95.00% - 95.99% |
|
94.00% - 94.99% |
|
|
60 |
% |
97.00% - 97.99% |
|
96.00% - 97.99% |
|
95.00% - 96.99% |
|
|
70 |
% |
98.00% - 98.99% |
|
98.00% - 98.99% |
|
97.00% - 97.99% |
|
|
80 |
% |
99.00% - 99.99% |
|
99.00% - 99.99% |
|
98.00% - 99.99% |
|
|
90 |
% |
100.00% - 100.99% |
|
100.00% - 100.99% |
|
100.00% - 101.99% |
|
|
100 |
% |
101.00% - 101.99% |
|
101.00% - 101.99% |
|
102.00% - 102.99% |
|
|
110 |
% |
102.00% - 102.99% |
|
102.00% - 103.99% |
|
103.00% - 104.99% |
|
|
120 |
% |
103.00% - 103.99% |
|
104.00% - 104.99% |
|
105.00% - 105.99% |
|
|
130 |
% |
104.00% - 104.99% |
|
105.00% - 105.99% |
|
106.00% - 107.99% |
|
|
140 |
% |
105.00% - 105.99% |
|
106.00% - 106.99% |
|
108.00% - 108.99% |
|
|
150 |
% |
106.00% - 106.99% |
|
107.00% - 108.99% |
|
109.00% - 110.99% |
|
|
155 |
% |
107.00% - 107.99% |
|
109.00% - 109.99% |
|
111.00% - 111.99% |
|
|
160 |
% |
108.00% - 108.99% |
|
110.00% - 110.99% |
|
112.00% - 113.99% |
|
|
165 |
% |
109.00% - 109.99% |
|
111.00% - 111.99% |
|
114.00% - 114.99% |
|
|
170 |
% |
110.00% or more |
|
112.00% or more |
|
115.00% or more |
|
|
175 |
% |
The
Compensation Committee has the discretion to adjust the actual results based on extraordinary events and/or conditions that either positively or negatively impact our performance.
For purposes of the 2014 Bonus Plan, actual FFO for 2014 was adjusted to eliminate interest expense incurred due to differences between the interest rate on our line of credit and interest rates
associated with an early
repayment of secured mortgage debt and a term loan, each of which was executed in January 2014. The 2014 target performance objectives did not contemplate either the early repayment or the term loan.
In addition, the Compensation Committee may further adjust the bonus payments in its discretion based on each named executive officer's achievement of departmental and individual goals, and overall
job performance. The table below sets forth the calculation of the 2014 bonus payouts with respect to the objective company performance goals:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Factor
|
|
2014 Target |
|
2014 Actual |
|
2014 Actual as
a Percentage
of Target |
|
Weighting |
|
Multiplier |
|
Bonus
Payout |
|
Revenue |
|
$272.5 million |
|
$272.4 million |
|
|
99.9 |
% |
|
33.3 |
% |
|
90 |
% |
|
30.0 |
% |
EBITDA |
|
$119.6 million |
|
$126.1 million |
|
|
105.4 |
% |
|
33.3 |
% |
|
140 |
% |
|
46.7 |
% |
FFO |
|
$99.8 million |
|
$105.0 million |
|
|
105.1 |
% |
|
33.3 |
% |
|
130 |
% |
|
43.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
120.0 |
% |
Funds
from operations ("FFO") represents net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property and impairment write-downs of depreciable real
estate, plus real estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures. EBITDA is
defined as earnings before interest, taxes, depreciation and amortization ("EBITDA"). FFO and
28
Table of Contents
EBITDA
are non-GAAP measures. See Appendix A for a reconciliation of these measures to GAAP, without the adjustment discussed above.
In
light of our performance in 2014 and the Compensation Committee's discretionary evaluation of each named executive officer's job performance, we paid the following annual bonus
amounts under the 2014 Bonus Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
Target Bonus
as a
Percentage of
Salary |
|
Target Bonus |
|
Actual
Bonus Award |
|
Actual Bonus
Award as
a Percentage of
Target |
|
Thomas M. Ray |
|
|
100 |
% |
$ |
525,000 |
|
$ |
693,000 |
|
|
132 |
% |
Jeffrey S. Finnin |
|
|
60 |
% |
$ |
225,000 |
|
$ |
250,000 |
|
|
111 |
% |
Derek S. McCandless |
|
|
60 |
% |
$ |
169,500 |
|
$ |
190,000 |
|
|
112 |
% |
Steven J. Smith |
|
|
35 |
% |
$ |
105,000 |
|
$ |
125,000 |
|
|
119 |
% |
Dominic M. Tobin |
|
|
50 |
% |
$ |
108,500 |
|
$ |
140,000 |
|
|
129 |
% |
Equity Compensation. Generally in the first quarter of each year, the Compensation Committee grants equity-based awards
to our named executive officers, other executives, key management personnel and other employees in order to align their interests with those of the stockholders and to provide a compensation element
intended to retain our named executive officers and other executives over the long term. For 2014, the value of the long-term equity awards granted to each named executive officer was based on the
Compensation Committee's assessment of each named executive officer's expected future contributions to our company, ability to impact our long-term results that drive stockholder value, each named
executive officer's overall long-term performance and competitive levels of long-term equity compensation for similarly situated executives.
In
March 2014, the Compensation Committee approved equity awards to our senior leadership team, including our named executive officers, with 60% of the value of the equity award in the
form of time-based restricted stock and 40% of the value of the equity award in the form of performance-based restricted stock ("PSAs"). The Compensation Committee believes that time-based restricted
stock awards offer a strong retention incentive to employees and are less dilutive to our current stockholders than stock options. To align the vesting period of the time-based restricted stock with
the PSAs for our senior leadership team, the Compensation Committee changed the vesting schedule of time-based restricted stock for 2014 from four years to three years with the time-based restricted
stock award vesting in three equal annual installments beginning on the first anniversary of the grant date, subject to continued employment with us.
In
lieu of annual stock option grants, the Compensation Committee granted PSAs in 2014 (and continuing in 2015) to further our objective of a pay-for-performance compensation program to
tie executive compensation to the achievement of our longer-term corporate strategies and business objectives and to the long-term interests of our stockholders. The Compensation Committee determined
to grant the PSAs in the form of restricted stock in lieu of stock options to place greater emphasis on our performance relative to other REITs. In 2014, PSAs were granted only to our senior
leadership team, including our named executive officers, while other employees of the Company received equity awards solely in the form of time-based restricted stock. The PSAs granted in 2014 vest in
full on the third anniversary of the grant based on our achievement of relative total shareholder return ("TSR") as described further below. The number of PSAs earned is based on our achievement of
TSR measured versus the MSCI US REIT Index over a three-year performance period, and the number of shares earned under the PSAs may range from 0% to 150% of the target number of shares. The PSAs are
earned as follows: (i) 20% of the PSAs are earned based on relative TSR achievement for each annual performance period during the three-year performance period (60% in total), and
(ii) 40% of the PSAs are earned based upon a cumulative TSR achievement over the three-year performance period. Earned PSAs are released at the end of the three-year performance period
29
Table of Contents
provided
that the executive officer continues to be employed by us at the end of the performance period. Holders of earned PSAs are also entitled to accrued cash dividends that will be paid at the end
of the performance period. The table below sets forth the performance multipliers for each level of TSR achievement relative to the MSCI US REIT Index to be used for each vesting period of the PSAs:
|
|
|
Relative TSR Ranking Relative to the MSCI
US REIT Index For the Performance Period
|
|
Performance Multiplier |
At or above the 75th Percentile |
|
150% |
Between the 75th Percentile and 50th Percentile |
|
Determined by linear interpolation |
At the 50th Percentile |
|
100% |
Between the 50th Percentile and 30th Percentile |
|
Determined by linear interpolation |
At the 30th Percentile |
|
50% |
Below the 30th Percentile |
|
0% |
The
PSA grants developed and implemented for 2014 were based on analysis of peer company and broader market performance-based equity practices, as prepared by W.T. Haigh, and are
consistent with our performance-based compensation philosophy.
The
equity awards granted to our NEOs in 2014 were as follows:
|
|
|
|
|
|
|
|
Name
|
|
Time-Based Restricted Stock
Awards: Number of Shares of
Restricted Stock (#) |
|
Performance-Based Restricted Stock
Awards: Number of Shares of
Restricted Stock at Target (#)(1) |
|
Thomas M. Ray |
|
|
41,601 |
|
|
27,734 |
|
Jeffrey S. Finnin |
|
|
11,346 |
|
|
7,564 |
|
Derek S. McCandless |
|
|
9,455 |
|
|
6,303 |
|
Steven J. Smith(2) |
|
|
15,128 |
|
|
3,782 |
|
Dominic M. Tobin |
|
|
5,106 |
|
|
3,404 |
|
- (1)
- PSAs
were issued in March 2014 at the maximum level of 150% of target, subject to forfeiture based on achievement of relative levels of TSR during the
performance periods. In February 2015, the Compensation Committee certified TSR achievement for 2014 of 26.65%, which resulted in earning and banking 87.2% of target PSAs, or a 17.44% weighted payout
for the 2014 performance period based on our relative performance versus the MSCI US REIT Index at approximately the 44th percentile. Because the PSAs were granted to each named
executive officer at the maximum achievement amount, PSAs were forfeited by each executive officer based on the difference between the earned PSAs at 87.2% to target for the first performance period
and the 150% issued amount of PSAs for the first performance period.
