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Section 1: DEF 14A (DEF 14A)

cbl-def14a_20200507.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

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 [ ]

Check the appropriate box:

[ ]

Preliminary Proxy Statement

[ ]

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

[X]

Definitive Proxy Statement

[ ]

Definitive Additional Materials

[ ]

Soliciting Material Under § 240.14a-12

 

CBL & ASSOCIATES PROPERTIES, INC.

(Name of Registrant as Specified in Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

[X]

No fee required

[ ]

Fee computed on table below per Exchange Act Rules 14(a)-6(i)(1) and 0-11

 

(1)

Title of each class of securities to which transaction applies:

 

 

(2)

Aggregate number of securities to which transaction applies:

 

 

(3)

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):

 

 

(4)

Proposed maximum aggregate value of transaction:

 

 

(5)

Total fee paid:

 

 

[ ]

Fee paid previously with preliminary materials.

 

[ ]

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.

 

(1)

Amount Previously Paid:

 

 

(2)

Form, Schedule or Registration Statement No.:

 

 

(3)

Filing Party:

 

 

(4)

Date Filed:

 

 

 

 

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

April 6, 2020

 

 

 

Dear Shareholder:

 

You are cordially invited to attend the annual meeting of shareholders which will be held on Thursday, May 7, 2020 at 4:00 p.m. (EDT). In light of public health concerns regarding the coronavirus (COVID-19) pandemic, recommendations and orders from federal, state and local governmental authorities, and to support the health and well-being of our shareholders, this year’s annual meeting will be a completely “virtual meeting” of shareholders.  You will be able to attend the meeting, vote and submit your questions live via webcast by visiting www.virtualshareholdermeeting.com/CBL2020.

 

The Notice and Proxy Statement on the following pages contain details concerning the business to come before the meeting.  Please sign and return your proxy card in the enclosed envelope, or vote your shares by telephone or via the Internet, to ensure that your shares will be represented and voted at the meeting even if you cannot attend via the live webcast.  Even if you plan to attend the meeting via the live webcast, you are urged to sign and return the enclosed proxy card (or voting instruction form, as applicable), or to vote your shares by telephone or via the Internet in accordance with the instructions on the enclosed proxy card or voting instruction form.

 

Thank you for your support.

 

Sincerely,

 

Chairman of the Board

 

 

 

 

 

 

 

 


 

CBL & ASSOCIATES PROPERTIES, INC.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

May 7, 2020

 

NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of CBL & Associates Properties, Inc., a Delaware corporation (the “Company”), will be held on Thursday, May 7, 2020 at 4:00 p.m. (EDT) via live webcast by visiting www.virtualshareholdermeeting.com/CBL2020.  You will need the 16-digit control number included on your proxy card or voting instruction form.  The meeting will be held for the following purposes:

 

 

1.

To act on the re-election of the Board of Directors’ nine director nominees to serve for a term of one year and until their respective successors are elected and qualified (“Proposal 1”);

 

2.

To act upon a proposal to ratify the selection of Deloitte & Touche LLP (“Deloitte”) as the independent registered public accountants for the Company’s fiscal year ending December 31, 2020 (“Proposal 2”);

 

3.

To act upon a proposal for the advisory approval of the compensation of our Named Executive Officers as set forth herein (“Proposal 3”);

 

4.

To act upon approval of an amendment to the Company’s Amended and Restated Certificate of Incorporation, as amended, to effect a reverse stock split at a ratio between 1-for-5 and 1-for-25, and a proportionate reduction in the number of authorized shares of common stock, to be determined at the discretion of the Board of Directors for the purpose of complying with New York Stock Exchange Listing Standards, subject to the Board of Directors’ discretion to abandon this amendment (“Proposal 4”); and

 

5.

To consider and act upon any other matters which may properly come before the meeting or any adjournment thereof.

In light of public health concerns regarding the coronavirus (COVID-19) pandemic, recommendations and orders from federal, state and local authorities, and to support the health and well‑being of our shareholders, this year’s meeting will be conducted virtually.  You are entitled to attend and participate in the Annual Meeting only if you were a shareholder of record as of the record date or hold a valid proxy for the meeting.  Those shareholders will be able to attend the virtual Annual Meeting, vote their shares and submit questions during the meeting via live audio webcast by visiting: www.virtualshareholdermeeting.com/CBL2020.  To participate, you will need the 16-digit control number included in your proxy materials or on your proxy card.  Please note that there will be no in-person meeting for you to attend.

In accordance with the provisions of the Company’s Bylaws, the Board of Directors has fixed the close of business on March 13, 2020, as the record date for the determination of the shareholders entitled to notice of, and to vote at, the Annual Meeting.

Your attention is directed to the accompanying Proxy Statement.

Your vote is very important.  Whether or not you plan to attend the meeting via live webcast, we urge you to submit your Proxy.  To submit your Proxy by mail, please sign, date and promptly return the enclosed Proxy (or voting instruction form) in order to ensure representation of your shares.  An addressed envelope for which no postage is required if mailed in the United States is enclosed for that purpose.  Alternatively, you may use the toll-free telephone number indicated on the enclosed Proxy (or voting instruction form) to vote by telephone or visit the website indicated thereon to vote via the Internet.  This will not prevent you from voting your shares during the meeting if you desire to do so.

