def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities
Exchange Act of 1934
Filed by the Registrant
x
Filed by a Party other than the Registrant
o
Check the appropriate box:
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o Preliminary
Proxy Statement |
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o Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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x Definitive
Proxy Statement
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o Definitive
Additional Materials
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o Soliciting
Material Pursuant to §240.14a-11(c) or §240.14a-12
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COLE CREDIT PROPERTY TRUST II, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if
other than Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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$125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(4) 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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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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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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TABLE OF CONTENTS
COLE
CREDIT PROPERTY TRUST II, INC.
2555 East Camelback Road, Suite 400
Phoenix, Arizona 85016
April 14,
2010
Dear Stockholder:
You are cordially invited to attend our 2010 Annual Meeting of
Stockholders to be held on Wednesday, May 26, 2010, at
9:00 a.m. local time at our offices located at 2575 East
Camelback Road, Suite 500, Phoenix, Arizona 85016.
The matters expected to be acted upon at the meeting are
described in the following Notice of the 2010 Annual Meeting of
Stockholders and Proxy Statement.
Directors and officers will be available at the meeting to speak
with you. There will be an opportunity during the meeting for
your questions regarding the affairs of Cole Credit Property
Trust II, Inc. and for a discussion of the business to be
considered at the meeting.
It is important that you use this opportunity to take part in
the affairs of your company by voting on the business to come
before this meeting. WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING, PLEASE COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE, OR
SUBMIT YOUR PROXY BY USING THE TELEPHONE OR THE INTERNET, SO
THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING. FOR
SPECIAL INSTRUCTIONS ON HOW TO VOTE YOUR SHARES, PLEASE
REFER TO THE INSTRUCTIONS ON THE PROXY CARD. Voting by
proxy does not deprive you of your right to attend the meeting
and to vote your shares in person.
We look forward to seeing you at the meeting.
Sincerely,
Christopher H. Cole
Chairman, President and
Chief Executive Officer
COLE
CREDIT PROPERTY TRUST II, INC.
NOTICE OF 2010 ANNUAL MEETING OF STOCKHOLDERS
TO BE
HELD ON MAY 26, 2010
To Cole Credit Property Trust II, Inc. Stockholders:
NOTICE IS HEREBY GIVEN that the 2010 Annual Meeting of
Stockholders of Cole Credit Property Trust II, Inc., a
Maryland corporation (the “Company,” “we,”
or “us”), will be held on Wednesday, May 26,
2010, at 9:00 a.m. local time at our offices located at
2575 East Camelback Road, Suite 500, Phoenix, Arizona
85016. The purpose of the meeting is to:
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Elect three directors to hold office for one-year terms expiring
at the 2011 Annual Meeting of Stockholders and until their
successors are duly elected and qualify; and
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Transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
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The proposals and other related matters are more fully described
in the proxy statement accompanying this notice.
Only stockholders of record at the close of business on
March 25, 2010 are entitled to receive this notice and to
vote at the meeting. This proxy statement, the proxy card and
our 2009 annual report to stockholders are being mailed to you
on or about April 16, 2010.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 26,
2010.
THE PROXY STATEMENT AND ANNUAL REPORT TO STOCKHOLDERS ARE
AVAILABLE AT www.colecapital.com.
You may obtain directions to attend the 2010 annual meeting
of stockholders of the Company by calling
1-800-778-8700.
All stockholders are cordially invited to attend the annual
meeting in person. Whether or not you expect to attend, WE URGE
YOU TO READ THE PROXY STATEMENT AND EITHER COMPLETE, SIGN AND
DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE
ENVELOPE PROVIDED OR TO SUBMIT YOUR PROXY BY TELEPHONE OR THE
INTERNET. FOR SPECIFIC INSTRUCTIONS ON HOW TO VOTE YOUR
SHARES, PLEASE REFER TO THE INSTRUCTIONS ON THE PROXY CARD.
YOUR PROMPT RESPONSE WILL HELP AVOID POTENTIAL DELAYS AND MAY
SAVE THE COMPANY SIGNIFICANT ADDITIONAL EXPENSE ASSOCIATED WITH
SOLICITING STOCKHOLDER VOTES.
By Order of the Board of Directors
John M. Pons
Secretary
Phoenix, Arizona
April 14, 2010
PLEASE
VOTE — YOUR VOTE IS IMPORTANT
QUESTIONS
AND ANSWERS
We are providing you with this proxy statement, which contains
information about the items to be voted upon at our Annual
Meeting of Stockholders. To make this information easier to
understand, we have presented some of the information below in a
question and answer format.
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Why did you send me this proxy statement? |
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We sent you this proxy statement and the enclosed proxy card
because our board of directors is soliciting your proxy to vote
your shares of the Company’s common stock at the 2010
Annual Meeting of Stockholders. This proxy statement includes
information that we are required to provide to you under the
rules of the Securities and Exchange Commission
(“SEC”) and is designed to assist you in voting. |
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What is a proxy? |
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A proxy is a person who votes the shares of stock of another
person who does not attend a meeting. The term “proxy”
also refers to the proxy card. When you return the enclosed
proxy card, or give your proxy by telephone or over the
Internet, you are giving us your permission to vote your shares
of common stock at the annual meeting. The people who will vote
your shares of common stock at the annual meeting are D. Kirk
McAllaster, Jr. and John M. Pons. They will vote your shares of
common stock as you instruct, unless you sign and return the
proxy card, or authorize your proxy by telephone or over the
Internet, and give no instructions. In this case, the proxies
will vote FOR all of the director nominees. With respect to any
other proposals to be voted upon, they will vote in accordance
with the recommendation of the board of directors or, in the
absence of such a recommendation, in their discretion. The
proxies will not vote your shares of common stock if you do not
return the enclosed proxy card or submit your proxy by telephone
or over the Internet. This is why it is important for you to
return the proxy card or submit your proxy by telephone or over
the Internet as soon as possible whether or not you plan on
attending the meeting in person. |
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If you authorize your proxy by telephone or over the Internet,
please do not return your proxy card. |
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When is the annual meeting and where will it be held? |
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The annual meeting will be held on Wednesday, May 26, 2010,
at 9:00 a.m. local time at our offices located at 2575 East
Camelback Road, Suite 500, Phoenix, Arizona 85016. |
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How many shares of common stock can vote? |
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As of the close of business on the record date of March 25,
2010, there were 206,007,064 shares of our common stock
issued and outstanding. Every stockholder of record as of the
close of business on March 25, 2010 is entitled to one vote
for each share of common stock held at that date and time. |
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What is a “quorum”? |
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A “quorum” consists of the presence in person or by
proxy of stockholders holding 50% of the outstanding shares.
There must be a quorum present in order for the annual meeting
to be a duly held meeting at which business can be conducted. If
you submit a properly executed proxy card, even if you abstain
from voting or do not give instructions for voting, then you
will at least be considered part of the quorum. |
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What may I vote on? |
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You may vote on the election of nominees to serve on the board
of directors and on any other proposal to be voted on. |
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How does the board of directors recommend I vote on the
proposal? |
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The board of directors recommends a vote FOR each of the
nominees for election as director who are named as such in this
proxy statement. |
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Who is entitled to vote? |
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Anyone who owned our common stock at the close of business on
March 25, 2010, the record date, is entitled to vote at the
annual meeting. |
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How do I vote? |
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You may vote your shares of common stock either in person or by
proxy. In order to vote in person, you must attend the annual
meeting. Whether or not you plan to attend the meeting and vote
in person, we urge you to have your vote recorded. Stockholders
may submit their proxy via mail, using the enclosed proxy card.
In addition, stockholders of record who live in the United
States may authorize proxies by following the
“Telephone” instruction on the enclosed proxy card.
