COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
Compensation decisions during the year ended December 31, 2003, pertaining
to the compensation of David Grain, President of Global Signal Inc. and a member
of our board of directors, were made by our Chairman and Chief Executive
Officer, Wesley R. Edens, who serves as Chairman and Chief Executive Officer of
Global Signal Inc.
16
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total stockholder
return on shares of our Common Stock with the cumulative total return of the S&P
500 Stock Index*, the Russell 2000 Stock Index, the NAREIT All REIT Index and
the NAREIT Mortgage REIT Index.** The period shown commences on October 10,
2002, the date that our Common Stock was registered under Section 12 of the
Securities Exchange Act of 1934, and ends on December 31, 2003, the end of our
last fiscal year. The graph assumes an investment of $100 on October 10, 2002
and the reinvestment of any dividends. The stock price performance shown on the
graph is not necessarily indicative of future price performance.
* Source: CRSP, Center for Research in Security Prices, Graduate School of
Business, The University of Chicago 2004. Used with permission. All rights
reserved. crsp.com.
** Source: SNL Financial LC, Charlottesville, VA
In accordance with the rules of the SEC, this section entitled "Performance
Graph" shall not be incorporated by reference into any of our future filings
under the Securities Act or the Exchange Act, and shall not be deemed to be
soliciting material or to be filed under the Securities Act or the Exchange Act.
17
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
For purposes of this proxy statement a "beneficial owner" means any person
who, directly or indirectly, through any contract, arrangement, understanding,
relationship or otherwise has or shares:
(i) voting power, which includes the power to vote, or to direct the voting
of, shares of our Common Stock; and/or
(ii) investment power, which includes the power to dispose, or to direct
the disposition of, shares of our Common Stock.
A person is also deemed to be the beneficial owner of a security if that
person has the right to acquire beneficial ownership of such security at any
time within 60 days.
Listed in the following table and the notes thereto is certain information
with respect to the beneficial ownership of shares of our Common Stock as of
April 13, 2004 by each person known by us to be the beneficial owner of more
than five percent of our Common Stock, and by each of our directors and
executive officers, individually and as a group.
NUMBER OF SHARES OF
COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER (1) BENEFICIALLY OWNED PERCENT OF CLASS (2)
---------------------------------------- ------------------- --------------------
Cohen and Steers Capital Management, Inc.(3)....... 3,797,676 10.9%
Fortress Principal Investment Holdings II LLC(4)... 2,947,554 8.3%
FMR Corp.(5)....................................... 1,917,771 5.5%
Wesley R. Edens(6)................................. 2,963,229 8.4%
David J. Grain(7).................................. 3,385 *
Stuart A. McFarland(7)............................. 3,385 *
David K. McKown(7)................................. 3,385 *
Peter M. Miller(7)................................. 9,785 *
Jonathan Ashley.................................... 8,711 *
Debra A. Hess...................................... 1,000 *
Randal A. Nardone(6)............................... 2,948,554 8.3%
Kenneth M. Riis.................................... 20,000 *
Erik P. Nygaard(7)................................. 568,612 1.6%
All directors, nominees and executive officers as a
group
(10 persons)..................................... 3,582,492 10.1%
* Denotes less than 1%.
(1) The address of Fortress Principal Investment Holdings II LLC and all
officers, directors and the nominee listed above are in the care of Fortress
Investment Group LLC, 1251 Avenue of the Americas, 16th Floor, New York, New
York 10020.
(2) Percentage amount assumes the exercise by such persons of all options to
acquire shares of our Common Stock and no exercise by any other person.
(3) Based on information contained in a Schedule 13G/A filed with the SEC on
February 17, 2004. The address of Cohen & Steers Capital Management is 757 Third
Avenue, New York, New York 10017.
(4) Includes 2,255,109 shares of our Common Stock beneficially owned by Fortress
Principal Investment Holdings II LLC and options to acquire 692,445 shares of
our Common Stock, which represents the portion of the 1,702,227 options that are
currently exercisable and exercisable within 60 days of the date hereof
beneficially owned by Fortress Principal Investment Holdings LLC. The number of
shares beneficially owned by Fortress Principal Investment Holdings LLC are
included in the number of shares beneficially owned by Fortress Principal
Investment Holdings II LLC by virtue of the fact that Fortress Principal
Investment Holdings LLC and Fortress Principal Investment Holdings II LLC have
common owners. The beneficial owners of each of Fortress Principal Investment
Holdings II LLC and Fortress
18
Principal Investment Holdings LLC are Messrs. Wesley R. Edens, Peter L. Briger,
Jr., Robert I. Kauffman, Randal A. Nardone and Michael E. Novogratz.