- (2)
- The
time-based restricted stock awards for Mr. Smith include 9,455 shares of time-based restricted stock granted pursuant to Mr. Smith's
employment offer letter approved by the Compensation Committee.
2015 Changes to Our Stock Awards. In March 2015, the Compensation Committee again approved equity awards to our senior
leadership team with 60% of the value of the equity award in the form of time-based restricted stock and 40% of the value of the equity award in the form of PSAs. After consultation with W.T. Haigh,
the Compensation Committee approved a change in the minimum and maximum number of shares that may be earned under the PSAs granted in 2015. The number of
30
Table of Contents
shares
that may be earned under the 2015 PSA grants now ranges from 25% to 175%, rather than from 0% to 150% as with the PSAs granted in 2014, as illustrated below:
|
|
|
Relative TSR Ranking Relative to the MSCI
US REIT Index For the Performance Period
|
|
Performance Multiplier |
Above the 75th Percentile |
|
175% |
At the 75th Percentile |
|
150% |
Between the 75th Percentile and 50th Percentile |
|
Determined by linear interpolation |
At the 50th Percentile |
|
100% |
Between the 50th Percentile and 30th Percentile |
|
Determined by linear interpolation |
At the 30th Percentile |
|
50% |
Below the 30th Percentile |
|
25% |
The
change in the minimum and maximum number of shares that may be earned under the PSAs was implemented to create an upside incentive for relative TSR performance in the top quartile
versus the MSCI US REIT Index balanced by a corresponding downside award that provides the opportunity to earn a small portion of the target award if relative TSR performance is below the
30th percentile. This change did not amend or alter in any way the 2014 PSA grants.
Quarterly Sales Incentive Compensation. In March 2014, in order to align the compensation of Steven J. Smith, our Senior
Vice President, Sales and Sales Operations, with the core business objectives of our company, the Compensation Committee approved a quarterly sales incentive program for Mr. Smith, which
provides for quarterly sales incentive payments based on the change in contracted straight-line rent ("Contracted SLR") calculated on a quarterly basis. The quarterly sales incentive program is in
addition to the annual incentive compensation that Mr. Smith may earn under the 2014 Bonus Plan as described above. The Compensation Committee approved the following potential quarterly
incentive payments based on our achievement of specified levels of changes in Contracted SLR on a quarterly basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Contracted SLR
($ in millions) |
|
|
|
|
|
Quarterly
Incentive
Payment |
|
|
|
Q1 |
|
Q2 |
|
Q3 |
|
Q4 |
|
Less than |
|
|
0.7 |
|
|
1.7 |
|
|
1.7 |
|
|
1.2 |
|
$ |
0 |
|
Greater than |
|
|
0.7 |
|
|
1.7 |
|
|
1.7 |
|
|
1.2 |
|
$ |
11,025 |
|
|
|
|
1.1 |
|
|
2.2 |
|
|
2.3 |
|
|
1.9 |
|
$ |
23,581 |
|
|
|
|
1.6 |
|
|
2.7 |
|
|
2.9 |
|
|
2.5 |
|
$ |
36,750 |
|
|
|
|
2.0 |
|
|
3.2 |
|
|
3.5 |
|
|
3.2 |
|
$ |
49,613 |
|
|
|
|
2.4 |
|
|
3.7 |
|
|
4.1 |
|
|
3.9 |
|
$ |
61,250 |
|
|
|
|
2.8 |
|
|
4.2 |
|
|
4.7 |
|
|
4.6 |
|
$ |
68,049 |
|
|
|
|
3.2 |
|
|
4.7 |
|
|
5.3 |
|
|
5.3 |
|
$ |
76,440 |
|
|
|
|
3.7 |
|
|
5.2 |
|
|
5.9 |
|
|
5.9 |
|
$ |
86,791 |
|
|
|
|
4.1 |
|
|
5.7 |
|
|
6.5 |
|
|
6.6 |
|
$ |
99,470 |
|
|
|
|
4.5 |
|
|
6.3 |
|
|
7.1 |
|
|
7.3 |
|
$ |
114,844 |
|
|
|
|
4.9 |
|
|
6.8 |
|
|
7.6 |
|
|
8.0 |
|
$ |
133,280 |
|
|
|
|
5.3 |
|
|
7.3 |
|
|
8.2 |
|
|
8.7 |
|
$ |
155,146 |
|
|
|
|
5.8 |
|
|
7.8 |
|
|
8.8 |
|
|
9.3 |
|
$ |
180,810 |
|
|
|
|
6.2 |
|
|
8.3 |
|
|
9.4 |
|
|
10.0 |
|
$ |
210,639 |
|
|
|
|
6.6 |
|
|
8.8 |
|
|
10.0 |
|
|
10.7 |
|
$ |
245,000 |
|
In
addition, under the quarterly sales incentive program, 50% of Mr. Smith's cash compensation (i.e. base salary plus quarterly sales incentive payments and annual cash
incentive awards) earned in 2014 in excess of $1 million would be paid in restricted stock units with a one-year vesting schedule. Based on actual performance in 2014, Mr. Smith earned a
total of $443,572 under the quarterly sales
31
Table of Contents
incentive
program, consisting of a quarterly payout of $86,791 in the first quarter of 2014, $114,844 in the second quarter of 2014, $86,791 in the third quarter of 2014 and $155,146 in the fourth
quarter of 2014. Mr. Smith's cash compensation in 2014 did not exceed $1 million, and therefore, all of Mr. Smith's incentive compensation was paid in cash.
For
2015, Mr. Smith will no longer earn annual incentive compensation under the quarterly sales incentive program described above, but rather he will only earn annual incentive
compensation under our annual cash incentive program applicable to other executive officers of our company, with an adjustment to his target bonus amount to adjust for the termination of the quarterly
sales incentive program described above.
Defined Contribution Plans. We have maintained a Section 401(k) Savings/Retirement Plan (the "401(k)
Plan") for eligible employees of our company and any designated affiliate, including our named executive officers. The 401(k) Plan provides our named executive officers and other employees with the
opportunity to save for their future retirement by deferring compensation up to IRS imposed limits. We currently make safe harbor contributions to the 401(k) Plan in an amount equal to three percent
(3%) of the participant's annual salary and subject to certain other limits. Plan participants vest immediately in the amounts contributed by us. Our employees are eligible to participate in the
401(k) Plan following their first month of full employment, with safe harbor contributions beginning after six months of credited service.
Other Elements of Compensation and Perquisites. In addition to other elements of compensation, as described above, we
provide the following other compensation and benefits to our named executive officers:
-
- Signing Bonus. We occasionally will offer a signing bonus
to certain employees in order to induce such persons to accept employment with our company. In 2014, we paid a signing bonus of $150,000 to Mr. Smith, which was negotiated as part of
Mr. Smith's employment offer letter entered into with our company in January 2014.
-
- Medical Insurance. We offer to each named executive
officer, the named executive officer's spouse and the named executive officer's children such health, dental and vision insurance programs as we make available to other eligible employees of our
company.
-
- Life and Disability Insurance. We provide each named
executive officer such short-term and long-term disability and/or life insurance as we make available to other eligible employees of our company. Our company offers life insurance coverage equal to
the annual salary of each employee, up to a designated maximum amount per employee.
-
- Parking Allowance. We provide each named executive
officer with the choice of paid parking at each company location or reimbursement of public transportation expenses, such as our company makes available to every other employee of our company.
Other Compensation Components
We believe that it is important to maintain flexibility to adapt our compensation structure to properly attract, motivate, and retain
the top executive talent for which we compete. We may provide compensation components that are different from or in addition to the components described above to our named executive officers, to
ensure that we provide a balanced, comprehensive and competitive compensation structure, as deemed appropriate by the Compensation Committee.
Accounting Considerations
ASC Topic 718, CompensationStock Compensation (referred to as ASC Topic
718), requires us to recognize an expense for the fair value of equity-based compensation awards. Grants of stock options,
32
Table of Contents
restricted
stock, restricted stock units and performance units under our equity incentive award plans will be accounted for under ASC Topic 718. Going forward, we expect to consider the accounting
implications of significant compensation decisions, especially in connection with decisions that relate to our equity incentive award plans and programs. As accounting standards change, we may revise
certain programs to appropriately align accounting expenses of our equity awards with our overall executive compensation philosophy and objectives.
COMPENSATION COMMITTEE REPORT
The Compensation Committee (the "Compensation Committee") of the Board of Directors (the "Board") of CoreSite Realty Corporation
reviewed and discussed the Compensation Discussion and Analysis included in this proxy statement with management. Based on such review and discussion, the Compensation Committee recommended to the
Board that the Compensation Discussion and Analysis be included in this proxy statement for filing with the Securities and Exchange Commission.