 

By Order of the Board of Directors

 

Chief Executive Officer

 

Chattanooga, Tennessee

April 6, 2020

 

 

CBL Properties  |  CBL Center, Suite 500  |  2030 Hamilton Place Boulevard  |  Chattanooga, TN 37421-6000  |  423.855.0001  |  cblproperties.com


 

TABLE OF CONTENTS

 

PROXY STATEMENT SUMMARY

1

ANNUAL MEETING AND PROXIES

4

VOTING AT THE ANNUAL MEETING

4

Record Date and Shares Entitled to Vote

4

Quorum Requirements

5

Votes Necessary to Approve the Proposals

5

Special Note Regarding Shares Held in Broker Accounts

5

Voting Procedures

6

PROPOSAL 1 – ELECTION OF DIRECTORS

7

Director Nominees

7

Additional Executive Officers

16

Other Senior Officers

18

Operation of the Company’s Business; Certain Aspects of the Company’s Capital Structure

19

CORPORATE GOVERNANCE MATTERS

19

Director Independence

20

Additional Policy Statements

20

Executive Sessions for Independent Directors

21

Board Leadership Structure

22

Board Management and Risk Oversight

22

Communicating With the Board of Directors

23

Code of Business Conduct and Ethics

23

Board of Directors’ Meetings and Committees

23

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

27

Delinquent Section 16(a) Reports

29

EXECUTIVE COMPENSATION

30

Compensation Discussion and Analysis

30

Summary Compensation Table

52

2019 Grants of Plan-Based Awards

54

Additional Information Concerning Executive Compensation

55

Pay Ratio Disclosure

57

2019 Outstanding Equity Awards at Fiscal Year-End

58

2019 Option Exercises and Stock Vested

60

Potential Payments Upon Termination or Change in Control

60

DIRECTOR COMPENSATION

66

Director Compensation Table

66

Additional Information Concerning Director Compensation

67

Equity Compensation Plan Information as of December 31, 2019

68

Compensation Committee Interlocks and Insider Participation

69

REPORT OF THE COMPENSATION COMMITTEE

69

REPORT OF THE AUDIT COMMITTEE

70

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

71

PROPOSAL 2 – RATIFICATION OF THE SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS

75

PROPOSAL 3 – ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

77

PROPOSAL 4 – APPROVAL OF AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION CONCERNING A REVERSE STOCK SPLIT

78

DATE FOR SUBMISSION OF SHAREHOLDER PROPOSALS AND RELATED MATTERS

88

HOUSEHOLDING OF PROXY MATERIALS

88

OTHER BUSINESS OF THE MEETING

89

Appendix A – Form of Certificate of Amendment

A-1

 

 

 


 

PROXY STATEMENT SUMMARY

 

This summary highlights information contained elsewhere in this Proxy Statement.  This summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully before voting.  Page references are supplied in this summary to help you find further information in this Proxy Statement.

 

Our 2020 Annual Meeting

 

Time and Date

 

4:00 p.m. (EDT) on Thursday, May 7, 2020

 

 

 

Location

 

The annual meeting will be held virtually via live webcast.  

You can join the meeting by visiting www.virtualshareholdermeeting.com/CBL2020

and entering the 16-digit control number listed on your proxy card.

 

 

 

Record Date

 

March 13, 2020

 

 

 

Voting

 

Each share is entitled to one vote on each matter to be voted upon at our Annual Meeting.

You can vote by proxy utilizing any of the following methods:

 

 

Internet: Go to the website shown on your Proxy or voting instruction form until 11:59 p.m. Eastern Time, the day before our Annual Meeting.

Telephone: As shown on the Proxy or voting instruction form you received until 11:59 p.m. Eastern Time, the day before our Annual Meeting.

Mail: Mark, sign, date and promptly return your Proxy or voting instruction form.

In Person at the Virtual Annual Meeting: You may vote in person during the virtual Annual Meeting by visiting www.virtualshareholdermeeting.com/CBL2020 and entering the 16-digit control number found on your proxy card or on the voting instruction form you received from your broker.

Internet Availability
of Materials

 

This Notice of Annual Meeting and Proxy Statement, as well as our Annual Report for the Company’s fiscal year ended December 31, 2019, are also available via the internet at: www.proxyvote.com.

 

Annual Meeting Proposals and Board Recommendations

 


Proposal

Board
Recommendation

Page
Reference

Proposal 1 – Election of Directors

For all nominees

7

Proposal 2 – Ratification of the selection of Deloitte as our independent registered public accounting firm for 2020

For

75

Proposal 3 – Advisory Vote to Approve Executive Compensation

For

77

Proposal 4 – Approval of an amendment to our Amended and Restated Certificate of Incorporation, as amended (the “Certificate of Incorporation”), to effect a reverse stock split at a ratio between 1‑for‑5 and 1‑for‑25, and a proportionate reduction in the number of authorized shares of common stock, to be determined at the discretion of our Board of Directors for the purpose of complying with New York Stock Exchange (“NYSE”) Listing Standards, subject to the Board of Directors’ discretion to abandon this amendment

For

78

Transaction of any other business that properly comes before our Annual Meeting

 

 

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Director Nominees (Page 7)

 



Name



Age


Director
Since



Occupation


Independent
(Yes/No)

Board
Committee
Memberships

Other Public
Company Boards

Charles B. Lebovitz

83

1993

Chairman of the Board
of the Company

No

Executive*

None

Stephen D. Lebovitz

59

1993

Chief Executive Officer
of the Company

No

Executive, Capital Allocation

None

Michael L. Ashner

67

2019

Chief Executive Officer,
Winthrop Capital Advisors, LLC, First Winthrop Corp. and Winthrop Realty Partners L.P.