(5) Based on information contained in a Schedule 13G filed with the SEC on
February 17, 2004. According to such Schedule 13G, various persons, as listed in
such Schedule 13G, have the right to receive or the power to direct the receipt
of dividends from, or the proceeds from the sale of the shares. The address of
FMR Corp. is 82 Devonshire Street, Boston, MA 02109.
(6) An aggregate of 2,947,554 of these shares are beneficially owned by Fortress
Principal Investment Holdings II LLC, as described in note 4.
(7) Includes options to acquire shares of our Common Stock that are currently
exercisable and exercisable within 60 days of the date hereof.
Section 16(a) of the Exchange Act requires directors, executive officers
and persons beneficially owning more than ten percent of a registered class of a
company's equity securities to file reports of ownership and changes in
ownership on Forms 3, 4, and 5 with the SEC and the New York Stock Exchange.
To our knowledge, based solely on review of the copies of such reports
furnished to us during the year ended December 31, 2003, all of our directors,
executive officers and greater-than-ten-percent owners were in compliance with
the Section 16(a) filing requirements, except that Fortress Principal Investment
Holdings, an affiliate of our manager (and the two executive officers of the
Company to whom its holdings are attributed, as described in the Security
Ownership of Management and Certain Beneficial Owners table above) failed to
timely file a Form 4 reflecting the grant of an option for 330,000 shares in
connection with the Company's January 2004 equity offering.
CHANGE IN CONTROL
We were formed in June 2002 for the purpose of separating the real estate
securities and certain credit leased operating real estate businesses from
Newcastle Investment Holdings LLC's other investments. In July 2002, Newcastle
Investment Holdings contributed to us certain assets and liabilities in exchange
for 16,488,517 shares of our common stock. We completed the initial public
offering of our common stock in October 2002, after which, Newcastle Investment
Holdings held approximately 70% of our outstanding stock. On May 19, 2003,
Newcastle Investment Holdings distributed to its stockholders all of the shares
of our common stock that it owned. As a result, Newcastle Investment Holdings no
longer owns any shares of our common stock.
19
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In late March 2004, we and a private investment fund managed by an
affiliate of our manager co-invested and each indirectly own an approximately
49% interest in a limited liability company that has acquired, in a
sale-leaseback transaction, 203 properties from a public company for a purchase
price of approximately $154 million. The properties are subject to a number of
master leases, the initial term of which in each case is a minimum of 15 years.
This investment was financed with debt at the limited liability company level
and our investment in this entity, reflected as an investment in an
unconsolidated subsidiary on our consolidated balance sheet, was approximately
$27 million as of the date of acquisition. Our manager receives from the
affiliated private investment fund with which we co-invested, in addition to
management fees, incentive compensation if the fund's aggregate investment
returns exceed certain thresholds.
In January 2004, we purchased from an underwriter $31.5 million face amount
of B and BB rated securities of Global Signal Trust I, a special purpose vehicle
established by Global Signal Inc., at a price resulting in a weighted average
yield of approximately 9.00%. Two of our directors are the CEO and President of
Global Signal, Inc., respectively. A private equity fund managed by an affiliate
of our manager owns a significant portion of Global Signal Inc.'s common stock;
our manager receives from this private equity fund, in addition to management
fees, incentive compensation if the fund's aggregate investment returns exceed
certain thresholds. Pursuant to this underwritten 144A offering, approximately
$418.0 million of Global Signal Trust I securities were issued in 7 classes,
rated AAA though B, of which the B and BB classes constituted $73.0 million. The
balance of the B and BB securities were sold on identical terms to a private
investment fund managed by an affiliate of our manager and to a large third
party mutual fund complex; our manager receives from this private investment
fund, in addition to management fees, incentive compensation if the fund's
aggregate investment returns exceed certain thresholds. The proceeds of the 144A
offering were utilized by Global Signal Inc. to repay an existing credit
facility, to pay an extraordinary dividend of approximately $140 million to its
stockholders of which approximately $67 million was paid to the above-referenced
private equity fund, and for general working capital purposes.