The
Compensation Committee:
Michael
Koehler
J. David Thompson
David A. Wilson
33
Table of Contents
2014 Summary Compensation Table
The following table sets forth certain information with respect to the compensation paid to our named executive officers during the
fiscal years ended December 31, 2014, 2013 and 2012, as applicable. Unless otherwise specified, positions listed below are those currently held by the named executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Year |
|
Salary
($) |
|
Bonus
($) |
|
Stock
Awards
($)(1) |
|
Option
Awards
($)(1) |
|
Non-Equity
Incentive Plan
Compensation
($)(2) |
|
All Other
Compensation
($)(3) |
|
Total
($) |
|
Thomas M. Ray |
|
|
2014 |
|
|
510,000 |
|
|
|
|
|
2,038,033 |
|
|
|
|
|
693,000 |
|
|
11,680 |
|
|
3,252,713 |
|
President and Chief Executive |
|
|
2013 |
|
|
459,327 |
|
|
|
|
|
900,007 |
|
|
600,005 |
|
|
400,000 |
|
|
10,980 |
|
|
2,370,319 |
|
Officer |
|
|
2012 |
|
|
443,750 |
|
|
|
|
|
877,506 |
|
|
585,000 |
|
|
638,000 |
|
|
10,064 |
|
|
2,554,320 |
|
Jeffrey S. Finnin |
|
|
2014 |
|
|
372,500 |
|
|
|
|
|
555,841 |
|
|
|
|
|
250,000 |
|
|
11,680 |
|
|
1,190,021 |
|
Chief Financial Officer |
|
|
2013 |
|
|
362,500 |
|
|
|
|
|
329,994 |
|
|
219,998 |
|
|
216,810 |
|
|
10,980 |
|
|
1,140,282 |
|
|
|
|
2012 |
|
|
353,750 |
|
|
|
|
|
278,404 |
|
|
185,601 |
|
|
293,000 |
|
|
11,911 |
|
|
1,122,666 |
|
Derek S. McCandless |
|
|
2014 |
|
|
278,825 |
|
|
|
|
|
463,192 |
|
|
|
|
|
190,000 |
|
|
10,370 |
|
|
942,387 |
|
Senior Vice President, Legal |
|
|
2013 |
|
|
265,850 |
|
|
|
|
|
288,004 |
|
|
192,002 |
|
|
146,540 |
|
|
10,020 |
|
|
902,416 |
|
and General Counsel |
|
|
2012 |
|
|
257,500 |
|
|
|
|
|
193,191 |
|
|
128,801 |
|
|
265,000 |
|
|
9,939 |
|
|
854,431 |
|
Steven J. Smith(4) |
|
|
2014 |
|
|
276,923 |
|
|
150,000 |
(4) |
|
577,927 |
|
|
|
|
|
568,572 |
|
|
5,963 |
|
|
1,579,385 |
|
Senior Vice President, Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Sales Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominic M. Tobin(5) |
|
|
2014 |
|
|
214,000 |
|
|
|
|
|
250,143 |
|
|
|
|
|
140,000 |
|
|
9,224 |
|
|
613,367 |
|
Senior Vice President, Operations |
|
|
2013 |
|
|
203,750 |
|
|
|
|
|
150,012 |
|
|
99,999 |
|
|
106,088 |
|
|
8,903 |
|
|
568,752 |
|
- (1)
- The
amounts included under the "Stock Awards" and "Options Awards" columns reflect the aggregate grant date fair value of the restricted stock awards and
option awards to purchase our common stock granted in each respective fiscal year, computed in accordance with FASB ASC Topic 718, excluding the effect of any estimated forfeitures. Assumptions used
to calculate these amounts are described in Note 12, "Equity Incentive Plan" to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended
December 31, 2014. The grant date fair value of stock awards, which are comprised of time-vested restricted stock and PSAs, includes the grant date fair value for the PSAs calculated based on
the achievement of target performance. For 2014, the total aggregate grant date fair value of stock awards, including the time-vested restricted stock units and the PSAs assuming the achievement of
highest level of performance, would be as follows: $2,397,050 for Mr. Ray, $653,757 for Mr. Finnin, $544,797 for Mr. McCandless, $626,885 for Mr. Smith and $294,208 for
Mr. Tobin.
- (2)
- Represents
the actual 2014 cash incentive awards earned by each named executive officer under the 2014 Bonus Plan. For Mr. Smith only, also includes
amounts earned under the quarterly sales incentive program as described under "Quarterly Sales Incentive Compensation" above.
- (3)
- Represents
company contributions to 401(k) plans, life insurance premiums and parking fees for each named executive officer for 2014.
- (4)
- Mr. Smith
was appointed as our Senior Vice President, Sales and Sales Operations, effective in January 2014. The amount in the "Bonus" column for
Mr. Smith represents a signing bonus negotiated as part of Mr. Smith's employment offer letter entered into with our company in January 2014.
- (5)
- Mr. Tobin
was not a named executive officer of our company in 2012.
34
Table of Contents
2014 Grants of Plan-Based Awards
The following table presents information regarding plan-based awards granted to our named executive officers for the fiscal year ended
December 31, 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units(#) |
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards |
|
Estimated Future Payouts Under
Equity Incentive Plan Awards(2) |
|
|
|
|
|
|
|
|
|
Grant Date
Fair Value
of Stock
Awards($)(1) |
|
|
|
|
|
Grant
Date |
|
Name
|
|
Award Description |
|
Threshold($) |
|
Target($) |
|
Maximum($) |
|
Threshold(#) |
|
Target(#) |
|
Maximum(#) |
|
Thomas M. Ray |
|
Annual Cash Incentive |
|
|
|
|
|
|
|
|
525,000 |
|
|
918,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock |
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,601 |
|
|
1,320,000 |
|
|
|
Performance Shares |
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,734 |
|
|
41,601 |
|
|
|
|
|
718,033 |
|
Jeffrey S. Finnin |
|
Annual Cash Incentive |
|
|
|
|
|
|
|
|
225,000 |
|
|
393,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock |
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,346 |
|
|
360,009 |
|
|
|
Performance Shares |
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,564 |
|
|
11,346 |
|
|
|
|
|
195,832 |
|
Derek S. McCandless |
|
Annual Cash Incentive |
|
|
|
|
|
|
|
|
169,500 |
|
|
296,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock |
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,455 |
|
|
300,007 |
|
|
|
Performance Shares |
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,303 |
|
|
9,455 |
|
|
|
|
|
163,185 |
|
Steven J. Smith |
|
Annual Cash Incentive |
|
|
|
|
|
|
|
|
105,000 |
|
|
183,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock |
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,673 |
|
|
180,004 |
|
|
|
Restricted Stock |
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,455 |
|
|
300,007 |
|
|
|
Performance Shares |
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,782 |
|
|
5,673 |
|
|
|
|
|
97,916 |
|
Dominic M. Tobin |
|
Annual Cash Incentive |
|
|
|
|
|
|
|
|
108,500 |
|
|
189,875 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock |
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,106 |
|
|
162,013 |
|
|
|
Performance Shares |
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,404 |
|
|
5,106 |
|
|
|
|
|
88,130 |
|
- (1)
- The
amounts included under this column reflect the grant date fair value of the restricted stock awards granted during 2014, computed in accordance with
FASB ASC Topic 718, excluding the effect of any estimated forfeitures. Assumptions used to calculate these amounts are described in Note 12, "Equity Incentive Plan" to our consolidated
financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2014.
- (2)
- Represents
the PSAs granted by the Compensation Committee in March 2014. See "Equity Compensation" above. The PSAs were issued at the maximum level of 150%
of target, subject to forfeiture based on achievement of certain levels of TSR during the performance periods. As discussed above, in February 2015, the Compensation Committee certified TSR
achievement for 2014 of 26.65%, which resulted in earning and banking 87.2% of target PSAs, or a 17.44% weighted payout for the 2014 performance period based on our relative performance versus the
MSCI US REIT Index at approximately the 44th percentile. Because the PSAs were granted to each named executive officer at the maximum achievement amount, PSAs were forfeited by
each executive officer based on the difference between the earned PSAs at 87.2% to target for the first performance period and the 150% issued amount of PSAs for the first performance period.
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
The amount in the "Bonus" column of the 2014 Summary Compensation Table for Mr. Smith represents a signing bonus negotiated as
part of Mr. Smith's employment offer letter entered into with our company in January 2014.
Amounts
in the "Non-Equity Incentive Plan Compensation" column of the 2014 Summary Compensation Table represent the actual 2014 cash incentive award earned by each named executive
officer under the 2014 Bonus Plan. In addition, for Mr. Smith only, the "Non-Equity Incentive Plan Compensation" column of the 2014 Summary Compensation Table includes compensation earned by
Mr. Smith under the quarterly sales incentive program as described under "Quarterly Sales Incentive Compensation" above. Amounts in the "Estimated Future Payouts Under Non-Equity Incentive Plan
Awards" columns of the 2014 Grants of Plan-Based Awards Table represent the target cash incentive award opportunity for each named executive officer under the 2014 Bonus Plan. Amounts in the
"Estimated Future Payouts Under Equity Incentive Plan Awards" columns of the 2014 Grants of Plan-Based Awards Table represent the target and maximum equity award opportunity for each named executive
officer with respect to the PSAs granted to named executives officers in 2014. See "Annual Cash Incentive Awards" and "Equity Compensation" above for a more detailed description of the 2014 Bonus Plan
and the PSAs.