Yes

Executive, Capital Allocation*

None

A. Larry Chapman

73

2013

Retired Executive Vice President and Head of Commercial Real Estate,
Wells Fargo & Co.

Yes

Audit ($)*, Compensation

Realty Income Corporation

Matthew S. Dominski

65

2005

Retired Chief Executive Officer, Urban Shopping Centers, Inc.

Yes

Audit ($), Compensation*

First Industrial Realty Trust

John D. Griffith

58

2015

Senior Vice President of
Real Estate and Development of Life Time, Inc.
Managing Partner of
Griffith Real Estate LLC
Former Executive Vice President of Property Development,
Target Corporation

Yes

Compensation, Nominating/ Corporate Governance

None

Richard J.
Lieb

60

2016

Managing Director and
Chairman of Real Estate
of Greenhill & Co., LLC

Yes

Audit ($),
Nominating/ Corporate Governance

AvalonBay Communities, Inc.;
iStar Inc.;
VEREIT, Inc.

Kathleen M. Nelson

74

2009

President and Founder,
KMN Associates LLC

Yes

Nominating/ Corporate Governance*,
Executive

Apartment Investment and Management Company;
Dime Community Bancshares, Inc.

Carolyn B. Tiffany

53

2019

Retired President of Winthrop Realty Trust

Yes

Audit ($), Compensation

None

*Denotes Committee Chairman

($)Audit Committee Financial Expert


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Ratification of Auditors (Page 75)

 

We are asking our shareholders to ratify the appointment of Deloitte as the independent registered public accounting firm to serve as our auditors for the year ending December 31, 2020.

 

 

 

 

 

 

 

 

 

Say-on-Pay (Page 77)

 

Consistent with our shareholders’ preference, our Board of Directors is providing shareholders with an annual vote to approve, on an advisory basis, the compensation of our named executive officers as disclosed in our Proxy Statement.

Please review our Compensation Discussion and Analysis (beginning on page 30), which describes the principal components of our executive compensation program, the objectives and key features of each component and the compensation decisions made by our Compensation Committee for our named executive officers, and the accompanying executive compensation tables and related information (beginning on page 52) for additional details about our executive compensation programs, including information about our named executive officers’ fiscal year 2019 compensation.

 

 

 

 

 

 

 

 

 

Board Proposal to Amend the Certificate of Incorporation to effect a reverse stock split at a ratio between 1-for-5 and 1-for-25, and a proportionate reduction in the number of authorized shares of common stock, for the purpose of complying with NYSE Listing Standards (Page 78)

 

As discussed in Proposal 4, the Board of Directors has approved, and is recommending to our shareholders for approval, an amendment to the Company’s Certificate of Incorporation to effect a reverse stock split at a ratio between 1-for-5 and 1-for-25, and a proportionate reduction in the number of authorized shares of common stock, to be determined at the discretion of our Board of Directors for the purpose of complying with NYSE Listing Standards, subject to the Board of Directors’ discretion to abandon this amendment.

 

 

 

 

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PROXY STATEMENT

 

CBL & ASSOCIATES PROPERTIES, INC.

2030 Hamilton Place Blvd.

Suite 500

CBL Center

Chattanooga, Tennessee 37421

(423) 855-0001

 

ANNUAL MEETING OF SHAREHOLDERS

May 7, 2020

 

 

 

ANNUAL MEETING AND PROXIES

 

The enclosed proxy is solicited by and on behalf of the Board of Directors of CBL & Associates Properties, Inc., a Delaware corporation (the “Company” or “CBL”), for use at the annual meeting of shareholders of the Company (the “Annual Meeting”) to be held on Thursday, May 7, 2020, at 4:00 p.m. (EDT) and at any and all postponements or adjournments thereof.  This year’s annual meeting will be an entirely “virtual meeting” of shareholders.  You will be able to attend the meeting as well as vote and submit your questions via live webcast by visiting www.virtualshareholdermeeting.com/CBL2020 and entering the 16-digit control number included on your proxy card or on the voting instruction form you received from your broker.  Any proxy given may be revoked at any time before it is voted by filing with the Secretary of the Company either an instrument revoking it or a duly executed proxy bearing a later date.  All expenses of the solicitation of proxies for the Annual Meeting, including the cost of mailing, will be borne by the Company.  In addition to solicitation by mail, Company officers and regular employees may solicit proxies from shareholders by telephone, telegram or personal interview but will not receive additional compensation for such services.  The Company also intends to request persons holding stock in their name or custody, or in the name of nominees, to send proxy materials to their principals and request authority for the execution of the proxies.  The Company will reimburse such persons for the associated expense.  

In light of public health concerns regarding the coronavirus (COVID-19) pandemic, recommendations and orders from federal, state and local authorities, and to support the health and well-being of our shareholders, this year’s meeting will be conducted virtually.  You are entitled to attend and participate in the Annual Meeting only if you were a shareholder of record as of the record date or hold a valid proxy for the meeting.  Those shareholders will be able to attend the virtual Annual Meeting, vote their shares and submit questions during the meeting via live audio webcast by visiting: www.virtualshareholdermeeting.com/CBL2020.  Please note that there will be no in-person meeting for you to attend.

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to Be Held on May 7, 2020:

 

The Company’s Notice of Annual Meeting and Proxy Statement for the Annual Meeting, as well as our Annual Report for the Company’s fiscal year ended December 31, 2019, are also available at www.proxyvote.com.