Stockholders of record with Internet access may submit a proxy
by following the “Internet” instructions on the
enclosed proxy card. The telephone and Internet voting
procedures are designed to authenticate the stockholder’s
identity and to allow stockholders to authorize a proxy and
confirm that their instructions have been properly recorded. If
the telephone or Internet option is available to you, we
strongly encourage you to use it because it is faster and less
costly. If you attend the annual meeting, you may also submit
your vote in person, and any previous votes or proxies that you
submitted will be superseded by the vote that you cast at the
annual meeting. If you return your signed proxy card, or
authorize your proxy by telephone or over the Internet, but do
not indicate how you wish to vote, your shares of common stock
will be counted as present for purposes of determining a quorum
and voted FOR the nominees for director, and with respect to any
other proposals to be voted upon, in accordance with the
recommendation of the board of directors or, in the absence of
such a recommendation, in the discretion of
Messrs. McAllaster and Pons. |
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Will my vote make a difference? |
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Yes. Your vote is needed to ensure that the proposals can be
acted upon. Unlike most other public companies, no large
brokerage houses or affiliated groups of stockholders own
substantial blocks of our shares. As a result, a large number of
our stockholders must be present in person or by proxy at the
annual meeting to constitute a quorum. AS A RESULT, YOUR
VOTE IS VERY IMPORTANT EVEN IF YOU OWN ONLY A SMALL NUMBER OF
SHARES! Your immediate response will help avoid potential delays
and may save us significant additional expense associated with
soliciting stockholder votes. We encourage you to
participate in the governance of the Company and welcome your
attendance at the annual meeting. |
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What if I return my proxy card and then change my mind? |
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You have the right to revoke your proxy at any time before the
vote by: |
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(1) notifying John M. Pons, our Secretary, in writing at
our offices located at 2575 East Camelback Road, Suite 500,
Phoenix, Arizona 85016;
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(2) attending the meeting and voting in person; or
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(3) returning another proxy after your first proxy, which
is received before the annual meeting date. Only the most recent
vote will be counted and all others will be discarded regardless
of the method of voting.
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How will voting on any other business be conducted? |
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Although we do not know of any business to be considered at the
annual meeting other than the election of directors, if any
other business is properly presented at the annual meeting, your
proxy gives authority to D. Kirk McAllaster, Jr., our executive
vice president and chief financial officer, and John M. Pons,
our |
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secretary, and each of them, to vote on such matters in
accordance with the recommendation of the board of directors or,
in the absence of such a recommendation, in their discretion. |
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Who pays the cost of this proxy solicitation? |
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Cole REIT II will pay all the costs of soliciting these proxies.
The Company will also reimburse brokerage houses and other
custodians, nominees and fiduciaries for their reasonable
out-of-pocket
expenses for forwarding proxy and solicitation materials to our
stockholders. |
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Is this proxy statement the only way that proxies are being
solicited? |
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No. In addition to mailing proxy solicitation material, our
directors and officers and personnel of our advisor and
affiliates, as well as third-party proxy service companies we
retain, may also solicit proxies in person, by telephone or by
any other electronic means of communication we deem appropriate.
No additional compensation will be paid to directors, officers
or other personnel for such services. We have retained D.F.
King & Co., Inc. to assist us in the distribution of
proxy materials and solicitation of votes. We anticipate the
costs of such services to the Company to be approximately
$50,000. |
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If I plan to attend the annual meeting in person, should I
notify anyone? |
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While you are not required to notify anyone in order to attend
the annual meeting, if you do plan to attend the meeting, we
would appreciate it if you would mark the appropriate box on the
enclosed proxy card, or indicate you plan to attend when you
authorize your proxy by telephone or over the Internet, to let
us know how many stockholders will be attending the meeting so
that we will be able to prepare a suitable meeting room for the
attendees. |
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Whom should I call if I have any questions? |
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If you have any questions about how to submit your proxy, or if
you need additional copies of this proxy statement or the
enclosed proxy card or voting instructions, you should contact: |
D.F. King & Co., Inc.
48 Wall Street, 22nd Floor
New York, New York 10005
Call Toll free:
(800) 628-8536
or
Collect at
(212) 269-5550
3
PROPOSAL 1
ELECTION
OF DIRECTORS
At the annual meeting, you and the other stockholders will vote
on the election of all three members of our board of directors.
Those persons elected will serve as directors until the 2011
Annual Meeting of Stockholders and until their successors are
duly elected and qualify. The board of directors has nominated
the following people for election as directors:
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Christopher H. Cole
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Marcus E. Bromley
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George N. Fugelsang
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Each of the nominees for director, other than
Mr. Fugelsang, is a current member of our board of
directors. The principal occupation and certain other
information about the nominees are set forth below.
If you return a properly executed proxy card, or if you
authorized your proxy by phone or over the Internet, unless you
direct the proxies to withhold your votes, the individuals named
as proxies will vote your shares for the election of the
nominees listed above. If any nominee becomes unable or
unwilling to stand for re-election, the board may reduce its
size, designate a substitute nominee, or fill the vacancy
through a majority vote of the remaining directors (including a
majority of the remaining independent directors if the vacancy
relates to an independent director position). If a substitute is
designated, proxies voting on the original nominee will be cast
for the substituted nominee.
Vote
Required; Recommendation
The vote of holders of a majority of all shares present in
person or by proxy at a meeting of stockholders duly called at
which a quorum is present, without the necessity for concurrence
by the board of directors, is necessary for the election of a
director. For purposes of the election of directors, abstentions
and broker non-votes will have the same effect as votes cast
against each director. A properly executed proxy card, or
instruction by telephone or over the Internet, indicating
‘‘FOR ALL NOMINEES LISTED” will be considered a
vote in favor of all nominees for re-election as director. A
properly executed proxy card, or instruction by telephone or
over the Internet, indicating “FOR ALL OTHER THAN THOSE
LISTED” will be considered a vote in favor of all nominees
except those nominees you specifically list and a vote against
the nominees you specifically list. A properly executed proxy
card, or instruction by telephone or over the Internet,
indicating “WITHHELD FOR ALL” will be considered a
vote against all directors.
THE BOARD
RECOMMENDS A VOTE “FOR ALL NOMINEES LISTED” FOR
ELECTION AS DIRECTORS
4
CERTAIN
INFORMATION ABOUT MANAGEMENT
Board of
Directors
In accordance with applicable law and our charter and bylaws,
the business and affairs of the Company are managed under the
direction of our board of directors. Our board of directors has
nominated each of the following individuals for election as a
director to serve until our 2011 Annual Meeting of Stockholders
and until his or her successor is elected and qualifies. Each
nominee, other than Mr. Fugelsang, currently is a director
of the Company. Mr. Bromley is an independent director and
Mr. Fugelsang will be considered an independent director
upon his election. Elizabeth L. Watson, a member of our board of
directors whose term expires at our 2010 Annual Meeting of
Stockholders, is not a nominee for re-election as a director.
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Name
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Positions
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Christopher H. Cole
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Chairman, Chief Executive Officer and President
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Marcus E. Bromley
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Director (Independent)
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Elizabeth L. Watson
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Director (Independent)
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George N. Fugelsang
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Director Nominee (Independent)
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Christopher H. Cole has served as our chairman, chief
executive officer and president since our formation in September
2004. Mr. Cole also has served as the chief executive
officer of Cole REIT Advisors II, LLC (“Cole Advisors
II”), our advisor, since its formation in September 2004,
and as its president since October 2007, and previously served
as its president from September 2004 until March 2007.
Mr. Cole has served as the chairman, chief executive
officer and president of Cole Credit Property Trust, Inc.
(“Cole REIT I”) since its formation in March 2004. He
has served as the chief executive officer of Cole REIT Advisors,
LLC (“Cole Advisors”) since its formation in April
2004, and as its president since October 2007, and previously
served as its president from April 2004 until March 2007.
Mr. Cole has served as the chairman, chief executive
officer and president of Cole Credit Property Trust III,
Inc. (“Cole REIT III”) since its formation in January
2008. He has served as the chief executive officer and president
of Cole REIT Advisors III, LLC (“Cole Advisors III”)
since its formation in January 2008, and previously served as
its treasurer from January 2008 until September 2008.
Mr. Cole has been the sole shareholder, chief executive
officer, president and treasurer of Cole Holdings Corporation
since its formation in August 2004 and has served as its
chairman and secretary since October 2007. Mr. Cole has
also been engaged as a general partner in the structuring and
management of real estate limited partnerships since February
1979. Mr. Cole has served as the chief executive officer of
Cole Capital Advisors, Inc. (“Cole Capital Advisors”)
since December 2002, as its president since October 2007, as its
treasurer since its formation in November 2002, and previously
served as its president from November 2002 until March 2007 and
as its secretary from November 2002 until December 2002.
Mr. Cole has served as the chief executive officer and
treasurer of Cole Capital Partners, LLC (“Cole Capital
Partners”) since January 2003, as its president since
October 2007, and previously served as its president from
January 2003 to March 2007. Mr. Cole has served as the
chief executive officer of Cole Realty Advisors, Inc.
(“Cole Realty Advisors”) since December 2002, as its
president since October 2007, as its treasurer since its
formation in November 2002, and previously served as its
president from November 2002 until March 2007, and its secretary
from November 2002 until December 2002.