Thomas M. RayOn August 1, 2010, we entered into an employment agreement with Thomas M. Ray, our President and Chief Executive Officer. The
agreement has an initial one-year term, subject to automatic annual renewal, unless either party elects to terminate the agreement by providing at least 90 days' notice prior to the applicable
anniversary date. The agreement provided for an initial annual
35
Table of Contents
base
salary and target annual bonus amount, subject to adjustment by the Board, and contains other customary employment terms and benefits.
Mr. Ray's
employment agreement also provides for, among other things, severance payments and the continuation of certain benefits following certain terminations of employment by
us or the termination of employment for "Good Reason" by Mr. Ray. Under these provisions, if Mr. Ray's employment is terminated by us without "Cause," or in connection with our
non-renewal of the agreement, or Mr. Ray resigns for Good Reason, Mr. Ray will have the right to receive continued payment of his base salary and the continuation of health benefits at
our expense for a period of 18 months following termination. In addition, Mr. Ray would receive a pro-rated lump sum payment upon termination in respect of his performance bonus amount
for the year of termination. Mr. Ray also would be entitled to accelerated vesting of any outstanding unvested equity awards that would have vested based on the passage of time had he remained
employed for 18 months after termination, and any of Mr. Ray's stock options would remain exercisable for at least a year following termination. Mr. Ray's employment agreement
provides that if he is terminated by us without Cause, or in connection with our non-renewal of the agreement, or he resigns for Good Reason, in each case within 60 days prior to or
12 months following a change in control of our company, then in addition to the payments and benefits described above, he would also receive an additional payment equal to his target
performance bonus amount for the year of termination. In addition, the salary continuation amount described above would be paid in a lump sum and Mr. Ray would receive accelerated vesting of
all of his outstanding unvested equity awards. In addition, Mr. Ray's employment agreement provides that if his employment is terminated due to his death or disability, he will receive a
pro-rated lump sum payment in respect of his target bonus amount for the year of termination and accelerated vesting of any of his outstanding unvested equity awards that would have vested based on
the passage of time if he had remained employed with us for 12 months following his termination.
Mr. Ray's
employment agreement also contains certain confidentiality covenants prohibiting Mr. Ray from, among other things, disclosing confidential information relating to
us. The employment agreement also contains non-competition and non-solicitation restrictions, pursuant to which Mr. Ray will not be permitted to compete with us in certain circumstances for a
period of 12 months following his termination of employment for any reason.
Jeffrey S. FinninOn January 24, 2011, Mr. Finnin became our Chief Financial Officer and he entered into an executive employment
agreement with us, with an initial one-year term, subject to automatic annual renewal, unless either party provides 90 days' notice of non-renewal. Mr. Finnin's employment agreement
provided for an for an initial annual base salary and target annual bonus amount, subject to adjustment by the Board, and contains other customary employment terms and benefits.
Mr. Finnin's
employment agreement also provides for severance payments and certain benefits following certain terminations of employment. If Mr. Finnin is terminated by us
without "Cause," or in connection with our non-renewal of his employment agreement, or if he resigns for "Good Reason," he will have the right to receive continued payment of base salary and health
benefits at our expense for 12 months after termination. In addition, Mr. Finnin would receive a pro-rated lump sum payment based on his performance bonus amount for the year of
termination and accelerated vesting of his unvested equity awards that would have vested in the 12 months after such termination, and his stock options would remain exercisable for at least one
year following termination. If such a termination occurs within 60 days prior to, or 12 months following, a change in control of our company, Mr. Finnin would receive a cash
payment equal to 125% of his annual base salary on the termination date (subject to certain conditions), a payment equal to his target performance bonus amount for the year, a pro-rated lump sum
payment based on his performance bonus amount for the year of termination, continued payment of health benefits at our expense for 12 months after termination and acceleration of all of
outstanding unvested equity awards. In addition, Mr. Finnin's employment agreement provides
36
Table of Contents
that
if his employment is terminated due to his death or disability, he will receive a pro-rated lump sum payment with respect to his target bonus amount for the year of termination and accelerated
vesting of any of his outstanding unvested equity awards that would have vested based on the passage of time if he had remained employed with us for 12 months following his termination. In
addition, Mr. Finnin's employment agreement contains confidentiality, non-competition and non-solicitation covenants similar to those described above for Mr. Ray.
Derek S. McCandlessOn March 11, 2011, Mr. McCandless became our Senior Vice President, Legal, General Counsel and Secretary, and he
entered into an executive employment agreement with us, with an initial one-year term, subject to automatic annual renewal, unless either party provides 90 days' notice of non-renewal.
Mr. McCandless's employment agreement provided for an for an initial annual base salary and target annual bonus amount, subject to adjustment by the Board, and contains other customary
employment terms and benefits. Mr. McCandless's employment agreement also includes provisions for severance payments, the continuation of certain benefits, the accelerated vesting of equity
awards and extended stock option exercise periods following certain terminations of employment that are substantially identical to those provided in Mr. Finnin's employment agreement. In
addition, Mr. McCandless's employment agreement contains confidentiality, non-competition and non-solicitation covenants similar to those described above for Mr. Ray.
Steven J. SmithOn January 8, 2014, Mr. Smith became our Senior Vice President, Sales and Sales Operations, and he executed an
employment offer letter in connection with his hiring, which provides for an initial annual base salary of $300,000, subject to annual adjustment, and contains other customary employment terms and
benefits. The employment offer letter entitles Mr. Smith to a signing bonus of $150,000 and guaranteed cash compensation in 2014 of $650,000. Pursuant to the employment offer letter,
Mr. Smith also is entitled to participate in our company's Senior Management Severance and Change in Control Program. See "Potential Payments upon Termination or Change in Control" for a
discussion of the benefits under the Senior Management Severance and Change in Control Program.
37
Table of Contents
2014 Outstanding Equity Awards at Fiscal Year-End Table
The following table presents information regarding the outstanding equity awards held by each of our named executive officers at
December 31, 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
Stock Awards |
|
Name
|
|
Grant Date |
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable |
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable |
|
Option
Exercise
Price ($) |
|
Option
Expiration
Date |
|
Number of
Shares or
Units of
Stock
That
Have Not
Vested (#) |
|
Market Value
of Shares
or Units of
Stock That
Have Not
Vested ($)(1) |
|
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares,
Units or
Other Rights
That Have Not
Vested (#)(4) |
|
Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights
That Have Not
Vested ($)(1) |
|
Thomas M. Ray |
|
9/22/2010 |
|
|
28,125 |
|
|
|
|
|
16.00 |
|
|
9/22/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/2011 |
|
|
|
|
|
27,088 |
(2) |
|
15.23 |
|
|
3/11/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,818 |
(2) |
|
461,493 |
|
|
|
|
|
|
|
|
|
4/5/2012 |
|
|
37,500 |
|
|
37,500 |
(2) |
|
23.99 |
|
|
4/5/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/5/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,288 |
(2) |
|
714,146 |
|
|
|
|
|
|
|
|
|
2/28/2013 |
|
|
15,046 |
|
|
45,135 |
(2) |
|
32.40 |
|
|
2/28/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/28/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,832 |
(2) |
|
813,490 |
|
|
|
|
|
|
|
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,601 |
(3) |
|
1,624,519 |
|
|
|
|
|
|
|
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,024 |
|
|
1,055,287 |
|
Jeffrey S. Finnin |
|
1/24/2011 |
|
|
26,095 |
|
|
|
|
|
14.37 |
|
|
1/24/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/2011 |
|
|
27,090 |
|
|
9,027 |
(2) |
|
15.23 |
|
|
3/11/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,938 |
(2) |
|
153,779 |
|
|
|
|
|
|
|
|
|
4/5/2012 |
|
|
11,898 |
|
|
11,897 |
(2) |
|
23.99 |
|
|
4/5/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/5/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,801 |
(2) |
|
226,529 |
|
|
|
|
|
|
|
|
|
2/28/2013 |
|
|
5,518 |
|
|
16,548 |
(2) |
|
32.40 |
|
|
2/28/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/28/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,638 |
(2) |
|
298,264 |
|
|
|
|
|
|
|
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,346 |
(3) |
|
443,061 |
|
|
|
|
|
|
|
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,370 |
|
|
287,799 |
|
Derek S. McCandless |
|
3/11/2011 |
|
|
4,924 |
|
|
|
|
|
15.23 |
|
|
3/11/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/2011 |
|
|
13,545 |
|
|
4,514 |
(2) |
|
15.23 |
|
|
3/11/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,969 |
(2) |
|
76,889 |
|
|
|
|
|
|
|
|
|
4/5/2012 |
|
|
8,258 |
|
|
8,255 |
(2) |
|
23.99 |
|
|
4/5/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/5/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,025 |
(2) |
|
157,176 |
|
|
|
|
|
|
|
|
|
2/28/2013 |
|
|
4,816 |
|
|
14,442 |
(2) |
|
32.40 |
|
|
2/28/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/28/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,666 |
(2) |
|
260,307 |
|
|
|
|
|
|
|
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,455 |
(3) |
|
369,218 |
|
|
|
|
|
|
|
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,142 |
|
|
239,845 |
|
Steven J. Smith |
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,673 |
(3) |
|
221,531 |
|
|
|
|
|
|
|
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,455 |
(3) |
|
369,218 |
|
|
|
|
|
|
|
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,685 |
|
|
143,899 |
|
Dominic M. Tobin |
|
9/22/2010 |
|
|
18,750 |
|
|
|
|
|
16.00 |
|
|
9/22/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/2011 |
|
|
12,192 |
|
|
4,061 |
(2) |
|
15.23 |
|
|
3/11/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,772 |
(2) |
|
69,197 |
|
|
|
|
|
|
|
|
|
4/5/2012 |
|
|
5,488 |
|
|
5,486 |
(2) |
|
23.99 |
|
|
4/5/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/5/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,676 |
(2) |
|
104,498 |
|
|
|
|
|
|
|
|
|
2/28/2013 |
|
|
2,508 |
|
|
7,522 |
(2) |
|
32.40 |
|
|
2/28/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/28/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,471 |
(2) |
|
135,543 |
|
|
|
|
|
|
|
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,106 |
(3) |
|
199,389 |
|
|
|
|
|
|
|
|
|
3/4/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,317 |
|
|
129,529 |
|
- (1)
- Based
on a price of $39.05 per share, which was the closing price of our common stock on the New York Stock Exchange on December 31, 2014.