 

VOTING AT THE ANNUAL MEETING

 

Record Date and Shares Entitled to Vote

 

Only shareholders of record at the close of business on March 13, 2020 are entitled to vote on the matters to be presented at the Annual Meeting.  The number of shares of the Company’s common stock, par value $.01 per share (“Common Stock”), outstanding on such date and entitled to vote was 191,966,991 shares.

 

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Quorum Requirements

 

The presence in person or by proxy of holders of record of a majority of the outstanding shares of Common Stock is required for a quorum to transact business at the Annual Meeting with respect to those matters requiring approval by the holders of Common Stock, but if a quorum should not be present, the Annual Meeting may be adjourned from time to time until a quorum is obtained.

 

Votes Necessary to Approve the Proposals

 

The vote required to approve each of the proposals at the Annual Meeting is as follows:

 

 

The affirmative vote of the holders of a plurality of the shares of Common Stock present or represented at the Annual Meeting is required for the election of the Board of Directors’ nominees for re-election as directors under Proposal 1.  

 

The affirmative vote of a majority of the votes cast by the holders of shares of Common Stock present or represented at the Annual Meeting is required for approval of:

 

o

Proposal 2, ratification of the selection of Deloitte as the independent registered public accountants (referred to herein as the “independent registered public accountants” or the “independent auditors”) for the Company’s fiscal year ending December 31, 2020; and

 

o

Proposal 3, the advisory resolution approving the compensation of our named executive officers.

 

The affirmative vote of the holders of a majority of the Company’s issued and outstanding shares of Common Stock, voting as a class, is required for the approval of Proposal 4, the proposed amendment to the Certificate of Incorporation to effect a reverse stock split at a ratio between 1-for-5 and 1-for-25, and a proportionate reduction in the number of authorized shares of common stock, to be determined at the discretion of our Board of Directors for the purpose of complying with NYSE Listing Standards, subject to the Board of Directors’ discretion to abandon this amendment.

 

Each share of Common Stock is entitled to one vote with respect to those matters upon which such share is to be voted.  No cumulative voting rights are authorized and dissenters’ rights are not applicable to these matters.  

 

While the Company’s directors will be elected by plurality vote at the Annual Meeting, as further described below under “Corporate Governance Matters – Additional Policy Statements,” the Board of Directors has implemented a majority voting policy under our Corporate Governance Guidelines, which provides that a director who is nominated in an uncontested election, and who receives a greater number of votes “withheld” from his or her election than votes “for” such election, is required to immediately tender his or her resignation to the Board of Directors for consideration.

 

Special Note Regarding Shares Held in Broker Accounts

 

Under NYSE Rule 452, NYSE member organizations are prohibited from giving a proxy to vote with respect to certain matters, including matters involving (i) an election of directors, (ii) any proposal related to executive compensation (including any shareholder advisory votes on the approval of executive compensation) or (iii) an authorization to implement an equity compensation plan, or any material revision to the terms of any existing equity compensation plan, without receiving voting instructions from a beneficial owner.  Therefore, brokers will not be entitled to vote shares at the Annual Meeting with respect to Proposal 1 or Proposal 3 without instructions by the beneficial owner of the shares. Beneficial owners of shares held in broker accounts are advised that, if they do not timely provide instructions to their broker, their shares will not be voted in connection with the election of directors (Proposal 1), or with taking action on Proposal 3.  

 

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Voting Procedures

 

If your shares are registered directly in your name with our transfer agent, Computershare, you are considered the shareholder of record with respect to those shares and you are receiving a proxy card for the virtual Annual Meeting.  If your shares are held in an account at a broker, bank or other similar organization, you are the beneficial owner of shares held in “street name” and are receiving a voting instruction form.  Holders of our Common Stock on the March 13, 2020 record date have three ways to vote: by mail, by phone and via the Internet using a computer:

 

By Mail: you may complete, sign and return your proxy card (or the voting instruction form received from your broker or bank, as applicable) by pre-paid mail.  

 

By Telephone: you also may use the toll-free telephone number indicated on the proxy card (or voting instruction form) to vote by telephone until 11:59 p.m. Eastern Time the day before our Annual Meeting.  

 

Via the Internet: Finally, you also may visit the website indicated on the proxy card (or voting instruction form) to vote via the Internet, until 11:59 p.m. Eastern Time the day before our Annual Meeting, or vote online during the virtual Annual Meeting, as describe below.

 

You must enter the 16-digit control number found on your proxy card (or the voting instruction form previously sent to you) in order to vote in advance of the Annual Meeting as described above, and to vote and/or to participate during the Annual Meeting by visiting: www.virtualshareholdermeeting.com/CBL2020. (If you are a “street name” holder and previously requested a legal proxy from your broker, bank or other similar organization, you may also use such legal proxy to vote at and/or participate in the Annual Meeting.)  Whether or not you plan to attend the virtual Annual Meeting, we urge you to vote in advance of the Annual Meeting by one of the methods described above.