Mr. Cole has served as the chief executive officer and
treasurer of the Cole Growth Opportunity Fund I GP, LLC
since its formation in March 2007. Mr. Cole served as the
executive vice president and treasurer of Cole Capital
Corporation from December 2002 until January 2008. Mr. Cole
has been the sole director of Cole Capital Corporation since
December 2002. The board of directors selected Mr. Cole to
serve as a director because he is the Company’s Chief
Executive Officer and Mr. Cole’s experience and
relationships in the non-traded REIT and real estate industries,
along with his knowledge of the Cole-related organization, will
provide significant value to the board of directors.
5
Marcus E. Bromley has been a member of our board of
directors, chairman of our board’s compensation committee
and a member of our board’s audit committee since May 2005.
Mr. Bromley has also served as a member of the board of
directors of Cole REIT III since October 2008. From 1993 through
2005, Mr. Bromley served as a member of the board of
trustees of Gables Residential Trust, a $3 billion
multi-family residential REIT with operations in Texas, Georgia,
South Florida, Washington, D.C. and Southern California
that was listed on the New York Stock Exchange prior to its sale
in 2005. From December 1993 until June 2000, Mr. Bromley
also served as the chief executive officer of Gables Residential
Trust. Prior to joining Gables Residential Trust,
Mr. Bromley was a division partner of Trammell Crow
Residential from 1982 until 1993. Mr. Bromley also serves
on the board of directors of Private Bank of Buckhead (Atlanta),
a community bank, and on the board of directors of Nancy Creek
Capital (Atlanta), a private equity firm. Mr. Bromley holds
a B.S. in Economics from Washington & Lee University
and a M.B.A. from the University of North Carolina. The board of
directors selected Mr. Bromley to serve as a director
because Mr. Bromley’s experience as the chief
executive officer of a public real estate company, his general
knowledge of the real estate industry and his financing
experience will bring valuable resources to the board of
directors.
Elizabeth L. Watson has been a member of our board of
directors, chairperson of our board’s audit committee and a
member of our board’s compensation committee since May
2005. Ms. Watson is not standing for reelection at this
year’s annual meeting of stockholders. Since September
2003, Ms. Watson has been a partner in, and has served as
the chief operating officer for, NGP Capital Partners III, LLC
(“NGP Capital”). Prior to joining NGP Capital, she was
a retail research analyst for Legg Mason Wood Walker from June
2002 until September 2003. From November 1997 until June 2002,
Ms. Watson was a partner in and served as executive vice
president and chief financial officer of National Government
Properties (“NGP”). Before joining NGP,
Ms. Watson served as the senior vice president, chief
financial officer and treasurer of Government Properties
Investors, Inc. from June 1994 until March 1997. From 1992 until
1994, Ms. Watson served as senior vice president, chief
financial officer and treasurer of Prime Retail, Inc., a
publicly traded real estate investment trust that developed and
owned factory outlet centers, and its predecessor company, The
Prime Group. Ms. Watson received her B.S. Accounting and
M.B.A. from the University of Maryland. She holds a Masters of
Real Estate from John Hopkins University and an International
Executive M.B.A. from Georgetown University. For the past ten
years, she has been a lecturer for Johns Hopkins
University’s Real Estate Masters Program and has taught
real estate accounting and taxation, real estate finance and
real estate investments. She is a licensed certified public
accountant and is a member of the Maryland Association of CPAs,
National Association of Real Estate Investment Trusts
(“NAREIT”) and the National Association of Real Estate
Companies. The board of directors selected Ms. Watson to
serve as a director because Ms. Watson’s experience in
the real estate industry, including her experience in retail
real estate, as well as her financial experience as the chief
financial officer of a real estate program. This experience
provided the board of directors with both strategic and
financial reporting guidance.
George N. Fugelsang is a nominee to be a member of our
board of directors. From 1994 through 2001, Mr. Fugelsang
was chief executive officer of Dresdner Kleinwort Benson North
America, the
U.S.-based
investment banking business of Dresdner Bank AG, where he was
responsible for all of Dresdner Bank AG’s activities in
North America. From 1996 until 2001, Mr. Fugelsang was also
chairman of the board of Dresdner Bank Mexico, S.A., chairman of
the board of Dresdner Bank Canada and a member of the board of
directors of Dresdner RCM Global Investors LLC.
Mr. Fugelsang served on the board of managers of
Mrs. Fields’ Famous Brands, LLC from May 2004 until
July 2008. Mr. Fugelsang also served on the board of
trustees of the Institute of International Bankers, the
Thunderbird School of Global Management and a member of the
board of directors of Advanced Research Technologies of
Montreal, Canada. He was also a member of the board of the New
York City Partnership, the German American Chamber of Commerce,
Inc., and a director of the Foreign Policy Association in New
York. Mr. Fugelsang currently serves on the advisory board
of the Monterey Institute of International Studies, an affiliate
of Middlebury College. The board of directors has nominated
Mr. Fugelsang to serve as a director because of
Mr. Fugelsang’s experience as the chief executive
officer of an investment bank, his extensive financing
experience and general business experience will bring valuable
resources to the board of directors.
6
Board
Meetings and Annual Stockholder Meeting
The board of directors held five regular meetings and held one
special meeting during the fiscal year ended December 31,
2009. Each director attended all of his or her board and
committee meetings in 2009. Although we do not have a formal
policy regarding attendance by members of our board of directors
at our Annual Meeting of Stockholders, we encourage all of our
directors to attend. Last year all of our directors attended our
Annual Meeting of Stockholders.
Independence
As required by our charter, a majority of the members of our
board of directors must qualify as “independent” as
affirmatively determined by the board. The board consults with
our legal counsel to ensure that the board’s determinations
are consistent with our charter and applicable securities and
other laws and regulations regarding the definition of
“independent.”
Consistent with these considerations, after review of all
relevant transactions or relationships between each director, or
any of his or her family members, and the Company, our senior
management and our independent registered public accounting
firm, the board has determined that the majority of our board is
comprised of independent directors. A copy of our charter, which
includes the independence standards used by our board of
directors, can be located on our website at
www.colecapital.com by clicking on
“Investments” and then “Investor Relations.”
Board
Committees
The board maintains certain standing committees to assist in
fulfilling its responsibilities. The board has established two
permanent committees, each composed solely of independent
directors: the audit committee and the compensation committee.
Each committee of the board reports regularly to the full board
and annually evaluates its performance. Each committee meets
periodically during the year, usually in conjunction with
regular meetings of the board. The committees established by the
board, their particular areas of responsibility, and other
related information, are described below.
Audit
Committee
The audit committee of the board of directors is comprised of
Ms. Watson (chairperson) and Mr. Bromley. The audit
committee, by approval of at least a majority of the members,
selects the independent registered public accounting firm to
audit our annual financial statements, reviews with the
independent registered public accounting firm the plans and
results of the audit engagement, approves the audit and
non-audit services provided by the independent registered public
accounting firm, reviews the independence of the independent
registered public accounting firm, considers the range of audit
and non-audit fees and reviews the adequacy of our internal
accounting controls. Our board of directors has adopted a
charter for the audit committee that sets forth its specific
functions and responsibilities. The audit committee charter can
be located on our website at www.colecapital.com by
clicking on “Investments” and then “Investor
Relations.”
Although our shares are not listed for trading on any national
securities exchange, both members of the audit committee meet
the current independence and qualifications requirements of the
New York Stock Exchange, as well as our charter and applicable
rules and regulations of the SEC. While both members of the
audit committee have significant financial
and/or
accounting experience, the board of directors determined that
Ms. Watson satisfies the SEC’s requirements for an
“audit committee financial expert” and designated
Ms. Watson as our audit committee financial expert. During
2009, the audit committee met four times. If Mr. Fugelsang
is elected, we expect that he would become a member of the audit
committee.
Compensation
Committee
The compensation committee of the board of directors is
comprised of Mr. Bromley (chairman) and Ms. Watson.
Although our shares are not listed for trading on any national
securities exchange, both of the members of the compensation
committee meet the current independence and qualification
requirements of the New York Stock Exchange, as well as our
charter and applicable rules and regulations of the SEC. The
primary purpose of the compensation committee is to oversee our
compensation programs. Our executive officers currently do not
receive compensation directly from us for services rendered to
us. Accordingly, the
7
compensation committee did not hold any meetings during 2009.
The compensation committee has adopted a written charter
approved by the board of directors. The compensation committee
charter can be located on our website at
www.colecapital.com by clicking on
“Investments” and then “Investor Relations.”
If Mr. Fugelsang is elected, we expect that he would become
a member of the compensation committee.