- (2)
- The
award vests in four equal annual installments beginning on the first anniversary of the grant date, provided that the award recipient remains in
continuous service with us as of each vesting date.
- (3)
- The
award vests in three equal annual installments beginning on the first anniversary of the grant date, provided that the award recipient remains in
continuous service with us as of each vesting date.
- (4)
- Represents
the PSAs granted by the Compensation Committee in March 2014. See "Equity Compensation" above. As discussed above, In February 2015, the
Compensation Committee certified TSR achievement for 2014 of 26.65%, which resulted in earning and banking 87.2% of target PSAs, or a 17.44% weighted payout for the 2014 performance period based on
our relative performance versus the MSCI US REIT Index at approximately the 44th percentile. Because the PSAs were granted to each named executive officer at the maximum
achievement amount, PSAs were forfeited by each executive officer based on the difference between the earned PSAs at 87.2% to target for the first performance period and the 150% issued amount of PSAs
for the first performance period. The amount of PSAs in the table above represent the amount of shares earned during the first performance period of 87.2% to target, with the remaining shares based on
the achievement of target performance in future performance periods.
38
Table of Contents
2014 Option Exercises and Stock Vested Table
The following table presents information regarding the vesting of stock awards for each of our named executive officers during 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
Stock Awards |
|
Name
|
|
Number of
Shares Acquired on
Exercise (#) |
|
Value Realized on
Exercise ($) |
|
Number of
Shares Acquired on
Vesting (#) |
|
Value Realized on
Vesting ($) |
|
Thomas M. Ray |
|
|
165,639 |
|
|
3,027,511 |
|
|
35,410 |
|
|
1,119,131 |
|
Jeffrey S. Finnin |
|
|
|
|
|
|
|
|
29,106 |
|
|
945,209 |
|
Derek S. McCandless |
|
|
|
|
|
|
|
|
9,927 |
|
|
311,091 |
|
Steven J. Smith |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominic M. Tobin |
|
|
|
|
|
|
|
|
5,520 |
|
|
174,521 |
|
Potential Payments upon Termination or Change in Control
In September 2010, we adopted the Senior Management Severance and Change in Control Program (the "Severance Plan"), in which members of
our senior membership team participate, other than Messrs. Ray, Finnin and McCandless. The Severance Plan provides that if a participant is terminated by us at any time without "Cause" or
resigns for "Good Reason" (each as defined in the Severance Plan), the participant will be entitled to receive the following severance payments and benefits: (i) continued payment of his or her
base salary for a period of time equal to three months, plus one additional month for each year of service with us (subject to a maximum of 12 months); (ii) continued payment of health
insurance premiums for a similar period of time; and (iii) accelerated vesting of any unvested equity awards that would have vested solely based on the passage of time had the participant
remained employed with us for 12 months following termination. If such a termination or resignation occurs within 60 days prior to or nine months following a change in control of our
company, participants will receive (i) a lump sum payment on termination of one year of the participant's base salary, (ii) a lump sum payment on termination of the participant's target
bonus amount for the year of termination, (iii) an additional lump sum payment amount equal to the participant's pro-rated bonus for the year of termination, (iv) continued payment of
health insurance premiums for up to 12 months, subject to certain conditions, and (v) accelerated vesting of all outstanding and unvested equity awards held by the participant. Each of
the foregoing benefits is conditioned on the participant executing a release of claims in favor of us following termination. The Severance Plan also contains certain confidentiality, non-solicitation
and non-competition covenants. The non-competition and non-solicitation covenants take effect following termination for the period in which the participant would have received severance payments,
based on an assumed termination (not in connection with a change in control) of the participant's employment by us without Cause on the date the participant's actual termination of employment occurs,
and applies regardless of whether severance payments are actually received under the plan.
Messrs. Ray,
Finnin and McCandless are entitled to severance payments pursuant to the terms of their employment agreements, as set forth under "Employment Agreements" above. The
definitions of "Cause" and "Good Reason" in the Severance Plan, as applicable, are substantially similar to the definitions of those terms in Messrs. Ray's, Finnin's and McCandless's employment
agreements, other than changes related to differences in reporting relationships.
In
addition, notwithstanding the terms set forth in the Severance Plan or the employment agreements for Messrs. Ray, Finnin and McCandless, pursuant to the restricted stock award
agreements for the PSAs granted to our senior leadership team, upon termination of employment with us at any time without "Cause" or resignation for "Good Reason" (each as defined in the PSA
restricted stock award agreement), any PSAs that have been earned as of the employment termination date shall be
39
Table of Contents
accelerated.
If such a termination or resignation occurs within 60 days prior to or twelve months following a change in control of our company, vesting of the PSAs shall be accelerated with
respect to the number of shares equal to the greater of (i) the target amount of shares set forth in the applicable restricted stock award agreement or (ii) the target amount of shares
multiplied by a performance multiplier, as determined by the Compensation Committee.
The
following table sets forth an estimate of the payments to be made to our named executive officers in the event any of the terminations described above or a change in control occurs,
assuming that the triggering event took place on December 31, 2014, and based on the closing market price of our common stock on December 31, 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
Death or
Disability ($) |
|
Termination
Without Cause or
for Good Reason
(without Change
in Control) ($) |
|
Termination
Without Cause or
for Good Reason
(with Change
in Control) ($) |
|
Thomas M. Ray |
|
|
|
|
|
|
|
|
|
|
Salary |
|
|
|
|
|
787,500 |
|
|
787,500 |
|
Bonus |
|
|
525,000 |
|
|
525,000 |
|
|
1,050,000 |
|
Acceleration of Stock and Option Awards |
|
|
2,659,013 |
|
|
4,211,219 |
|
|
6,206,912 |
|
Health Insurance |
|
|
|
|
|
21,035 |
|
|
21,035 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
3,184,013 |
|
|
5,544,754 |
|
|
8,065,447 |
|
Jeffrey S. Finnin |
|
|
|
|
|
|
|
|
|
|
Salary |
|
|
|
|
|
375,000 |
|
|
468,750 |
|
Bonus |
|
|
225,000 |
|
|
225,000 |
|
|
450,000 |
|
Acceleration of Stock and Option Awards |
|
|
855,561 |
|
|
855,561 |
|
|
1,921,422 |
|
Health Insurance |
|
|
|
|
|
14,023 |
|
|
14,023 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,080,561 |
|
|
1,469,584 |
|
|
2,854,195 |
|
Derek S. McCandless |
|
|
|
|
|
|
|
|
|
|
Salary |
|
|
|
|
|
282,500 |
|
|
353,125 |
|
Bonus |
|
|
169,500 |
|
|
169,500 |
|
|
339,000 |
|
Acceleration of Stock and Option Awards |
|
|
567,063 |
|
|
567,063 |
|
|
1,437,652 |
|
Health Insurance |
|
|
|
|
|
5,319 |
|
|
5,319 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
736,563 |
|
|
1,024,382 |
|
|
2,135,096 |
|
Steven J. Smith |
|
|
|
|
|
|
|
|
|
|
Salary |
|
|
|
|
|
75,000 |
|
|
300,000 |
|
Bonus |
|
|
|
|
|
|
|
|
210,000 |
|
Acceleration of Stock and Option Awards |
|
|
|
|
|
196,929 |
|
|
738,436 |
|
Health Insurance |
|
|
|
|
|
1,074 |
|
|
4,296 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
273,003 |
|
|
1,252,732 |
|
Dominic M. Tobin |
|
|
|
|
|
|
|
|
|
|
Salary |
|
|
|
|
|
198,917 |
|
|
217,000 |
|
Bonus |
|
|
|
|
|
|
|
|
217,000 |
|
Acceleration of Stock and Option Awards |
|
|
|
|
|
387,849 |
|
|
870,965 |
|
Health Insurance |
|
|
|
|
|
12,854 |
|
|
14,023 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
599,620 |
|
|
1,318,988 |
|
40
Table of Contents
Pension Benefits
The named executive officers do not participate in any pension plans and received no pension benefits during the year ended
December 31, 2014, other than with respect to our defined contribution 401(k) plan.