 

As noted above, under the rules of the NYSE, on certain routine matters brokers may, at their discretion, vote shares they hold in “street name” on behalf of beneficial owners who have not returned voting instructions to the brokers.  Routine matters include the ratification of the selection of the independent registered public accountants (Proposal 2).  In instances – such as voting on Proposals 1 and 3 at the Annual Meeting – where brokers are prohibited from exercising discretionary authority (so-called “broker non-votes”), the shares for which they have not received voting instructions are counted as present for the purpose of determining whether or not a quorum exists at the Annual Meeting, but are not included in the vote totals.  Because broker non-votes are not included in the vote, they are not counted as votes cast “for” or “against” a proposal.  Accordingly, assuming the presence of a quorum at the Annual Meeting, abstentions and broker non-votes will have no effect on the election of any nominee for director under Proposal 1, so long as such nominee receives any affirmative votes, and also will have no effect on the ratification of the selection of the independent registered public accountants under Proposal 2, or on the advisory resolution approving compensation of our named executive officers under Proposal 3.  While we believe that Proposal 4, concerning the approval of the proposed amendment to the Company’s Certificate of Incorporation to effect a reverse stock split and a proportionate reduction in the number of authorized shares of common stock, subject to implementation in the discretion of our Board of Directors, is considered a routine item under the NYSE Rules, which means there should be no broker non-votes with respect to such matter, abstentions (and broker non-votes, if any) will have the same effect as a vote against Proposal 4 to amend our Certificate of Incorporation.

 

Unless contrary instructions are indicated on the accompanying form of proxy, the shares represented thereby will be voted by the persons named as proxies on such form FOR the election of the Board of Directors’ nominees for re-election as directors of the Company as described in Proposal 1; FOR ratification of the selection of Deloitte as the independent registered public accountants for the Company’s fiscal year ending December 31, 2020 as described in Proposal 2; FOR the advisory resolution approving compensation of our Named Executive Officers as described in Proposal 3; and FOR the approval of the proposed amendment to the Company’s Certificate of Incorporation to effect a reverse stock split at a ratio between 1-for-5 and 1-for-25, and a proportionate reduction in the number of authorized shares of common stock, to be determined at the discretion of our Board of Directors for the purpose of

6


 

complying with NYSE Listing Standards, subject to the Board of Directors’ discretion to abandon this amendment, as described in Proposal 4.

 

PROPOSAL 1

ELECTION OF DIRECTORS

General

 

Our Company’s Board of Directors, upon the recommendation of our Nominating/Corporate Governance Committee, has nominated the Company’s nine current directors for re-election by shareholders at this year’s Annual Meeting.  Under our Certificate of Incorporation and Third Amended and Restated Bylaws, as amended (the “Bylaws”), a majority of our directors must be unaffiliated (“Independent Directors”) with the Company and its predecessor entity, CBL & Associates, Inc. and its affiliates (“CBL’s Predecessor”).  Since the Company’s 2014 Annual Meeting, following the declassification of our Board of Directors as approved by our shareholders, all directors have been elected on an annual basis.

 

Our Board of Directors has delegated to the Nominating/Corporate Governance Committee, pursuant to the provisions of such Committee’s Charter and our Company’s Corporate Governance Guidelines, the responsibility for evaluating and recommending to the Board candidates to be considered as nominees for election as directors of our Company.  In discharging these responsibilities, the Nominating/Corporate Governance Committee may solicit recommendations from any or all of the following sources: the Independent Directors, the Chairman of the Board, the Chief Executive Officer, other executive officers, third-party search firms or any other source it deems appropriate.  The Nominating/Corporate Governance Committee’s criteria for the evaluation and selection of director candidates are described in more detail below under “Board of Directors’ Meetings and Committees – Nominating/Corporate Governance Committee.”

 

Director Nominees

 

Upon the recommendation of the Nominating/Corporate Governance Committee, our Board intends to present for action at the Annual Meeting the re-election of Charles B. Lebovitz, Stephen D. Lebovitz, Michael L. Ashner, A. Larry Chapman, Matthew S. Dominski, John D. Griffith, Richard J. Lieb Kathleen M. Nelson and Carolyn B. Tiffany, each to serve for a term of one year and until their successors are duly elected and shall qualify.  Charles B. Lebovitz and Stephen D. Lebovitz serve as Chairman of the Board and as Chief Executive Officer, respectively, of the Company.  Messrs. Ashner, Chapman, Dominski, Griffith and Lieb and Mses. Nelson and Tiffany are the Company’s seven Independent Directors.  Unless authority to vote for such nominees is withheld, the enclosed proxy will be voted for such nominees, except that the persons designated as proxies reserve discretion to cast their votes for other persons in the unanticipated event that any of such nominees is unable or declines to serve.  

 

Mr. Ashner and Ms. Tiffany, who were initially appointed to the Board in November 2019, were recommended to the Nominating/Corporate Governance Committee and the Board for consideration by the Chairman of the Board and by the Chief Executive Officer of the Company, in connection with a Standstill Agreement entered into effective November 1, 2019 (the “Exeter Standstill Agreement”) with Exeter Capital Investors, L.P., Exeter Capital GP LLC, WEM Exeter LLC, and Michael L. Ashner (collectively, the “Exeter Group”) with respect to the composition of our Board of Directors and certain additional matters as described below. Exeter Capital Investors, L.P. is a single purpose entity controlled by Michael L. Ashner, to acquire common shares in CBL. Pursuant to the Exeter Agreement, among other things:

 

 

The Board expanded the size of the Board from 7 to 9 directors and appointed Michael L. Ashner and Carolyn B. Tiffany as directors, effective November 1, 2019, with each to serve until our 2020 Annual Meeting and until his or her successor is duly elected and qualified. The Company agreed that, during a period beginning on the date of the Exeter Standstill Agreement and ending on the later of (x) 30 days prior to the deadline to make nominations for election to the Board at the Company’s 2021 annual meeting of stockholders as determined pursuant to our current Bylaws and (y) 30 days following the date that neither Mr. Ashner, nor any

7


 

 

Replacement Director (as defined below) for Mr. Ashner, continues to serve on the Board (the “Standstill Period”), the size of the Board may not exceed 9 directors, except as may be required by the terms of our preferred stock issuances.