Nominating
Board of Directors — Functions
Our board of directors believes that it is appropriate for our
board not to have a standing nominating committee as it would be
comprised of the entire board. Therefore, all members of our
board of directors participate in the consideration of director
nominees. The primary functions of the members of our board of
directors relating to the consideration of director nominees are
to identify individuals qualified to serve on the board of
directors and to select a slate of director nominees for
election by the stockholders at the annual meeting.
Board
Membership Criteria and Selection of Directors
The board of directors annually reviews the appropriate
experience, skills and characteristics required of board members
in the context of the then-current membership of the board. This
assessment includes, in the context of the perceived needs of
the board at that time, issues of knowledge, experience,
judgment and skills such as an understanding of the real estate
industry or brokerage industry or accounting or financial
management expertise. Other considerations include the
candidate’s independence from conflict with the Company and
the ability of the candidate to attend board meetings regularly
and to devote an appropriate amount of effort in preparation for
those meetings. It also is expected that independent directors
nominated by the board of directors shall be individuals who
possess a reputation and hold positions or affiliations
befitting a director of a large publicly held company and are
actively engaged in their occupations or professions or are
otherwise regularly involved in the business, professional or
academic community. A majority of our directors must be
independent, as defined in our charter. Moreover, as required by
our charter, at least one of our independent directors must have
at least three years of relevant real estate experience, and
each director must have at least three years of relevant
experience demonstrating the knowledge and experience required
to successfully acquire and manage the type of assets we acquire
and manage.
The board of directors is responsible for selecting its own
nominees and recommending them for election by the stockholders.
Each of our nominees was recommended by our board of directors.
Pursuant to our charter, however, the independent directors must
nominate replacements for any vacancies among the independent
director positions. All director nominees then stand for
election by the stockholders annually.
In its nomination review process, our board of directors
solicits candidate recommendations from its own members and
management of the Company. Our board of directors may engage the
services of a search firm to assist in identifying potential
director nominees. Our board of directors also will consider
recommendations made by stockholders for director nominees who
meet the established director criteria set forth above. In order
to be considered by our board of directors, recommendations made
by stockholders must be submitted within the timeframe required
to request a proposal to be included in the proxy materials. See
“Stockholder Proposals” below. In evaluating the
persons recommended as potential directors, our board of
directors will consider each candidate without regard to the
source of the recommendation and take into account those factors
that our board of directors determines are relevant.
Stockholders may directly nominate potential directors (without
the recommendation of our board of directors) by satisfying the
procedural requirements for such nomination as provided in
Article II, Section 12 of our bylaws.
In considering possible candidates for election as a director,
the Board of Directors is guided by the principle that each
director should (i) be an individual of high character and
integrity; (ii) be accomplished in his or her respective
field, with superior credentials and recognition;
(iii) have relevant expertise and experience upon which to
be able to offer advice and guidance to management;
(iv) have sufficient time available to devote to our
affairs; (v) represent the long-term interests of our
stockholders as a whole; and (vi) represent a diversity of
background and experience.
8
Communication
with Directors
We have established procedures for stockholders or other
interested parties to communicate directly with our board of
directors. Such parties can contact the board by mail at:
Chairperson of the Cole Credit Property Trust II, Inc.
Audit Committee,
c/o Corporate
Secretary, 2575 East Camelback Road, Suite 500, Phoenix,
Arizona 85016.
The chairperson of the audit committee will receive all
communications made by this means.
Board
Leadership Structure; Independent Lead Director
Christopher H. Cole serves as both our Chairman of the Board and
Chief Executive Officer. The board of directors believes that
independent oversight of management is an important component of
an effective board of directors. The independent board of
directors’ members have determined that the most effective
board of directors’ leadership structure for the Company at
the present time is for the Chief Executive Officer to also
serve as Chairman of the board of directors. The independent
board members believe that because the Chief Executive Officer
is ultimately responsible for the
day-to-day
operation of the Company and for executing the Company’s
strategy, and because the performance of the Company is an
integral part of board deliberations, the Chief Executive
Officer is the director best qualified to act as Chairman of the
board. The board of directors retains the authority to modify
this structure to best address the Company’s unique
circumstances, and so advance the best interests of all
stockholders, as and when appropriate. In addition, although we
do not have a lead independent director, the board of directors
believes that the current structure is appropriate, as the
Company has no employees and is externally managed by our
advisor, whereby all operations are conducted by our advisor or
its affiliates.
The board of directors also believes, for the reasons set forth
below, that its existing corporate governance practices achieve
independent oversight or management accountability, which is the
goal that many seek to achieve by separating the roles. Our
governance practices provide for strong independent leadership,
independent discussion among directors and for independent
evaluation of, and communication with, our executive officers
and officers and key personnel of our external advisor. Some of
the relevant processes and other corporate governance practices
include:
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A majority of our directors are independent directors. Each
director is an equal participant in decisions made by the full
board of directors. In addition, all matters that relate to our
sponsor, our advisor or any of their affiliates, must be
approved by a majority of the independent directors. The Audit
Committee is comprised entirely of independent directors.
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Each of our directors is elected annually by our stockholders.
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Our external advisor has a one-year contract, with an annual
review by, and renewal subject to, the approval of our board of
directors. The fees paid to our advisor must be deemed
reasonable, as determined by our independent directors, on an
annual basis.
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The
Board’s Role in Risk Oversight
The board of directors oversees our stockholders’ and other
stakeholders’ interest in the long-term health and the
overall success of the Company and its financial strength.
The full board of directors is actively involved in overseeing
risk management for the Company. It does so, in part, through
its approval of all property acquisitions and all assumptions of
debt, as well as its oversight of the Company’s executive
officers and the control it has over our advisor. In particular,
the board of directors may determine at any time to terminate
the advisor, and must evaluate the performance of the Advisor,
and re-authorize the Advisory Agreement, on an annual basis.
9
In addition, the Audit Committee reviews risks related to
financial reporting. The Audit Committee discusses material
violations of Company policies brought to its attention on an ad
hoc basis, and once per year reviews a summary of the finance
related violations. Additionally, the outcome of the
Company’s Audit Risk assessment is presented to the Audit
Committee annually; this assessment identifies internal control
risks and drives the internal audit plan for the coming year.
Material violations of the Company’s Code of Ethics and
related corporate policies are reported to the Audit Committee
as required, are reported to the full Board, if applicable.
Code of
Business Conduct and Ethics
Our board of directors has adopted a Code of Business Conduct
and Ethics that is applicable to all members of our board of
directors, our executive officers and our employees. The policy
may be located on our website at www.colecapital.com by
clicking on “Cole Credit Property Trust II, Inc. Enter
Here For More Information” and then “Governance
Docs.” If, in the future, we amend, modify or waive a
provision in the Code of Business Conduct and Ethics, we may,
rather than filing a Current Report on
Form 8-K,
satisfy the disclosure requirement by posting such information
on our website as necessary.
Compensation
of Directors
Directors who are also officers or employees of the Company
(only Mr. Cole, who is an officer but not an employee) do
not receive any special or additional remuneration for service
on the board of directors or any of its committees. Each
non-employee director receives compensation for service on the
board of directors and any of its committees as provided below.
Cash
Compensation
We pay each of our independent directors:
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an annual retainer of $25,000;
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$2,000 for each board meeting attended in person;
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$2,000 per committee meeting attended in person (committee
chairpersons receive an additional $500 per committee meeting
for serving in that capacity, up to a maximum of
$3,000); and
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$250 per board meeting attended by telephone conference.
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All directors receive reimbursement of reasonable
out-of-pocket
expenses incurred in connection with attendance at meetings of
the board of directors.
2004
Independent Directors’ Stock Option Plan
Under our 2004 Independent Directors’ Stock Option Plan
(the “Plan”), we initially issued non-qualified stock
options to purchase 5,000 shares of common stock to each
independent director at an exercise price equal to $9.15 per
share as of the date each independent director was elected as a
director. We expect to issue additional options to purchase
5,000 shares to each independent director then in office in
connection with each subsequent Annual Meeting of Stockholders,
including the 2010 annual meeting, each with an exercise price
equal to $9.10 per share during such time as we are offering
shares to the public at $10.00 per share and thereafter at 100%
of the then-current fair market value per share.
Fair market value is generally defined in the Plan to mean
(1) the closing sales price on the immediately preceding
date on which sales were reported if the shares are listed on a
recognized stock exchange (or the mean between the bid and ask
prices if no sales are reported on such date), or (2) the
average closing dealer bid and ask price of a share as reflected
on The Nasdaq Stock Market. However, in the
10
absence of an established public trading market, our board of
directors will determine fair market value in good faith.
We may not grant options at any time when the issuance of the
shares underlying the grant, when combined with those issuable
upon exercise of outstanding options or warrants granted to our
advisor, directors, officers or any of their affiliates, would
exceed 10% of our outstanding shares.