Nonqualified Deferred Compensation
The named executive officers do not participate in any nonqualified deferred compensation plans and received no nonqualified deferred
compensation during the year ended December 31, 2014.
Equity Compensation Plan Information
The following table sets forth certain information, as of December 31, 2014, concerning shares of our common stock authorized
for issuance under our equity compensation plans, which consists only of our 2010 Equity Incentive Award Plan (As Amended and Restated).
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
to be Issued Upon
Exercise of
Outstanding
Options,
Warrants and Rights
(a) |
|
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
(b) |
|
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected
in Column (a))
(c) |
|
Equity compensation plans approved by stockholders |
|
|
758,095 |
|
$ |
20.94 |
|
|
3,562,813 |
|
Equity compensation plans not approved by stockholders |
|
|
|
|
|
|
|
|
|
|
Total equity compensation plans |
|
|
758,095 |
(1) |
$ |
20.94 |
|
|
3,562,813 |
(1) |
- (1)
- As
of March 20, 2015, 3,318,345 shares of common stock remained available for future grants of awards under the 2010 Plan and 1,267,994 shares of our
common stock were subject to outstanding awards under the 2010 Plan.
41
Table of Contents
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 20, 2015 with respect to the beneficial ownership of our common
stock by (i) each person who beneficially holds more than 5% of the outstanding shares of our common stock based solely on our review of SEC filings; (ii) each director or director
nominee; (iii) each named executive officer listed in the table titled "2014 Summary Compensation Table" above; and (iv) all directors and executive officers as a group.
The
number of shares beneficially owned by each stockholder is determined under SEC rules and generally includes shares for which the holder has voting or investment power. The
information does not necessarily indicate beneficial ownership for any other purpose. The percentage of beneficial ownership shown in the following table is based on 22,020,022 outstanding shares of
common stock as of March 20, 2015. For purposes of calculating each person's or group's percentage ownership, shares of common stock issuable pursuant to the terms of stock options, Operating
Partnership units or restricted stock units exercisable or vesting within 60 days after March 20, 2015 are included as outstanding and beneficially owned for that person or group, but
are not treated as outstanding for the purpose of computing the percentage ownership of any other person or group.
Unless
otherwise indicated, the address for all persons named below is c/o CoreSite Realty Corporation, 1001 17th Street, Suite 500, Denver, Colorado 80202.
|
|
|
|
|
|
|
|
Name of Beneficial Owner
|
|
Shares of
Common Stock
Beneficially Owned |
|
Percent of
Outstanding
Common Stock |
|
Beneficial holders of 5% or more of our common stock: |
|
|
|
|
|
|
|
The Carlyle Group L.P. |
|
|
25,275,390 |
(1) |
|
53.4 |
% |
The Vanguard Group Inc. |
|
|
2,629,768 |
(2) |
|
11.9 |
% |
FMR LLC |
|
|
2,522,917 |
(3) |
|
11.5 |
% |
BlackRock, Inc. |
|
|
1,976,549 |
(4) |
|
9.0 |
% |
JPMorgan Chase & Co. |
|
|
1,104,075 |
(5) |
|
5.0 |
% |
Named Executive Officers, Directors and Director Nominees: |
|
|
|
|
|
|
|
James A. Attwood, Jr. |
|
|
|
|
|
|
|
Michael Koehler |
|
|
19,844 |
(6) |
|
* |
|
Thomas M. Ray |
|
|
503,630 |
(7) |
|
2.3 |
% |
Robert G. Stuckey |
|
|
|
|
|
|
|
Paul E. Szurek |
|
|
18,594 |
(6) |
|
* |
|
J. David Thompson |
|
|
14,094 |
(6) |
|
* |
|
David A. Wilson |
|
|
18,594 |
(6) |
|
* |
|
Jeffrey S. Finnin |
|
|
199,953 |
(8) |
|
* |
|
Dominic M. Tobin |
|
|
92,229 |
(9) |
|
* |
|
Derek S. McCandless |
|
|
118,048 |
(10) |
|
* |
|
Steven J. Smith |
|
|
33,833 |
|
|
* |
|
All current executive officers and directors as a group (12 persons) |
|
|
1,116,856 |
(11) |
|
5.0 |
% |
- *
- Less
than one percent (1%).
- (1)
- Based
solely on a Schedule 13G filed with the SEC on February 14, 2013. Amounts shown represent 25,275,390 Operating Partnership units
beneficially owned by The Carlyle Group L.P. Pursuant to the limited partnership agreement of Coresite, L.P., the Operating Partnership units are redeemable for cash, or at our
discretion, into shares of our common stock on a one-for-one basis. The table above assumes the conversion of all Operating Partnership units into shares of our common stock on a one-for-one basis.
The shares are beneficially owned by The Carlyle Group L.P. and its subsidiaries and affiliates, consisting of Carlyle Group Management L.L.C.,
42
Table of Contents
Carlyle
Holdings I GP Inc., Carlyle Holdings I GP Sub L.L.C., Carlyle Holdings I L.P., TC Group, L.L.C., TC Group Sub L.P., Carlyle Realty V GP, L.L.C.,
Carlyle Realty V, L.P., CoreSite CRP V Holdings, LLC, Carlyle Realty III, GP, L.L.C., Carlyle Realty III, L.P., CoreSite CRP III Holdings, LLC, Carlyle
Realty IV GP, L.L.C., Carlyle Realty IV, L.P., CoreSite CRP IV Holdings, LLC, CRP IV AIV GP, L.L.C., CRP IV AIV GP, L.P., CRQP IV AIV, L.P.,
CRP IV-A AIV, L.P., CoreSite CRP IV Holdings (VCOC II), LLC, CoreSite CRP IV Holdings (VCOC I), LLC, CRP III AIV GP, L.L.C., CRP III
AIV GP, L.P., CRQP III AIV, L.P. and CoreSite CRP III Holdings (VCOC), LLC. The address of The Carlyle Group L.P. and each of the other entities listed above
is c/o The Carlyle Group, 1001 Pennsylvania Ave NW, Suite 220 South, Washington, DC 20004.
- (2)
- Based
solely on a Schedule 13G/A filed with the SEC on February 11, 2015. The address of The Vanguard Group Inc. is 100 Vanguard Blvd.,
Malvern, PA 19355. Includes 1,605,018 shares reported as beneficially owned by the Vanguard Specialized FundsVanguard REIT Index Fund as set forth on a Schedule 13G/A filed with
the SEC on February 6, 2015.
- (3)
- Based
solely on a Schedule 13G/A filed with the SEC on February 13, 2015. The address of FMR LLC is 245 Summer Street, Boston, MA
02210.
- (4)
- Based
solely on a Schedule 13G/A filed with the SEC on January 15, 2015. The shares are beneficially owned by BlackRock, Inc. and its
subsidiaries and affiliates, consisting of BlackRock Advisors, LLC, BlackRock Asset Management Canada Limited, BlackRock Asset Management Ireland Limited, BlackRock Fund Advisors, BlackRock
Institutional Trust Company, N.A., BlackRock International Limited, BlackRock Investment Management (UK) Ltd, BlackRock Investment Management, LLC and BlackRock Japan Co Ltd. The
address of BlackRock, Inc. and each of the other entities listed above is 55 East 52nd Street, New York, NY 10022.
- (5)
- Based
solely on a Schedule 13G filed with the SEC on February 13, 2015. The address of JPMorgan Chase & Co. is 270 Park Ave.,
New York, NY 10017.
- (6)
- Includes
(i) 2,500 shares issuable upon the exercise of options that are currently exercisable and (ii) restricted stock units representing
the right to receive 11,094 shares that are vested or vest within 60 days of March 20, 2015.
- (7)
- Includes
(i) 141,554 shares issuable upon the exercise of options that may be exercised within 60 days of March 20, 2015 and
(ii) 2,000 shares held by a family trust of which Mr. Ray is a co-trustee.
- (8)
- Includes
91,093 shares issuable upon the exercise of options that may be exercised within 60 days of March 20, 2015.