 

During the Standstill Period and for so long as the Exeter Group meets the Minimum Ownership Level (as defined below), the Company will support and solicit proxies for the election of Mr. Ashner and Ms. Tiffany at this year’s Annual Meeting, together with the Company’s other nominees, and Exeter Group will have certain rights to designate replacement directors if either of Mr. Ashner or Ms. Tiffany resigns from the Board or is rendered unable to serve on the Board for any reason prior to the end of the Standstill Period (each such director, a “Replacement Director” and, collectively with Mr. Ashner and Ms. Tiffany, the “Exeter Directors”), subject to such Replacement Directors being independent and recommended by the Nominating/Corporate Governance Committee and approved by the Board. The Exeter Directors may be recused from any Board or committee discussions involving enforcement of the Company’s rights under the Exeter Standstill Agreement.

 

Both Mr. Ashner and Ms. Tiffany have provided (and any Replacement Director will provide) a resignation letter stating that, if at any time Exeter Group’s aggregate beneficial ownership of our common stock is less than a “Minimum Ownership Level” defined as the lower of (x) 5% of our issued and outstanding common stock and (y) 10,350,000 shares of our common stock (subject to adjustments for stock splits), each such resignation shall (subject to the Board’s discretion) become effective immediately.

 

The Board established a new advisory committee having the principal responsibility of reviewing and evaluating the Company’s capital structure, equity and debt sourcing, financial strategies, capital allocation plans and distribution policies (the “Capital Allocation Committee”), consisting of Michael L. Ashner, Stephen D. Lebovitz and Richard J. Lieb and chaired by Mr. Ashner, with any change in the number of members of such committee to require the unanimous approval of the Board.  

 

The Board also appointed Mr. Ashner to the Executive Committee and appointed Ms. Tiffany to both the Audit Committee and the Compensation Committee, with Mr. Ashner, Ms. Tiffany, or any Replacement Director for Ms. Tiffany to continue to be appointed to such respective Board committees during the Standstill Period and for so long as Exeter Group meets the Minimum Ownership Level.

 

Exeter Group agreed that, during the Standstill Period, it will not, and will not permit any of its Affiliates or Associates (as defined in the Standstill Agreement) to, directly or indirectly (a) nominate or recommend any person for election to the Board at any meeting of our stockholders, (b) submit any proposal for consideration at, or bring any other business before, any such meeting or (c) initiate, encourage or participate in any “vote no,” “withhold” or similar campaign with respect to any such meeting, and it will not publicly or privately encourage or support any other stockholder in taking any such action.

 

Exeter Group agreed that it will, and will cause each of its Affiliates or Associates to, vote at this year’s Annual Meeting (and at any other meeting prior to the expiration of the Standstill Period) all Company common stock which they have the right to vote in favor of the Company’s director nominees and otherwise in accordance with the Board’s recommendations, and will vote against any competing director nominees.

 

Concurrently with the execution of the Exeter Standstill Agreement, the Company granted Exeter Group a waiver from the Company’s ownership limitation provided in its Certificate of Incorporation (the “Ownership Limitation Waiver”) to enable the Exeter Group to beneficially own up to 9.8% of the Company’s outstanding common stock, subject to the terms of the Ownership Limitation Waiver.

 

The Exeter Directors will be compensated for Board and committee service, and reimbursed for out-of-pocket expenses incurred in serving as a director, in the same manner as currently provided for our other Independent Directors.

8


 

 

We reimbursed the Exeter Group in the amount of $225,000 for its fees and expenses (including legal expenses) incurred in connection with the negotiation of the Exeter Standstill Agreement and related matters.

 

The Exeter Standstill Agreement included additional customary standstill restrictions providing that, during the Standstill Period, neither the Exeter Group nor any of its Affiliates or Associates (as defined therein) will:

 

o

engage in proxy or consent solicitations, encourage or support any “contested solicitation” with respect to the election or removal of directors, or seek to call (or encourage the calling of) a special meeting of stockholders;

 

o

form, join, or participate in any “group” (within the meaning of Section 13(d)(3) of the Exchange Act) with respect to Company Interests (as defined in the Exeter Standstill Agreement), other than a “group” consisting solely of the persons and entities set forth in the Exeter Group’s Schedule 13D concerning the Company’s securities as filed with the SEC on August 26, 2019 (the “Exeter Schedule 13D”), or any Affiliate of the Exeter Group that agrees to be bound by the Exeter Standstill Agreement;

 

o

deposit Company Interests in any voting trust or subject any Company Interests to any voting arrangement (other than a voting trust or arrangement solely among Exeter Group and its Affiliates);

 

o

make or encourage any proposal for consideration at a shareholder meeting or any proposal for a merger, acquisition, recapitalization, restructuring, disposition, liquidation, dissolution or similar transaction or business combination involving the Exeter Group and the Company (or solicit, recommend or publicly comment on, any third party offer or proposal for any such transaction);

 

o

seek to amend our Certificate of Incorporation, Bylaws, or other governing documents of the Company or our subsidiaries;

 

o

seek further representation on our Board;

 

o

enter into or maintain any economic, compensatory, pecuniary or other arrangements with any director or nominees for election to our Board;

 

o

seek to advise, support, influence or knowingly encourage any person with respect to the voting or disposition of any Company Interests;

 

o

acquire, cause to be acquired or seek to acquire ownership of Company Interests (beneficial or otherwise) in excess of the amount permitted by the Ownership Limitation Waiver, or seek to increase the ownership limit contained in the Ownership Limitation Waiver;

 

o

institute any litigation, arbitration, “books and records” demand or other proceeding against the Company or our current or former directors or officers, or any affiliates or associates, (other than to enforce the Exeter Standstill Agreement);

 

o

seek any amendment, modification, or waiver of the terms of the Exeter Standstill Agreement, or challenge its validity or enforceability; and

 

o

enter into any negotiations, discussions, agreements, arrangements or understandings with respect to any of the foregoing activities.