We have authorized and reserved a total of 1,000,000 shares
for issuance under the Plan. If the number of outstanding shares
is changed into a different number or kind of shares or
securities through a reorganization or merger in which we are
the surviving entity, or through a combination, recapitalization
or otherwise, we will make an appropriate adjustment in the
number and kind of shares that may be issued pursuant to
exercise of the options.
We also will make a corresponding adjustment to the exercise
price of the options granted prior to any change. Any such
adjustment, however, will not change the total payment, if any,
applicable to the portion of the options not exercised but will
change only the exercise price for each share.
Options granted to independent directors under the Plan become
exercisable on the first anniversary of the date of grant.
Options granted under the Plan will lapse and no longer be
exercisable on the first to occur of (1) the tenth
anniversary of the date they are granted or (2) immediately
following the date the director ceases to be a director for
“Cause” as defined in the Plan. Options granted under
the Plan may be exercised by payment of cash or through the
delivery of shares of our common stock with a fair market value
equal to the exercise price to be paid. The independent
directors may not sell, pledge, assign or transfer their options
other than by will or the laws of descent or distribution. No
options issued under the Plan may be exercised if such exercise
would jeopardize our status as a REIT under the Internal Revenue
Code.
The term of the Plan is ten years. Upon the earlier of our
dissolution or liquidation, upon our reorganization, merger or
consolidation with one or more corporations as a result of which
we are not the surviving corporation, or upon the sale of all or
substantially all of our properties, the Plan will terminate,
and any outstanding options will be forfeited. Alternatively,
the board of directors may provide in writing in connection with
any such transaction for any or all of the following
alternatives:
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the assumption by the successor corporation of the options
granted or the replacement of the options with options covering
the stock of the successor corporation, or a parent or
subsidiary of such corporation, with appropriate adjustments as
to the number and kind of shares and exercise prices;
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the continuance of the Plan and the options by such successor
corporation under the original terms; or
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the payment in cash or other property lieu of and in complete
satisfaction of such options.
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Equity
Compensation Plan Information
The following table gives information about our equity
compensation plans as of December 31, 2009:
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Number of Securities
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Weighted-Average
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Number of Securities
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to be Issued Upon
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Exercise Price of
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Remaining Available for
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Exercise of
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Outstanding
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Future Issuance Under
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Outstanding Options,
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Options, Warrants
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Equity Compensation
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Plan Category
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Warrants and Rights
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and Rights
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Plans
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Equity compensation plans approved by security holders
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45,000
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(1)
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$
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9.12
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950,000
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(2)
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Equity compensation plans not approved by security holders
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—
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N/A
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—
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Total
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45,000
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(1)
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$
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9.12
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950,000
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(2)
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11
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(1) |
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Represents options that were granted pursuant to our 2004
Independent Directors’ Stock Option Plan as of
December 31, 2009. Options to purchase 35,000 shares
were exercisable as of December 31, 2009. |
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All shares authorized for issuance pursuant to awards not yet
granted under the 2004 Independent Directors’ Stock Option
Plan. |
Director
Compensation Table
The following table sets forth certain information with respect
to our director compensation during the fiscal year ended
December 31, 2009:
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Change in
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Pension Value
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and
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Non-Equity
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Nonqualified
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Fees Earned
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Stock
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Option
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Incentive Plan
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Deferred
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All Other
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or Paid
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Awards
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Awards
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Compensation
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Compensations
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Compensation
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Name
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in Cash
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($)
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(1)($)
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($)
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Earnings
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(2)($)
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Total ($)
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Christopher H. Cole
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$ —
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$ —
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$ —
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$ —
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$ —
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$ —
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$ —
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Marcus E. Bromley
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39,750
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—
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6,919
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—
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—
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—
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46,669
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Elizabeth L. Watson
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39,000
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—
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6,919
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—
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—
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1,212
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47,131
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(1) |
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The value of option awards represents the amount of compensation
cost recognized by the Company for financial statement purposes
under ACS 718 as the aggregate grant date fair value. |
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Amount represents travel expense incurred by Mr. Bromley
and Ms. Watson to attend various director meetings. |
Compensation
Committee Interlocks and Insider Participation
No member of our compensation committee served as an officer or
employee of the Company or any of our subsidiaries during the
fiscal year ended December 31, 2009 or formerly served as
an officer of the Company or any of our subsidiaries. In
addition, during the fiscal year ended December 31, 2009,
none of our executive officers served as a member of a
compensation committee (or other board committee performing
equivalent functions or, in the absence of any such committee,
the entire board of directors) of any entity that has one or
more executive officers serving as a member of our board of
directors or compensation committee.
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires each director, officer and individual
beneficially owning more than 10% of a registered security of
the Company to file with the SEC, within specified time frames,
initial statements of beneficial ownership
(Form 3) and statements of changes in beneficial
ownership (Forms 4 and 5) of common stock of the
Company. Officers, directors and greater than 10% beneficial
owners are required by SEC rules to furnish the Company with
copies of all such forms they file. Based solely on a review of
the copies of such forms furnished to the Company during and
with respect to the fiscal year ended December 31, 2009
and/or
written representations that no additional forms were required,
the Company believes that its officers, directors and greater
than 10% beneficial owners complied with these filing
requirements in 2009, other than Ms. Watson, who did not
timely file one Form 4 for one transaction whereby she
purchased 2,500 shares of common stock.
12
Executive
Officers
In addition to Christopher H. Cole, as of March 31, 2010,
the following individuals currently serve as our executive
officers:
D. Kirk McAllaster, Jr., 43, has served as our
executive vice president and chief financial officer since
October 2007. He has served as executive vice president and
chief financial officer of Cole Advisors II since March
2007, and previously served as its vice president, finance from
December 2005 until March 2007.
Mr. McAllaster has served as executive vice president and
chief financial officer of Cole REIT I since October 2007, and
has been a member of its board of directors since May 2008. He
has served as executive vice president and chief financial
officer of Cole Advisors since March 2007, and previously served
as its vice president, finance from December 2005 until March
2007. Mr. McAllaster has served as executive vice
president, chief financial officer, secretary and treasurer of
Cole REIT III since its formation in January 2008.
Mr. McAllaster has served as executive vice president and
chief financial officer of Cole Advisors III since its
formation in January 2008.
Mr. McAllaster has served as executive vice president,
chief financial officer and treasurer of Cole Realty Advisors
since September 2009 and previously served as executive vice
president and chief financial officer from March 2007 until
September 2009. Mr. McAllaster has served as executive vice
president and chief financial officer of Cole Capital Partners
and Cole Capital Advisors since March 2007 and previously served
as vice president, finance for each Cole Capital Partners and
Cole Capital Advisors from December 2005 to March 2007.
Prior to joining Cole in May 2003, Mr. McAllaster worked
for six years with Deloitte & Touche LLP, most
recently as audit senior manager. He has over 19 years of
accounting and finance experience in public accounting and
private industry. Mr. McAllaster received a B.S. degree
from California State Polytechnic University — Pomona
with a major in Accounting. He is a Certified Public Accountant
licensed in the states of Arizona and Tennessee and is a member
of the American Institute of CPAs and the Arizona Society of
CPAs.
John M. Pons, 46, has served as our secretary since our
formation in September 2004. He also served as a member of our
board of directors from September 2004 until November 2004.
Mr. Pons has served as executive vice president, general
counsel and secretary of Cole Advisors II since September
2008, and previously served as its executive vice president,
chief administrative officer, general counsel and secretary from
October 2007 until September 2008, as its executive vice
president, chief operating officer, general counsel and
secretary from March 2007 until October 2007, as its senior vice
president and general counsel from December 2005 until March
2007, as its senior vice president and counsel from August 2005
until December 2005 and as its vice president, counsel and
secretary from September 2004 until August 2005.
Mr. Pons also has served as secretary for Cole REIT I and
has been a member of its board of directors since its formation
in March 2004. He has served as executive vice president,
general counsel and secretary of Cole Advisors since September
2008, and previously served as its executive vice president,
chief administrative officer, general counsel and secretary from
October 2007 until September 2008, as its executive vice
president, chief operating officer, general counsel and
secretary from March 2007 until October 2007, as its senior vice
president and general counsel from December 2005 until March
2007, as its senior vice president and counsel from August 2005
until December 2005 and as its vice president, counsel and
secretary from March 2004 until August 2005. Mr. Pons has
served as executive vice president, general counsel and
secretary of Cole Advisors III since its formation in
January 2008, and previously served as its chief operating
officer from January 2008 until May 2008.