- (9)
- Includes
(i) 48,250 shares issuable upon the exercise of options that may be exercised within 60 days of March 20, 2015 and
(ii) 6,591 Operating Partnership units redeemable for cash, or at our discretion, into shares of our common stock on a one-for-one basis. The table above assumes the conversion of all Operating
Partnership units into shares of our common stock on a one-for-one basis.
- (10)
- Includes
45,000 shares issuable upon the exercise of options that may be exercised within 60 days of March 20, 2015.
- (11)
- Includes
(i) 387,541 shares issuable upon the exercise of options that may be exercised within 60 days of March 20, 2015,
(ii) restricted stock units representing the right to receive 44,376 shares and (iii) 8,998 Operating Partnership units redeemable for cash, or at our discretion, into shares of our
common stock on a one-for-one basis. The table above assumes the conversion of all Operating Partnership units into shares of our common stock on a one-for-one basis.
43
Table of Contents
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who own more than ten percent of a
registered class of our equity securities, to file reports of securities ownership and changes in such ownership with the SEC. Executive officers,
directors and greater than ten percent stockholders also are required by rules promulgated by the SEC to furnish us with copies of all Section 16(a) forms they file.
Based
solely upon a review of Forms 3 and 4 and amendments thereto and written representations furnished to us during the most recent fiscal year, no person who at any time during
the fiscal year was a director, officer, or beneficial owner of more than 10% of any class of our equity securities failed to file on a timely basis, as disclosed in the above forms, reports required
by Section 16(a) of the Exchange Act during the most recent fiscal year.
44
Table of Contents
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The Restructuring Transactions
Immediately prior to the completion of our initial public offering ("IPO"), we entered into a series of transactions with the Funds to
create our current organizational structure (the "Restructuring Transactions"). In connection with this restructuring, all of the property and non-cash assets that were then used in the operation of
our company's business were contributed by the Funds to our Operating Partnership. In the Restructuring Transactions, the Funds contributed 100% of their ownership interests in the entities that,
directly or indirectly, owned or leased all of the properties that comprised our portfolio and all the other non-cash assets used in our business at that time. The aggregate undepreciated book value
plus construction in progress of the contributed properties was $586.2 million as of June 30, 2010. In exchange for this contribution, our Operating Partnership issued to the Funds
34,600,000 Operating Partnership units in the aggregate having a total value of $553.6 million, based upon a price of $16.00 per unit. Of these Operating Partnership units, approximately 19.5%,
or $108.1 million in value, 11.4%, or $63.2 million in value, and 15.6%, or $86.2 million in value, respectively, were issued to the Funds contributing One Wilshire
Holdings, LLC, 900 N. Alameda Holdings, LLC and 12100 Sunrise Valley Drive Holdings, LLC, each of which now holds Operating Partnership units exchangeable into five percent or
more of our common stock. All of the Operating
Partnership units held by each of these three entities are beneficially held by DBD Investors V, L.L.C. See "Security Ownership of Certain Beneficial Owners and Management."
In
connection with the Restructuring Transactions, we entered into an agreement with certain of the Funds granting them certain rights to receive information about us and to consult with
and advise us on significant matters so long as they continue to own any Operating Partnership units or shares of our common stock and the number of Operating Partnership units and shares of common
stock held collectively by the Funds is equal to or greater than 5% of the total number of shares of outstanding common stock (assuming all Operating Partnership units are exchanged for common stock).
This agreement also provides that for so long as the Funds have the right to nominate directors for election to our Board, such rights will be assigned to two of these Funds. The Funds have agreed to
maintain the confidentiality of any material non-public information they receive in connection with the foregoing and the Funds will not receive any compensation or expense reimbursement pursuant to
this agreement.
Registration Rights Agreement
In connection with our IPO, we granted the Funds which received Operating Partnership units in the Restructuring Transactions certain
registration rights with respect to any shares of our common stock that may be acquired by them in connection with the exchange of units tendered for redemption. An aggregate of 25,275,390 shares of
our common stock issuable upon exchange of units issued in the Restructuring Transactions remain subject to a registration rights agreement. The holders of such units are entitled to require us to
seek to register all such shares of common stock underlying the units for public sale, subject to certain exceptions, limitations and conditions precedent. We will bear expenses incident to our
registration requirements under the registration rights agreement, except that such expenses shall not include any underwriting fees, discounts or commissions, brokerage or sales commissions, or
out-of-pocket expenses of the persons exercising the redemption rights or transfer taxes, if any, relating to the sale of such shares. In 2014, we did not incur any costs in connection with the
registration of our common stock under the registration rights agreement.
Tax Protection Agreement
We have agreed with each of the Funds that have directly or indirectly contributed their interests in properties in our portfolio to
our Operating Partnership that if we directly or indirectly sell, convey,
45
Table of Contents
transfer
or otherwise dispose of all or any portion of these interests in a taxable transaction, we will make an interest-free loan to the contributors in an amount equal to the contributor's tax
liabilities, based on an assumed tax rate. Any such loan would be repayable out of the after-tax proceeds (based on an assumed tax rate) of any distribution from the Operating Partnership to, or any
sale of Operating Partnership units (or common stock issued by us in exchange for such units) by, the recipient of such loan, and would be non-recourse to the borrower other than with respect to such
proceeds. These tax protection provisions apply for a period expiring on the earlier of (i) September 28, 2017 and (ii) the date on which these contributors (or certain
transferees) dispose in certain taxable transactions of 90% of the Operating Partnership units that were issued to them in connection with the contribution of these properties.
Syniverse Agreement
On September 19, 2012, we licensed space at our LA1 property (Los Angeles, California) to Syniverse Technologies, LLC, a
provider of business and technology services for the mobile telecommunications industry and a company that is wholly owned by an affiliate of Carlyle. The license agreement, which the Board and our
management believe was entered into upon market terms, provides for a three-year term with a total contract value of approximately $0.4 million. Total revenue was $0.1 million for the
year ended December 31, 2014.
Beats Music Agreement
In 2013, we began licensing space at our NY1 property (New York, New York) to Beats Music, LLC, a provider of streaming music
services and a company that was an affiliate of Carlyle. The license agreement, which the Board and our management believe was entered into upon market terms, provides for a three-year term with a
total contract value of approximately $2.1 million. Beat Music, LLC was acquired by Apple, Inc. in November 2014 and is no longer considered an affiliate of Carlyle after the
acquisition. Total revenue received by us in 2014 from Beats Music, LLC through the date of its acquisition by Apple, Inc. was $0.6 million.
Carlyle Agreement
We lease 1,520 net rentable square feet of space at our VA1 property (Reston, Virginia) to affiliates of Carlyle. Total revenue was
approximately $0.3 million for the year ended December 31, 2014. The Board and our management believe the lease was entered into upon market terms.
Statement of Policy Regarding Transactions with Related Parties
Our Code of Business Conduct and Ethics, which applies to all our directors, officers, employees and agents, includes a process for
identifying and resolving potential conflicts of interest, including conflicts arising from transactions with related parties. Specifically, our Code of Business Conduct and Ethics requires that any
conflict of interest of our directors, executive officers or other principal officer may only be waived by our Board. All transactions disclosed above were reviewed and approved in accordance with our
Code of Business Conduct and Ethics and applicable law.
46
Table of Contents
MISCELLANEOUS
Stockholder Proposals and Nominations
Any proposal of a stockholder intended to be included in our proxy statement for the 2016 Annual Meeting of Stockholders pursuant to
SEC Rule 14a-8 must be received by us no later than November 27, 2015, unless the date of our 2016 Annual Meeting of Stockholders is more than 30 days before or after
May 20, 2016, in which case the proposal must be received a reasonable time before we begin to print and mail our proxy materials. All proposals should be directed to our Corporate Secretary,
at 1001 17th Street, Suite 500, Denver, Colorado 80202.
A
stockholder nomination of a person for election to our Board or a proposal for consideration at our 2016 Annual Meeting of Stockholders not intended to be included in our proxy
statement pursuant to SEC Rule 14a-8 must be submitted in accordance with the advance notice procedures and other requirements set forth in Section 11 of Article II of our current
bylaws. Pursuant to Section 11 of Article II of our current bylaws, we must receive timely notice of the nomination or other proposal in writing by not later than 5:00 p.m.,
Eastern Time, on November 27, 2015, nor earlier than October 28, 2015. However, in the event that the 2016 Annual Meeting of Stockholders is advanced or delayed by more than
30 days from the first anniversary of the date of the 2015 Annual Meeting of Stockholders, notice by the stockholder to be timely must be received no earlier than the 150th day prior to
the date of the meeting and not later than 5:00 p.m., Eastern Time, on the later of the 120th day prior to the date of the meeting or the 10th day following the date of the first
public announcement of the meeting. A copy of our bylaws can be obtained from our Corporate Secretary, who can be reached at 1001 17th Street, Suite 500, Denver, Colorado 80202.