In November 2003, we and a private investment fund managed by an affiliate
of our manager co-invested and each indirectly own an approximately 38% interest
in a limited liability company that has acquired approximately 130 real estate
related loans from a third party financial institution for a purchase price of
approximately $80.0 million. Our investment in this entity, reflected as an
investment in an unconsolidated subsidiary on our consolidated balance sheet,
was approximately $30.6 million at December 31, 2003. Our manager receives from
this private investment fund, in addition to management fees, incentive
compensation if the fund's aggregate investment returns exceed certain
thresholds. The remaining approximately 24% interest in the limited liability
company is owned by the above-referenced third party financial institution.
In July 2002, Newcastle Investment Holdings LLC contributed certain assets
and liabilities to us in exchange for all of the shares of our Common Stock. Our
chairman and chief executive officer also serves as chairman and chief executive
officer of Newcastle Investment Holdings. In addition, our manager, Fortress
Investment Group LLC, also serves as manager of Newcastle Investment Corp. At
the time the transfer of assets and liabilities from Newcastle Investment
Holdings to us was approved and other organizational matters were approved for
us, Newcastle Investment Holdings was our sole stockholder. As a result, these
matters were not approved at arm's length and the terms of the transfer may not
be as favorable to us as if the transfer was with an unaffiliated third party.
We may enter into future transactions with Newcastle Investment Holdings with
the approval of our independent directors. Currently, Newcastle Investment
Holdings does not own any shares of our Common Stock.
We are party to a management agreement with Fortress Investment Group LLC,
pursuant to which Fortress Investment Group LLC provides for the day-to-day
management of our operations. The management agreement requires our manager to
manage our business affairs in conformity with the policies and the investment
guidelines that are approved and monitored by our board of directors. Our
chairman and chief executive officer and all of our executive officers also
serve as officers of our manager. As a result, the management agreement between
us and our manager and the amendment to the
20
management agreement were not negotiated at arm's-length, and the terms,
including fees payable, may not be as favorable to us as if it had been
negotiated with an unaffiliated third party.
Since our manager also manages Newcastle Investment Holdings and other
entities, it may become subject to conflicts of interest with respect to
managing our interests and the interests of such entities.
We have not entered into any other transactions in which any other director
or officer or stockholder of ours or of our manager had any material interest.
Mr. Grain, a member of our board of directors, serves as President of
Global Signal Inc. (formerly Pinnacle Holdings Inc.), whose equity is partially
owned by Fortress Investment Fund, an affiliate of ours managed by our manager
and Mr. Edens, our Chairman and Chief Executive Officer serves as Chairman and
Chief Executive officer of Global Signal Inc.
Fortress Principal Investment Holdings LLC, an affiliate of our manager,
has options to purchase 1,702,227 shares of our Common Stock. Fortress Principal
Investment Holdings II LLC owns 2,255,109 shares of our common stock. The
beneficial owners of each of Fortress Principal Investment Holdings LLC and
Fortress Principal Investment Holdings II LLC are Messrs. Wesley R. Edens, Peter
L. Briger, Jr., Robert I. Kauffman, Randal A. Nardone and Michael E. Novogratz.
Fortress Investment Holdings LLC is the sole member of Fortress Investment
Group LLC, our manager. The beneficial owners of Fortress Investment Holdings
LLC are Messrs. Wesley R. Edens, Peter L. Briger, Jr., Robert I. Kauffman,
Randal A. Nardone and Michael E. Novogratz.
21
PROPOSAL NO. 2
APPROVAL OF APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS
PROPOSED INDEPENDENT AUDITOR
Ernst & Young LLP, independent certified public accountants, has served as
independent auditors for us and our subsidiaries for the fiscal year ended
December 31, 2003. The Audit Committee of the board of directors has appointed
Ernst & Young LLP to be our independent auditors for the fiscal year ending
December 31, 2004 and has further directed that the selection of the independent
auditors be submitted for approval by the stockholders at the Annual Meeting.