Mr. Pons has served as executive vice president, general
counsel and secretary of Cole Realty Advisors since September
2008, and previously served as its executive vice president,
chief administrative officer, general counsel and secretary from
October 2007 until September 2008, as its executive vice
president,
13
chief operating officer and general counsel from March 2007
until October 2007, and as its senior vice president from
January 2006 until March 2007.
He has served as executive vice president, general counsel and
secretary of Cole Capital Advisors and Cole Capital Partners
since September 2008, and previously served for each as its
executive vice president, chief administrative officer, general
counsel and secretary from October 2007 until September 2008, as
its executive vice president, chief operating officer and
general counsel from March 2007 until October 2007, as its
senior vice president and general counsel from December 2005
until March 2007, as its senior vice president and counsel from
August 2005 until December 2005, and as its vice president and
counsel from September 2003 until August 2005.
Prior to joining Cole in September 2003, Mr. Pons was an
associate general counsel and assistant secretary with GE
Capital Franchise Finance Corporation since December 2001.
Before attending law school, Mr. Pons was a Captain in the
United States Air Force where he served from 1988 until 1992.
Mr. Pons received a B.S. degree in Mathematics from
Colorado State University and a M.S. degree in Administration
from Central Michigan University before earning his J.D. (Order
of St. Ives) in 1995 at the University of Denver.
Compensation
of Executive Officers
Our executive officers, including our principal financial
officer, do not receive compensation directly from us for
services rendered to us, and we do not intend to pay any
compensation directly to our executive officers. As a result, we
do not have, and our board of directors has not considered, a
compensation policy or program for our executive officers and
has not included a Compensation Discussion and Analysis in this
proxy statement.
Our executive officers are also officers of Cole Advisors II,
our advisor, and its affiliates, including Cole Capital
Corporation, the dealer-manager in our public offerings and Cole
Realty Advisors, our property manager, and are compensated by
these entities, in part, for their services to us. We pay fees
to such entities under our advisory agreement, dealer manager
agreement and property management and leasing agreement. We also
reimburse Cole Advisors II for its provision of
administrative services, including related personnel costs,
subject to certain limitations. A description of the fees that
we pay to our advisor, dealer-manager and property manager, or
any affiliate thereof is found in the “Transactions with
Related Persons, Promoters and Certain Control Persons”
section below.
14
BENEFICIAL
OWNERSHIP OF EQUITY SECURITIES
The following table sets forth information as of March 31,
2010, regarding the beneficial ownership of our common stock by
each person known by us to own 5% or more of the outstanding
shares of common stock, each of our directors, our director
nominee and each named executive officer, and our directors and
executive officers as a group. The percentage of beneficial
ownership is calculated based on 206,005,935 shares of
common stock outstanding as of March 31, 2010.
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Amount and Nature of
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Shares Beneficially Owned (1)
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Name and Address of Beneficial
Owner
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Number
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Percentage
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Christopher H. Cole (2)
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33,589
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*
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|
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Marcus E. Bromley (3)
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25,000
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*
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George N. Fugelsang
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-
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*
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Elizabeth L. Watson (4)
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27,500
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*
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D. Kirk McAllaster, Jr.
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299
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*
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All officers and directors as a group (5 persons)
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86,388
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*
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* |
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Represents less than 1% of the outstanding common stock. |
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(1) |
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Beneficial ownership is determined in accordance with the rules
of the SEC and generally includes voting or investment power
with respect to securities and shares issuable pursuant to
options, warrants and similar rights held by the respective
person or group which may be exercised within 60 days
following March 31, 2010. Except as otherwise indicated by
footnote, and subject to community property laws where
applicable, the persons named in the table above have sole
voting and investment power with respect to all shares of common
stock shown as beneficially owned by them. |
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(2) |
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Includes 20,000 shares owned by Cole Holdings Corporation
and 13,589 shares owned by the Christopher H. Cole
Generation Skipping Trust, for which Mr. Cole is the
Trustee, for which Mr. Cole disclaims beneficial ownership.
Mr. Cole is the sole stockholder of Cole Holdings
Corporation and controls the voting and disposition decisions of
Cole Holdings Corporation. |
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(3) |
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Includes 5,000 shares owned by Mr. Bromley pursuant to
exercise of options and shares issuable upon exercise of options
to purchase up to 20,000 shares of common stock, which are
exercisable within 60 days of March 31, 2010. |
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(4) |
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Includes shares issuable upon exercise of options to purchase up
to 25,000 shares of common stock, which are exercisable
within 60 days of March 31, 2010. |
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(5) |
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Includes shares issuable upon exercise of options to purchase an
aggregate of up to 45,000 shares of common stock, which are
exercisable within 60 days of March 31, 2010. |
15
AUDIT
COMMITTEE REPORT
Independent
Auditors
During the year ended December 31, 2009,
Deloitte & Touche LLP (“Deloitte &
Touche”) served as our independent auditors and provided
certain tax and other services. Deloitte & Touche has
served as our independent auditors since our formation.
Deloitte & Touche representatives will be present at
the 2010 Annual Meeting of Stockholders and will have the
opportunity to make a statement if they desire to do so. In
addition, the Deloitte & Touche representatives will
be available to respond to appropriate questions posed by any
stockholders. The audit committee anticipates that it will
engage Deloitte & Touche as our independent auditors
to audit our financial statements for the year ending
December 31, 2010. The audit committee reserves the right,
however, to select new auditors at any time in the future in its
discretion if it deems such decision to be in the best interests
of the Company and its stockholders. Any such decision would be
disclosed to the stockholders in accordance with applicable
securities laws.
The audit committee reviewed the audit and non-audit services
performed by Deloitte & Touche, as well as the fees
charged by Deloitte & Touche for such services. In its
review of the non-audit services and fees, the audit committee
considered whether the provision of such services is compatible
with maintaining the independence of Deloitte &
Touche. The aggregate fees billed to us for professional
accounting services, including the audit of Cole REIT II’s
annual financial statements by Deloitte & Touche
during the years ended December 31, 2009 and 2008, are set
forth in the table below.
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Year Ended
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Year Ended
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December 31,
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December 31,
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2009
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2008
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Audit fees
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$
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747,700
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$
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1,332,300
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Audit-related fees
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80,750
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31,890
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Tax fees
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|
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263,977
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243,328
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All other fees
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—
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—
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Total
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$
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1,092,427
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$
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1,607,518
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For purposes of the preceding table, Deloitte &
Touche’s professional fees are classified as follows:
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•
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Audit fees – These are fees for professional services
performed for the audit of our annual financial statements and
the required review of quarterly financial statements and other
procedures performed by Deloitte & Touche in order for
them to be able to form an opinion on our consolidated financial
statements. These fees also cover services that are normally
provided by independent auditors in connection with statutory
and regulatory filings or engagements and other services that
generally only the independent auditor reasonably can provide,
such as services associated with filing registration statements,
periodic reports and other filings with the SEC, and audits of
acquired properties or businesses or statutory audits for our
subsidiaries or affiliates.
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•
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Audit-related fees – These are fees for assurance and
related services that traditionally are performed by independent
auditors, such as due diligence related to acquisitions and
dispositions, attestation services that are not required by
statute or regulation, statutory subsidiary or equity investment
audits incremental to the audit of the consolidated financial
statements and general assistance with the implementation of
Section 404 of the Sarbanes-Oxley Act of 2002 and other SEC
rules promulgated pursuant to the Sarbanes-Oxley Act of 2002.
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•
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Tax fees – These are fees for all professional
services performed by professional staff in our independent
auditor’s tax division, except those services related to
the audit of our financial statements. These include fees for
tax compliance, tax planning, and tax advice, including federal,
state and local
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16
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issues. Services may also include assistance with tax audits and
appeals before the IRS and similar state and local agencies, as
well as federal, state, and local tax issues related to due
diligence.
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•
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All other fees – These are fees for other permissible
work performed that do not meet the above-described categories,
including assistance with internal audit plans and risk
assessments.
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Pre-Approval
Policies
The audit committee charter imposes a duty on the audit
committee to pre-approve all auditing services performed for us
by our independent auditors, as well as all permitted non-audit
services (including the fees and terms thereof) in order to
ensure that the provision of such services does not impair the
auditors’ independence. Unless a type of service to be
provided by the independent auditors has received
“general” pre-approval, it will require
“specific” pre-approval by the audit committee.
All requests or applications for services to be provided by the
independent auditor that do not require specific pre-approval by
the audit committee will be submitted to management and must
include a detailed description of the services to be rendered.