 

Exeter Group agreed to cause its Affiliates and Associates (as defined in the Exeter Standstill Agreement) to comply with all of the terms of such agreement, and to require each of the Exeter Directors to preserve the confidentiality of the Company’s non-public information.

 

The Exeter Standstill Agreement includes customary representations and warranties of the parties and provides that, during the Standstill Period, each of the parties will be subject to a customary mutual non-disparagement obligation.  Exeter Group also represented that it is not, and will not become, a party to any agreement, arrangement or understanding (whether written

9


 

 

or oral) with any Exeter Director with respect to such person’s service as a director on our Board of Directors or any Board committee.

The Nominating/Corporate Governance Committee did not engage the services of any third-party search firm in connection with its selection of Mr. Ashner and Ms. Tiffany as additional directors of the Company.

 

Summary of Board Experience  As a general matter, our Board believes that each of our directors has valuable individual qualifications, attributes and skills, including significant leadership and strategic planning expertise, gained through experience in one or more of the fields and capacities summarized below that, taken together, provide us with the variety and depth of knowledge, judgment and vision necessary to provide effective oversight of the management of a publicly traded real estate investment trust (“REIT”) in the shopping center industry such as our Company.  The following table highlights our directors’ experience, qualifications, attributes and skills:

 

 

C.
Lebovitz

S.
Lebovitz

M.
Ashner

L.
Chapman

M.
Dominski

J.
Griffith

R.
Lieb

K.
Nelson

C.
Tiffany

Chief Executive Officer/President/ Founder

X

X

X

 

X

 

 

X

 

Chief Operating Officer/Business Unit Chief Executive

 

 

 

X

 

X

X

X

X

Commercial Real Estate

X

X

X

X

X

X

X

X

X

Financial Services / Capital Markets

 

X

X

X

X

 

X

X

X

Investment Banking

 

 

 

 

 

 

X

 

 

Legal Services

 

 

X

 

 

 

 

 

 

Retail Operations

 

 

 

 

 

X

 

 

 

Financial Literacy

X

X

X

X

X

X

X

X

X

Risk Oversight / Management

X

X

X

X

X

X

X

X

X

 

Additional details concerning the senior executive management, professional, public company and philanthropic leadership experiences that our Board, with the advice of the Nominating/Corporate Governance Committee, has determined qualify each director for service on our Company’s Board of Directors are set forth in each individual’s biography presented below. For each of these individuals, the position(s) shown in the left column represents the individual’s position(s) with the Company and with CBL & Associates Management, Inc., a Delaware corporation (the “Management Company”), through which the Company’s property management and development activities are conducted.

 

10


 

DIRECTOR NOMINEE

 

BIOGRAPHICAL INFORMATION

 

 

 

Charles B. Lebovitz

Chairman of the Board

Director since 1993

Age – 83

 

Charles B. Lebovitz serves as Chairman of the Board of the Company and as Chairman of the Executive Committee of the Board of Directors.  He previously served as Chief Executive Officer of the Company from the completion of its initial public offering in November 1993 until 2010, and also served as President of the Company until February 1999.  Prior to the Company’s formation, he served in a similar capacity with CBL’s Predecessor.  Mr. Lebovitz has been involved in shopping center development since 1961 when he joined his family’s development business.  In 1970, he became affiliated with Arlen Realty & Development Corp. (“Arlen”) where he served as President of Arlen’s shopping center division, and, in 1978, he founded CBL’s Predecessor together with his associates.  

 

Mr. Lebovitz is an Advisory Director of First Horizon Bank, N.A., Chattanooga, Tennessee and a member of the Urban Land Institute.  He is a past president of the B’nai Zion Congregation in Chattanooga, a member of the National Board of Directors of Maccabiah USA/Sports for Israel (Maccabiah Games), and a National Vice Chairman of the United Jewish Appeal.  He was the Campaign Chair for the Jewish Federation of Greater Chattanooga in 1989 and served as President in 1990-91.  Mr. Lebovitz also has previously served as Chairman of the International Council of Shopping Centers, Inc. (“ICSC”) and as a Trustee and Vice President (Southern Division) of the ICSC and is a former member of the Board of Governors of the National Association of Real Estate Investment Trusts (“Nareit”).  He is a former member of the Chancellor’s Round Table for the University of Tennessee at Chattanooga, a Past President of the Alumni Council for The McCallie School, Chattanooga, and a past member of The McCallie School Board of Trustees, where he was named the recipient of the 1995 Distinguished Alumnus Award.  He also is a past member of the Board of Trustees for Girls’ Preparatory School in Chattanooga.  Mr. Lebovitz received the 2015 Leadership Fundraiser of the Year Award from the Association of Fundraising Professionals in conjunction with National Philanthropy Day.  Mr. Lebovitz received his Bachelor of Arts degree in Business from Vanderbilt University.  He is the father of Company executive officers Stephen D. Lebovitz, Michael I. Lebovitz and Alan L. Lebovitz.