Representatives of Ernst & Young LLP will be present at the Annual Meeting,
will be given the opportunity to make a statement, if they so desire, and will
be available to respond to appropriate questions from stockholders.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The board of directors recommends a vote FOR the approval of the
appointment of Ernst & Young LLP as independent auditors for the Company for
fiscal year 2004.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
During the years ended 2002 and 2003, we engaged Ernst & Young LLP to
provide us with audit and tax services. Services provided included the
examination of annual financial statements, limited review of unaudited
quarterly financial information, review and consultation regarding filings with
the Securities and Exchange Commission and the Internal Revenue Service,
assistance with management's evaluation of internal accounting controls,
consultation on financial and tax accounting and reporting matters, and
verification procedures as required by collateralized bond obligations. Fees for
2003 and 2002 were as follows:
YEAR AUDIT FEES AUDIT-RELATED FEES TAX-RELATED FEES ALL OTHER FEES
---- ---------- ------------------ ---------------- --------------
2003................. $ 776,800 $183,700 $132,500 $--
2002................. $1,889,000(1) $ 14,500 $ 65,000 $--
(1) Includes fees paid in connection with our initial public offering of $1.5
million in 2002.
Audit Fees. Audit fees are fees billed for the consolidated financial
statements as well as required audits of certain subsidiaries, consultation on
audit related matters and required review of SEC filings.
Audit Related Fees. Audit-related fees principally included attest
services not required by statute or regulation.
Tax Fees. Tax fees for the years ended December 31, 2003 and 2002 related
to tax planning and compliance and return preparation.
The Audit Committee has considered all services provided by the independent
auditors to us and concluded this involvement is compatible with maintaining the
auditors' independence.
The Audit Committee is responsible for appointing the Company's independent
auditor and approving the terms of the independent auditor's services. All
engagements for services after May 6, 2003 were pre-approved by the Audit
Committee. The Audit Committee has a policy for the pre-approval of all audit
and permissible non-audit services to be provided by the independent auditor.
This policy is subject to certain guidelines and pre-approved services
that, in the judgment of management and the auditor, would not violate the
auditor's independence. At the end of each quarter, or at any time cumulative
fees not previously reported to the Audit Committee exceed $500,000, management
creates a schedule of the services performed which the Audit Committee then
reviews and approves.
22
ADVANCE NOTICE FOR STOCKHOLDER NOMINATIONS AND PROPOSALS
FOR 2005 ANNUAL MEETING
Proposals received from stockholders are given careful consideration by the
Company in accordance with Rule 14a-8 under the Exchange Act. Stockholder
proposals are eligible for consideration for inclusion in the proxy statement
for the 2005 annual meeting of stockholders if they are received by the Company
on or before December 28, 2004. Any proposal should be directed to the attention
of the Company's Secretary at 1251 Avenue of the Americas, 16th Floor, New York,
New York 10020.
In order for a stockholder proposal submitted outside of Rule 14a-8 to be
considered "timely" within the meaning of Rule 14a-4(c), such proposal must be
received by the Company not later than the last date for submission of
stockholder proposals under the Company's Bylaws. In order for a proposal
relating to business to be conducted at our 2005 annual meeting of stockholders
to be "timely" under the Company's Bylaws, it must be received by the secretary
of the Company at our principal executive office after the close of business on
December 28, 2004 and before the close of business on January 27, 2005. However,
in the event that the date of mailing of the notice of the 2005 annual meeting
of stockholders is advanced or delayed by more than 30 days from April 28, 2005,
a proposal by the stockholders to be timely must be received not earlier than
the close of business on the 120th day before mailing of notice of such meeting
and not later than the close of business on the later of the 90th day before
mailing of notice of such meeting or the 10th day after the day on which public
announcement of the date of such meeting is first made by the Company. For
additional requirements, a stockholder may refer to our Bylaws, a copy of which
may be obtained from our Secretary. If we do not receive timely notice pursuant
to our Bylaws, the proposal my be excluded from consideration at the meeting.
OTHER MATTERS
The board of directors knows of no other business to be brought before the
Annual Meeting. If any other matters properly comes before the Annual Meeting,
including a proposal omitted from this Proxy Statement in accordance with Rule
14a-8 under the Exchange Act, the proxies will be voted on such matters in
accordance with the judgment of the persons named as proxies therein, or their
substitutes, present and acting at the meeting.
No person is authorized to give any information or to make any
representation not contained in this proxy statement, and, if given or made,
such information or representation should not be relied upon as having been
authorized. The delivery of this proxy statement shall not, under any
circumstances, imply that there has not been any change in the information set
forth herein since the date of the proxy statement.