Management will determine whether such services are included
within the list of services that have received the general
pre-approval of the audit committee. The audit committee will be
informed on a timely basis of any such services rendered by the
independent auditors.
Requests or applications to provide services that require
specific pre-approval by the audit committee will be submitted
to the audit committee by both the independent auditors and the
principal financial officer, and must include a joint statement
as to whether, in their view, the request or application is
consistent with the SEC’s rules on auditor independence.
The chairperson of the audit committee has been delegated the
authority to specifically pre-approve de minimis amounts for
services not covered by the general pre-approval guidelines. All
amounts, other than such de minimis amounts, require specific
pre-approval by the audit committee prior to engagement of
Deloitte & Touche. All amounts, other than de minimis
amounts not subject to pre-approval, specifically pre-approved
by the chairperson of the audit committee in accordance with
this policy are to be disclosed to the full audit committee at
the next regularly scheduled meeting.
All services rendered by Deloitte & Touche for the
years ended December 31, 2009 and December 31, 2008
were pre-approved in accordance with the policies and procedures
described above.
Report of
the Audit Committee
Pursuant to the audit committee charter adopted by our board of
directors, the audit committee’s primary function is to
assist the board of directors in fulfilling its oversight
responsibilities by overseeing the independent auditors and
reviewing the financial information to be provided to the
stockholders and others, the system of internal control over
financial reporting that management has established and the
audit and financial-reporting process. The audit committee is
composed of two independent directors. Our management has the
primary responsibility for the financial statements and the
reporting process, including the system of internal control over
financial reporting. Membership on the audit committee does not
call for the professional training and technical skills
generally associated with career professionals in the field of
accounting and auditing and the members of the audit committee
are not professionally engaged in the practice of accounting or
auditing. The audit committee’s role does not provide any
special assurance with regard to the financial statements of the
Company, nor does it involve a professional evaluation of the
quality of the audits performed by the independent auditors. The
audit committee relies in part, without independent
verification, on information provided to it and on
representations made by management and the independent auditors
that the financial statements have been prepared in conformity
with accounting principles generally accepted in the United
States of America.
In this context, in fulfilling its oversight responsibilities,
the audit committee reviewed the 2009 audited financial
statements with management, including a discussion of the
quality and acceptability of the financial reporting and
controls of the Company.
17
The audit committee reviewed with Deloitte & Touche,
which is responsible for expressing an opinion on the conformity
of those audited financial statements with accounting principles
generally accepted in the United States of America, their
judgments as to the quality and the acceptability of the
financial statements and such other matters as are required to
be discussed by the applicable auditing standards as
periodically amended (including significant accounting policies,
alternative accounting treatments and estimates, judgments and
uncertainties). The Audit Committee has received the written
disclosures from the independent registered public accounting
firm required by Public Company Accounting Oversight Board
(United States) (“PCAOB”) Ethics and Independence
Rule 3526, Communication with Audit Committees
Concerning Independence and discussed with the independent
registered public accounting firm its independence within the
meaning of the rules and standards of the PCAOB and the
securities laws and regulations administered by the SEC.
The audit committee discussed with Deloitte & Touche
the overall scope and plans for the audit. The audit committee
meets periodically with Deloitte & Touche, with and
without management present, to discuss the results of their
examinations, their evaluations of internal controls and the
overall quality of the financial reporting of the Company.
In reliance on these reviews and discussions, the audit
committee recommended to the board of directors that the 2009
audited financial statements of the Company be included in its
Annual Report on
Form 10-K
for the year ended December 31, 2009 for filing with the
SEC.
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The Audit Committee of the Board of Directors:
Elizabeth L. Watson (Chairperson)
Marcus E. Bromley
|
18
TRANSACTIONS
WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL
PERSONS
Our independent directors have reviewed the material
transactions between our affiliates and us during the year ended
December 31, 2009. Set forth below is a description of the
transactions with affiliates. We believe that we have executed
all of the transactions set forth below on terms that are fair
to the Company.
Advisory
Agreement
We are party to an Advisory Agreement with Cole Advisors II
whereby Cole Advisors II manages our
day-to-day
operations and for identifying and making investments on our
behalf. In return, we pay to Cole Advisors II a monthly
asset management fee equal to 0.02083% of the aggregate asset
value of our assets and reimburse costs and expenses incurred by
Cole Advisors II in providing asset management services.
Such fees and expenses recorded for the year ended
December 31, 2009 totaled approximately $8.4 million.
We also pay to Cole Realty Advisors up to 2.0% of the contract
purchase price of each property or asset that we acquire, along
with reimbursement of acquisition expenses. Such payments for
the year ended December 31, 2009 totaled approximately
$4.0 million, all of which were fees. We also pay to Cole
Advisors II a financing coordination fee equal to 1.0% of
the amount available under any debt financing that we obtain and
use for the acquisition of properties and other investments.
Such payments for the year ended December 31, 2009 totaled
approximately $2.1 million. We reimburse the expenses
incurred by Cole Advisors II in connection with its
provision of administrative services, including related
personnel costs, subject to the limitation that we do not
reimburse Cole Advisors II for any amount by which the
operating expenses (including the asset management fee) at the
end of the four preceding fiscal quarters exceeds the greater of
(i) 2.0% of average invested assets, or (ii) 25.0% of
net income other than any additions to reserves for
depreciation, bad debt or other similar non-cash reserves and
excluding any gain from the sale of assets for that period. Such
expenses recorded for the year ended December 31, 2009
totaled approximately $906,000. Additionally, for substantial
assistance in connection with the sale of properties, we pay
Cole Advisors II or its affiliates an amount equal to up to
one-half of the brokerage commission paid on the sale of
property, not to exceed 2.0% of the contract price of each
property sold; provided, however, in no event may the real
estate commissions paid to our advisor, its affiliates and
unaffiliated third parties exceed the lesser of the competitive
real estate commission or an amount equal to 6.0% of the
contract sales price. No such payments were made for the year
ended December 31, 2009.
Additionally, we are required to pay to Cole Advisors II
performance fees based on a percentage of proceeds or stock
value upon our sale of assets or the listing of our common stock
on a national securities exchange, but only if, in the case of
our sale of assets, our investors have received a return of
their net capital invested and an 8.0% annual cumulative,
non-compounded return or, in the case of the listing or
quotation of our common stock, the market value of our common
stock plus the distributions paid to our investors exceeds the
sum of the total amount of capital raised from investors plus
the amount of cash flow necessary to generate an 8.0% annual
cumulative, non-compounded return to investors. In the event of
a sale of our assets, after investors have received a return of
their net capital invested and an 8.0% annual cumulative,
non-compounded return, then we will pay to Cole Advisors II
10.0% of remaining net sale proceeds. Upon listing our common
stock on a national securities exchange, we will pay to Cole
Advisors II a fee equal to 10.0% of the amount, if any, by
which (1) the market value of our outstanding stock plus
distributions paid by us prior to listing, exceeds (2) the
sum of the total amount of capital raised from investors and the
amount of cash flow necessary to generate an 8.0% annual
cumulative, non-compounded return to investors.
Cole Advisors II has paid expenses in connection with our
organization and our public offering of our common stock.
Pursuant to the Advisory Agreement, we reimburse Cole
Advisors II up to 1.5% of our gross offering proceeds with
respect to those expenses. During the year ended
December 31, 2009, we recorded approximately $525,000 for
organization and offering expenses.
Our Advisory Agreement has a one-year term expiring May 29,
2010, subject to an unlimited number of successive one-year
renewals upon mutual consent of the parties. Our independent
directors are required to determine, at least annually, that the
compensation to Cole Advisors II is reasonable in relation
to the nature
19
and quality of services performed and the investment performance
of the Company and that such compensation is within the limits
set forth in our charter. Upon termination of the Advisory
Agreement, we may be required to pay to Cole Advisors II a
performance fee similar to the performance fee described above
if Cole Advisors II would have been entitled to a
subordinated participation in net sale proceeds had the
portfolio been liquidated (based on an independent appraised
value of the portfolio) on the date of termination.
Christopher H. Cole, our chief executive officer, president and
chairman of our board of directors, indirectly owns 100% of the
ownership and voting interests of Cole Advisors II.
Mr. Cole also is the chief executive officer and president
of Cole Advisors II. D. Kirk McAllaster, Jr., our executive
vice president and chief financial officer, is the executive
vice president and chief financial officer of Cole Advisors II.
John M. Pons, our secretary, is the executive vice president,
secretary and general counsel of Cole Advisors II.