Householding
Any stockholder, including both stockholders of record and beneficial holders who own their shares through a broker, bank or other
nominee, who share an address with another holder of our common stock are only being sent one Notice of Internet Availability of Proxy Materials or set of proxy materials, unless such holders have
provided contrary instructions. We will deliver promptly upon written or oral request a separate copy of these materials to any holder at a shared address to which a single copy of the proxy materials
were delivered. If you wish to receive a separate copy of these materials in the future or if you are receiving multiple copies and would like to receive a single copy, please contact our Corporate
Secretary in writing, at 1001 17th Street, Suite 500, Denver, Colorado 80202, or by telephone at (866) 777-2673.
Other Matters
We do not intend to bring before the Annual Meeting any matters other than the proposals specifically described above, and we know of
no matters other than those to come before the Annual Meeting. If any other matters properly come before the Annual Meeting or any postponement or adjournment thereof, it is the intention of the
persons named in the accompanying proxy to vote such proxy in accordance with the recommendation of our management on such matters, including any matters dealing with the conduct of the Annual
Meeting.
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By Order of the Board of Directors |
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DEREK S. MCCANDLESS
Secretary |
Denver,
Colorado
March 26, 2015
47
Table of Contents
APPENDIX A
Reconciliation of Net Income to FFO
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Year Ended |
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(in thousands)
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December 31,
2014 |
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December 31,
2013 |
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Net income |
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$ |
40,052 |
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$ |
31,612 |
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Real estate depreciation and amortization |
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73,955 |
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62,040 |
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Gain on land disposal |
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(1,208 |
) |
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FFO |
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$ |
112,799 |
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$ |
93,652 |
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Preferred stock dividends |
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(8,338 |
) |
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(8,338 |
) |
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FFO available to common shareholders and OP unit holders |
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$ |
104,461 |
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$ |
85,314 |
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Funds
From Operations (FFO) is a supplemental measure of our performance which should be considered along with, but not as an alternative to, net income and cash provided by operating
activities as a measure of operating performance and liquidity. We calculate FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts. FFO
represents net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property and undepreciated land and impairment write-downs of depreciable real estate, plus real
estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures.
Our
management uses FFO as a supplemental performance measure because, in excluding real estate related depreciation and amortization and gains and losses from property dispositions, it
provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs.
We
offer this measure because we recognize that FFO will be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes
depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions, nor the level of capital expenditures and capitalized leasing
commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our financial condition and results from operations,
the utility of FFO as a measure of our performance is limited. FFO is a non-GAAP measure and should not be considered a measure of liquidity, an alternative to net income, cash provided by operating
activities or any other performance measure determined in accordance with GAAP, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends or make
distributions. In addition, our calculations of FFO are not necessarily comparable to FFO as calculated by other REITs that do not use the same definition or implementation guidelines or interpret the
standards differently from us. Investors in our securities should not rely on these measures as a substitute for any GAAP measure, including net income.
Table of Contents
Reconciliation of Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
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Year Ended |
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(in thousands)
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December 31,
2014 |
|
December 31,
2013 |
|
Net income |
|
$ |
40,052 |
|
$ |
31,612 |
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Adjustments: |
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Interest expense, net of interest income |
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5,305 |
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2,657 |
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Income tax (benefit) expense |
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38 |
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401 |
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Depreciation and amortization |
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80,722 |
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65,785 |
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EBITDA |
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$ |
126,117 |
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$ |
100,455 |
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EBITDA
is defined as earnings before interest, taxes, depreciation and amortization. Management uses EBITDA as an indicator of our ability to incur and service debt. In addition, we
consider EBITDA to be appropriate supplemental measures of our performance because they eliminate depreciation and interest, which permits investors to view income from operations without the impact
of non-cash depreciation or the cost of debt. However, because EBITDA is calculated before recurring cash charges including interest expense and taxes, and are not adjusted for capital expenditures or
other recurring cash requirements of our business, their utilization as a cash flow measurement is limited.
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1 1 12345678
12345678 12345678 12345678 12345678 12345678 12345678 12345678 NAME THE
COMPANY NAME INC. - COMMON 123,456,789,012.12345 THE COMPANY NAME INC. -
CLASS A 123,456,789,012.12345 THE COMPANY NAME INC. - CLASS B
123,456,789,012.12345 THE COMPANY NAME INC. - CLASS C 123,456,789,012.12345
THE COMPANY NAME INC. - CLASS D 123,456,789,012.12345 THE COMPANY NAME INC. -
CLASS E 123,456,789,012.12345 THE COMPANY NAME INC. - CLASS F
123,456,789,012.12345 THE COMPANY NAME INC. - 401 K 123,456,789,012.12345 . x
02 0000000000 JOB # 1 OF 2 1 OF 2 PAGE SHARES CUSIP # SEQUENCE # THIS PROXY
CARD IS VALID ONLY WHEN SIGNED AND DATED. KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY TO VOTE, MARK BLOCKS BELOW IN BLUE OR
BLACK INK AS FOLLOWS: Signature (Joint Owners) Signature [PLEASE SIGN WITHIN
BOX] Date Date CONTROL # SHARES To withhold authority to vote for any
individual nominee(s), mark For All Except and write the number(s) of the
nominee(s) on the line below. 0 0 0 0 0 0 0 0 0 0000233062_1 R1.0.0.51160 For
Withhold For All All All Except The Board of Directors recommends you vote
FOR the following: 1. Election of Directors Nominees 01 Robert G. Stuckey 02
Thomas M. Ray 03 James A. Attwood, Jr. 04 Michael R. Koehler 05 Paul E.
Szurek 06 J. David Thompson 07 David A. Wilson CORESITE REALTY CORPORATION
1001 17TH STREET, SUITE 500 DENVER, CO 80202 Investor Address Line 1 Investor
Address Line 2 Investor Address Line 3 Investor Address Line 4 Investor
Address Line 5 John Sample 1234 ANYWHERE STREET ANY CITY, ON A1A 1A1 Investor
Address Line 1 Investor Address Line 2 Investor Address Line 3 Investor
Address Line 4 Investor Address Line 5 John Sample 1234 ANYWHERE STREET ANY
CITY, ON A1A 1A1 VOTE BY INTERNET - www.proxyvote.com Use the Internet to
transmit your voting instructions and for electronic delivery of information
up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting
date. Have your proxy card in hand when you access the web site and follow
the instructions to obtain your records and to create an electronic voting
instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would
like to reduce the costs incurred by our company in mailing proxy materials,
you can consent to receiving all future proxy statements, proxy cards and
annual reports electronically via e-mail or the Internet. To sign up for
electronic delivery, please follow the instructions above to vote using the
Internet and, when prompted, indicate that you agree to receive or access
proxy materials electronically in future years. VOTE BY PHONE -
1-800-690-6903 Use any touch-tone telephone to transmit your voting
instructions up until 11:59 P.M. Eastern Time the day before the cut-off date
or meeting date. Have your proxy card in hand when you call and then follow
the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return
it in the postage-paid envelope we have provided or return it to Vote
Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. The Board of
Directors recommends you vote FOR proposals 2 and 3. For Against Abstain 2
Ratification of the appointment of KPMG LLP as independent registered public
accounting firm for the fiscal year ending December 31, 2015. 3 The advisory
resolution to approve the compensation of our named executive officers. NOTE:
Such other business as may properly come before the meeting or any
adjournment thereof. Please sign exactly as your name(s) appear(s) hereon.
When signing as attorney, executor, administrator, or other fiduciary, please
give full title as such. Joint owners should each sign personally. All
holders must sign. If a corporation or partnership, please sign in full
corporate or partnership name, by authorized officer.
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0000233062_2
R1.0.0.51160 Important Notice Regarding the Availability of Proxy Materials
for the Annual Meeting: The Form 10-K, Notice & Proxy Statement, Letter
to Shareholders is/are available at www.proxyvote.com . CORESITE REALTY
CORPORATION Annual Meeting of Stockholders May 20, 2015 1:30 p.m., Mountain
Time This proxy is solicited on behalf of the Board of Directors The
undersigned stockholder of Coresite Realty Corporation (the
"Company") hereby appoints Thomas M. Ray and Derek S. McCandless,
and each of them, with power to act without the other and with power of
substitution, as proxies and attorneys-in-fact and hereby authorizes them to
attend the Annual Meeting of Stockholders of the Company to be held May 20,
2015, or any postponement or adjournment thereof (the "Meeting"),
with all powers which the undersigned would possess if present at the
Meeting, and to cast on behalf of the undersigned all votes that the
undersigned is entitled to cast at the Meeting. The undersigned acknowledges
receipt of the Notice of Meeting and accompanying Proxy Statement and revokes
any proxy heretofore given with respect to the Meeting. THIS PROXY CARD, WHEN
PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED. IF NO DIRECTION IS MADE BUT THE CARD IS SIGNED, THIS PROXY CARD
WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES UNDER PROPOSAL 1, FOR PROPOSAL
2, AND FOR PROPOSAL 3. THE VOTES ENTITLED TO BE CAST BY THE UNDERSIGNED WILL
BE CAST IN THE DISCRETION OF THE PROXYHOLDER ON ANY OTHER MATTER THAT MAY
PROPERLY COME BEFORE THE MEETING. Continued and to be marked, dated and
signed on reverse side
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