ADDITIONAL INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission ("SEC") at 450 Fifth
Street NW, Washington, D.C. 20549. You may read and copy any reports, statements
or other information we file at the SEC's public reference rooms in Washington,
D.C., New York, New York. Please call the SEC at (800) SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available to
the public from commercial document retrieval services and on the web site
maintained by the SEC at www.sec.gov. Such information will also be furnished
upon written request to Newcastle Investment Corp., c/o Fortress Investment
Group LLC, 1251 Avenue of the Americas, 16th Floor, New York, NY 10020,
Attention: Investor Relations and can also be accessed through our website at
www.newcastleinv.com.
The SEC has adopted rules that permit companies and intermediaries such as
brokers to satisfy delivery requirements for proxy statements with respect to
two or more stockholders sharing the same address by delivering a single proxy
statement addressed to those stockholders. This process, which is commonly
referred to as "householding," potentially provides extra convenience for
stockholders and cost savings for companies. The Company and some brokers
household proxy materials, delivering a single proxy statement to multiple
stockholders sharing an address unless contrary instructions have been received
from the affected stockholders.
23
Once you have received notice from your broker or the Company that they or
the Company will be householding materials to your address, householding will
continue until you are notified otherwise or until you revoke your consent. If,
at any time, you no longer wish to participate in householding and would prefer
to receive a separate proxy statement, please notify your broker if your shares
are held in a brokerage account or the Company if you hold registered shares.
You can notify the Company by sending a written request to, Newcastle Investment
Corp., 1251 Avenue of the Americas, 16th Floor, New York, New York 10020,
Attention: Investor Relations.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROXY STATEMENT
TO VOTE ON THE ELECTION OF ONE DIRECTOR AND THE APPROVAL OF ERNST & YOUNG LLP AS
OUR INDEPENDENT AUDITORS FOR FISCAL YEAR 2004. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS
PROXY STATEMENT. THIS PROXY STATEMENT IS DATED APRIL 28, 2004. YOU SHOULD NOT
ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF
ANY DATE OTHER THAN SUCH DATE, AND NEITHER THE MAILING OF THIS PROXY STATEMENT
TO STOCKHOLDERS NOR THE ELECTION OF THE NOMINEES DESCRIBED HEREIN WILL CREATE
ANY IMPLICATION TO THE CONTRARY.
By Order of the Board of Directors,
/s/ Randal A. Nardone
Randal A. Nardone
Secretary
New York, New York
April 28, 2004
24
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
NEWCASTLE INVESTMENT CORP.
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD May 27, 2004, the
undersigned appoints Wesley R. Edens and Randal A. Nardone, or either of them,
with full power of substitution, to attend the Annual Meeting of Stockholders of
NEWCASTLE INVESTMENT CORP. on May 27, 2004 (the "Annual Meeting"), and any
adjournments thereof, on behalf of the undersigned and to vote all shares which
the undersigned would be entitled to vote and to take all actions which the
undersigned would be entitled to take if personally present upon the following
matters set forth in the Notice of Annual Meeting and described more fully in
the Proxy Statement:
1. Proposal to elect one Class II director to serve until the 2007
annual meeting of stockholders or until his successor is elected and
duly qualified.
[ ] FOR the ONE nominee listed below (except as marked to
the contrary below)
[ ] WITHHOLD AUTHORITY to vote for the ONE nominee listed
below --
David J. Grain
2. Proposal to approve the appointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year 2004.
[ ] FOR this appointment --
[ ] AGAINST this appointment --
[ ] ABSTAIN --
3. In their discretion, upon such other business as may properly come
before the meeting and any adjournments thereof.
This proxy, when properly executed, will be voted as directed. If this
proxy is executed but no direction is indicated, this proxy will be voted FOR
the proposal to elect one Class II director to serve until the 2007 annual
meeting of stockholders or until his successor is elected and duly qualified,
FOR the approval of the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year 2004; and in the discretion of the
proxy holder on any other business that properly comes before the Annual Meeting
or any adjournment or postponement thereof. The undersigned hereby revokes any
proxy heretofore given with respect to such meeting.
PLEASE DATE, SIGN AND RETURN
PROXY PROMPTLY
Receipt of Notice of Annual
Meeting and Proxy Statement
is hereby acknowledged
Stockholder's Signature
Joint Holder's Signature (if applicable)
Date:
NOTE: Please sign exactly as the name appears on the records of the Company and
date. If the shares are held jointly, each holder should sign. When signing as
an attorney, executor, administrator, trustee, guardian, officer of a
corporation or other entity or in another representative capacity, please give
the full title under signature(s).
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