Property
Management and Leasing Agreement
We are party to a Property Management and Leasing Agreement with
Cole Realty Advisors. Pursuant to the agreement, we pay to Cole
Realty Advisors fees up to (i) 2.0% of gross revenues from
our single-tenant properties and (ii) 4.0% of gross
revenues from our multi-tenant properties, plus leasing
commissions based upon the customary leasing commissions
applicable to the geographic location of the property, subject
to certain limits. We also reimburse Cole Realty Advisors’
costs of managing and leasing the properties. Such fees and
expenses recorded for the year ended December 31, 2009
totaled approximately $5.9 million.
Our Property Management and Leasing Agreement has a one-year
term expiring May 29, 2010, subject to an unlimited number
of successive one-year renewals.
Christopher H. Cole, our chief executive officer, president and
chairman of our board of directors, indirectly owns 100% of the
ownership and voting interests of Cole Realty Advisors.
Mr. Cole also is the chief executive officer, president and
treasurer of Cole Realty Advisors. D. Kirk McAllaster, Jr.,
our executive vice president and chief financial officer, is the
executive vice president and chief financial officer of Cole
Realty Advisors. John Pons, our secretary, is the executive vice
president, general counsel and secretary of Cole Realty Advisors.
Dealer
Manager Agreement
We were a party to a Dealer Manager Agreement with Cole Capital
Corporation, the dealer manager in our public offerings. We paid
to Cole Capital Corporation 7.0% of the gross offering proceeds
from the offerings of our securities, except that no selling
commissions were paid on shares sold under our distribution
reinvestment plan. Cole Capital Corporation reallowed all of the
selling commission to participating broker-dealers. The
commission was subject to certain discounts based on the volume
of securities sold to individual investors. Cole Capital
Corporation also waived the selling commission with respect to
shares sold by an investment advisory representative. In
addition, Cole Capital Corporation received up to 1.5% of gross
proceeds from our public offerings, before reallowance to
participating broker-dealers, as a dealer-manager fee. Cole
Capital Corporation, in its sole discretion, reallowed a portion
of its dealer-manager fee to such participating broker-dealers
as a marketing and due diligence expense reimbursement, based on
such factors as the volume of shares sold by such participating
broker-dealers and marketing support incurred as compared to
those of other participating broker-dealers. We did not pay a
dealer manager fee for shares purchased through our distribution
reinvestment plan. During the year ended December 31, 2009,
we did not pay any amounts to Cole Capital Corporation for
selling commissions or dealer manager fees.
Christopher H. Cole, our chief executive officer, president and
chairman of our board of directors, indirectly owns 100% of the
ownership and voting interests of Cole Capital Corporation.
Mr. Cole also is the sole director of Cole Capital
Corporation.
20
STOCKHOLDER
PROPOSALS
Any proposals by stockholders for inclusion in proxy
solicitation material for the 2011 annual meeting must be
received by our secretary John M. Pons, at our offices no
later than December 15, 2010, and must comply with the
requirements of
Rule 14a-8
of the Securities Exchange Act of 1934, as amended. If a
stockholder wishes to present a proposal at the 2011 annual
meeting, whether or not the proposal is intended to be included
in the 2010 proxy materials, our bylaws currently require that
the stockholder give advance written notice to our secretary,
John M. Pons, at our offices no earlier than
December 17, 2010 and no later than January 16, 2011.
Stockholders are advised to review the Company’s bylaws,
which contain other requirements with respect to advance notice
of stockholder proposals and director nominations.
OTHER
MATTERS
As of the date of this proxy statement, we know of no business
that will be presented for consideration at the annual meeting
other than the items referred to above. If any other matter is
properly brought before the meeting for action by stockholders,
proxies in the enclosed form returned to us will be voted in
accordance with the recommendation of the board of directors or,
in the absence of such a recommendation, in accordance with the
discretion of the proxy holder.
A copy of the Company’s 2009 annual report to stockholders,
filed with the SEC, is enclosed herewith. You may also obtain
our other SEC filings and certain other information concerning
the Company through the Internet at www.sec.gov and
www.colecapital.com. Information contained in any website
referenced in this proxy statement is not incorporated by
reference in this proxy statement.
By Order of the Board of Directors
John M. Pons
Secretary
PLEASE
VOTE — YOUR VOTE IS IMPORTANT
21
The Board of Directors recommends you vote “FOR ALL NOMINEES LISTED” IN PROPOSAL 1.
IF YOU
AUTHORIZE YOUR PROXY BY MAIL, PLEASE RETURN ONLY THIS PROXY CARD IN THE ATTACHED
SELF-ADDRESSED, STAMPED ENVELOPE. DO NOT RETURN THE PROXY STATEMENT. IF YOU RETURN ANY ADDITIONAL
DOCUMENTS, YOUR PROXY CARD MAY BE UNDELIVERABLE BECAUSE OF INSUFFICIENT POSTAGE. DO NOT RETURN THIS
PROXY CARD IF YOU AUTHORIZE YOUR PROXY BY INTERNET OR TELEPHONE.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE
HELD ON MAY 26, 2010.
THE PROXY STATEMENT AND ANNUAL REPORT TO STOCKHOLDERS ARE AVAILABLE AT www.colecapital.com.
PROXY FOR 2010 ANNUAL MEETING OF STOCKHOLDERS
OF COLE CREDIT PROPERTY TRUST II, INC.
MAY 26, 2010
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder hereby appoints D. Kirk McAllaster, Jr. and John M. Pons, and each of
them, as proxy and attorney-in-fact, with full power of substitution as determined by the Board of
Directors of Cole Credit Property Trust II, Inc., on behalf and in the name of the undersigned, to
attend the Annual Meeting of Stockholders of Cole Credit Property Trust II, Inc. to be held on May
26, 2010, at 9:00 a.m. local time at the company’s offices located at 2575 East Camelback Road,
Suite 500, Phoenix, Arizona 85016, and at any adjournments or postponements thereof, and to cast on
behalf of the undersigned all votes which the undersigned would be entitled to cast if personally
present, as indicated on the reverse side of this card, and otherwise to represent the undersigned
at the meeting with all powers possessed by the undersigned if personally present. The undersigned
acknowledges receipt of the Notice of Annual Meeting of Stockholders, the proxy statement and the
annual report, the terms of each of which are incorporated herein by reference.
When this proxy card is properly executed, the votes entitled to be cast by the undersigned
stockholder will be cast in the manner directed herein. If no direction is made, the votes entitled
to be cast by the undersigned stockholder will be cast “FOR ALL NOMINEES LISTED” in Proposal 1. The
proxies are authorized to vote upon such other matters as may properly come before the meeting or
any adjournments or postponements thereof in accordance with the recommendation of the board of
directors or, in the absence of such a recommendation, in their discretion, including, but not
limited to, the power and authority to adjourn or postpone the meeting.
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| INTERNET |
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TELEPHONE |
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MAIL |
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| http://www.dfking.com/ccptII |
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1-800-628-8536 |
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Go to the website address listed
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Use any touch-tone telephone
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Mark, sign and date your proxy card |
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above
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Have your proxy card available
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Detach your proxy card |
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Have your proxy card available
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Follow the recorded instructions
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Return your proxy card in the |
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Follow the instructions that
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postage-paid envelope provided to |
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appear on your computer screen
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D.F. King & Co., Inc. |
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Wall Street Station |
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P. O. Box 1163 |
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New York, New York 10269-0013 |
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FOR ALL |
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FOR ALL |
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WITHHELD FOR |
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NOMINEES |
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OTHER THAN |
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ALL |
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LISTED |
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THOSE LISTED |
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PROPOSAL 1: Election of
Directors for the term
specified in the Proxy
Statement:
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o
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Christopher H. Cole
Marcus E. Bromley
George N. Fugelsang
WITHHELD: (Write name(s) of nominee(s) below).
IN THEIR DISCRETION, to act upon such other business as may properly come before the Annual Meeting
of Stockholders or any adjournment or postponement thereof.
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WILL ATTEND |
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If you plan to attend the Annual Meeting of Stockholders,
please mark the WILL ATTEND box.
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Dated: , 2010
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Please sign exactly as your name appears on this proxy card. When shares of common stock are held by joint tenants, both should sign. When signing as attorney, as executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign in
partnership name by general partner or other authorized person. |
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Name of Stockholder (Print) |
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Signature |
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Signature (if held jointly) |
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*
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By (if entity):
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*
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Title (if entity):
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YOUR
PROXY, WHETHER BY INTERNET, TELEPHONE OR MAIL, MUST BE RECEIVED BY
THE COMPANY OR ITS PROXY SOLICITOR NO LATER THAN 9:00 A.M. LOCAL TIME
ON MAY 26, 2010 TO BE INCLUDED IN THE VOTING RESULTS