Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Resignation and Appointment of Officers
In connection with the Internalization, each of Ann B. Harrington, Paul V. Varisano and Douglas W. Bath provided notice of their respective resignations as Interim Chief Executive Officer, President, General Counsel and Secretary, Chief Financial Officer and Treasurer and Chief Investment Officer, effective immediately upon on the Internalization. Each of Ms. Harrington, Mr. Varisano and Mr. Bath will continue to be employed by an affiliate of the Advisor and are resigning as a result of the termination of the Advisory Agreement, and not due to any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.
Effective upon the Internalization, the Board appointed Kendall K. Young as the Company’s Chief Executive Officer and President and as a member of the Board to fill an existing vacancy. Mr. Young, age 61, previously served as Executive Vice President and Head of Senior Housing for Healthpeak Properties (NYSE: PEAK) from 2010 through 2019, where he was responsible for the senior housing platform. Prior to that role, Mr. Young was the Global Head of Asset Management for real estate at Strategic Value Partners from 2007 to 2010, a Managing Director and Global Head of Asset Management in Merrill Lynch’s Global Principal Investing business from 2005 to 2007 and a Managing Director with GE Capital Real Estate from 1992 to 2005. Mr. Young holds a Bachelor of Arts degree in Business Administration from the University of Southern California and a Masters of Business Administration from the University of California Irvine.
Mr. Young will receive an annual base salary of $425,000, subject to annual review commencing in June 2023. Mr. Young will initially be eligible for annual cash incentive compensation at 50% (threshold), 100% (target) and 150% (maximum) of 80% of his annual base salary, subject to annual review commencing in 2023. For 2022, Mr. Young’s target annual cash incentive compensation opportunity will be $135,000.
As soon as practicable following commencement of his employment, Mr. Young will also be granted a one-time, long-term incentive award having a total target award value of $3,800,000 that, subject to his continued employment with the Company through December 31, 2025, will vest 25% on such date and the remaining 75% will vest on such date if and to the extent certain performance criteria are to be achieved. If, prior to the vesting date, (a) his employment is terminated because of his death or disability, by the Company without cause or by him for good reason, a pro rata portion of the award will vest or (b) a change of control occurs, the award will vest and be paid following the change of control based on the level of achievement of the performance goal as of the change of control.
Mr. Young will also receive severance if his employment is terminated by the Company without cause or by him for good reason, or due to his death or disability, equal to continued payment of his annual base salary for twelve months following termination (if such termination occurs prior to December 31, 2024 only), and a prorated amount of the target annual cash incentive compensation (regardless of when such termination occurs).
The Company and Mr. Young have entered into a Restrictive Covenant Agreement that subjects Mr. Young to noncompetition and noninterference restrictions during employment, as well as nonsolicitiation restrictions during employment and for a period of twelve months following termination of Mr. Young’s employment for any reason, and certain confidentiality and nondisparagement restrictions during employment and thereafter.
In addition, effective upon the Internalization, the Board appointed Nicholas R. Balzo as the Company’s Chief Financial Officer, Treasurer and Secretary. Mr. Balzo, age 35, has previously served as Chief Accounting Officer of the Sponsor from March 2022 until the Internalization and, from March 2021 to March 2022, Senior Vice President of DigitalBridge Group Inc. (formerly Colony Capital, Inc. and NorthStar Asset Management Group Inc.), the Sponsor’s predecessor (the “Prior Sponsor”), where Mr. Balzo was responsible for oversight of finance and accounting for the Company. Prior to this role, Mr. Balzo served in various accounting and finance roles at the Prior Sponsor since joining in 2014. Before joining the Prior Sponsor, Mr. Balzo was in the assurance practice of Baker Tilly US, LLP. Mr. Balzo, a Certified Public Accountant, earned a Bachelor of Science in Accounting and Master of Business Administration from St. John's University.
Mr. Balzo will receive an annual base salary of $325,000. Mr. Balzo will initially be eligible for annual cash incentive compensation at 50% (threshold), 100% (target) and 150% (maximum) of $225,000, subject to annual review commencing in 2023. For 2022, Mr. Balzo’s target annual cash incentive compensation opportunity will be $175,000.
As soon as practicable following commencement of his employment, Mr. Balzo will also be granted a one-time, long-term incentive award having a total target award value of $855,000 that, subject to his continued employment with the Company
through December 31, 2025, will vest 25% on such date and the remaining 75% will vest on such date if and to the extent certain performance criteria are to be achieved. If, prior to the vesting date, (a) his employment is terminated because of his death or disability, by the Company without cause or by him for good reason, a pro rata portion of the award will vest or (b) a change of control occurs, the award will vest and be paid following the change of control based on the level of achievement of the performance goal as of the change of control.
Mr. Balzo will also receive severance if his employment is terminated by the Company without cause or by him for good reason equal to continued payment of his annual base salary for twelve months following termination, and a prorated amount of the target annual cash incentive compensation.
In addition, Mr. Balzo received a retention award from an affiliate of the Advisor, which will be assumed by the Company effective as of the Internalization, which provides that, subject to his continued service through June 30, 2023, he will receive a cash bonus equal to 20% of his then-current base salary, payable within 30 days of such date.
The Company and Mr. Balzo have entered into a Restrictive Covenant Agreement that subjects Mr. Balzo to noncompetition restrictions during employment and for a period of six months following a termination of Mr. Balzo’s employment for cause or by Mr. Balzo without good reason, as well as noninterference restrictions and nonsolicitiation restrictions during employment and for a period of twelve months following termination of Mr. Balzo’s employment for any reason, and certain confidentiality and nondisparagement restrictions during employment and thereafter.
The foregoing descriptions of the employment arrangements with Mr. Young and Mr. Balzo are qualified in their entirety by the text of the offer letters and the Restrictive Covenant Agreements and, in respect of Mr. Balzo, the Retention Award Letter, copies of which are filed as Exhibits 10.3, 10.4, 10.5, 10.6 and 10.7.
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