 

 

 

Stephen D. Lebovitz

Chief Executive Officer

Director since 1993

Age – 59

 

Stephen D. Lebovitz serves as Chief Executive Officer of the Company, and also served as President of the Company prior to Michael I. Lebovitz being promoted to serve as President in June 2018.  He previously served as President and Secretary of the Company from February 1999 to January 1, 2010, when he became President and Chief Executive Officer, and has served as a director of the Company since the completion of its initial public offering in November 1993.  He also serves as a member of the Executive Committee and the Capital Allocation Committee of the Board of Directors.  Since joining CBL’s Predecessor in 1988, Mr. Lebovitz has also served as Executive Vice President – Development/Acquisitions, Executive Vice President – Development, Senior Vice President – New England Office, and as Senior Vice President – Community Center Development and Treasurer of the Company. Before joining CBL’s Predecessor, Mr. Lebovitz was affiliated with Goldman, Sachs & Co. from 1984 to 1986.  

 

Mr. Lebovitz served as Chairman of the ICSC from May 2015 through May 2016. He is a past Trustee and Divisional Vice President of the ICSC (2002-08), and is a former member of the Advisory Board of Governors of Nareit. Mr. Lebovitz is a former Trustee of Milton Academy, Milton, Massachusetts, a former member of the Board of Trust of Children’s Hospital, Boston, and a past president of the Boston Jewish Family & Children’s Service. He received the 2014 Edwin N. Sidman Leadership Award for his philanthropic contributions to Boston’s Combined Jewish Philanthropies, including his service as a former Board member and annual campaign chair. Mr. Lebovitz holds a Bachelor’s degree in Political Science from Stanford University and a Master of Business Administration degree from Harvard University. Stephen D. Lebovitz is a son of Charles B. Lebovitz and a brother of Michael I. Lebovitz and Alan L. Lebovitz.

 

 

 

 

 

 

11


 

DIRECTOR NOMINEE

 

BIOGRAPHICAL INFORMATION

 

 

 

Michael L. Ashner

Director since 2019

Age – 67

 

Michael L. Ashner joined the Company as a director on November 1, 2019.  Mr. Ashner is Chairman of the Board’s Capital Allocation Committee and a member of the Executive Committee of the Company’s Board of Directors.  Mr.  Ashner is currently the Chief Executive Officer of Winthrop Capital Advisors, LLC, First Winthrop Corp. and Winthrop Realty Partners L.P., a group of affiliated companies that own, operate and provide asset management services to real estate related assets.  He also formerly served as a Trustee of Winthrop Realty Liquidating Trust, the liquidating trust established to liquidate the remaining assets of Winthrop Realty Trust, a NYSE listed REIT, which process was completed by year-end 2019.  

 

From December 31, 2003 to December 31, 2016, Mr. Ashner served as Chief Executive Officer and Chairman (from April 2004) of Winthrop Realty Trust.  Mr. Ashner also served as the Executive Chairman and a trustee of Lexington Realty Trust (“Lexington”), a NYSE listed real estate investment trust, from December 31, 2006 when Newkirk Realty Trust, Inc. (“Newkirk”) was merged into Lexington to March 20, 2008.  Mr. Ashner previously served as a director and the Chairman and Chief Executive Officer of Newkirk until it was merged into Lexington.  Mr. Ashner also currently serves as the Chief Executive Officer of First Winthrop Corporation, a real estate investment and management company, a position he has held since 1996.  Mr. Ashner previously served as a director and Chief Executive Officer of Shelbourne Properties I, Inc., Shelbourne Properties II, Inc. and Shelbourne Properties III, Inc. (collectively, the “Shelbourne Entities”), three real estate investment trusts, from August 2002 until their liquidation in April 2004.  Mr. Ashner is a Trustee of the Northwell Hospital System, American Friends of Beit Ruth and a past trustee of the National World War II Museum of New Orleans.  Mr. Ashner is a graduate of Cornell University and University of Miami School of Law.

 

 

 

A. Larry Chapman

Director since 2013

Age – 73

 

A. Larry Chapman joined the Company as a director on August 16, 2013.  Mr. Chapman is Chairman of the Audit Committee and a member of the Compensation Committee of the Company’s Board of Directors.  Mr. Chapman is a retired 37-year veteran of Wells Fargo & Co., serving as an executive officer of the company from 1987 to 2011.  He most recently served as Executive Vice President and the Head of Commercial Real Estate, and as a member of the Wells Fargo Management Committee, from 2006 until his retirement in June 2011.  Mr.  Chapman joined Wells Fargo in 1974 in its Houston Real Estate office.  In 1987, he was promoted to President of Wells Fargo Realty Advisors, a wholly-owned subsidiary of Wells Fargo & Co. As the Group Head of Wells Fargo’s Commercial Real Estate Lending business, Mr. Chapman was responsible for the group’s 75 nationally located real estate loan production offices and 1,500 full time employees.  At his retirement in 2011, Mr. Chapman managed the largest bank real estate lending portfolio in the United States, which totaled approximately $60 billion.  

 

Mr. Chapman is a member of the Board of Directors of Realty Income Corporation, a triple net lease REIT, and also serves on its Audit and Technology Risk committees.  He is a former board member of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley; past governor, council member, and trustee of the Urban Land Institute; a past member of Nareit; and a member and past trustee of the ICSC.  Mr. Chapman previously was appointed by the Governor of California to serve on the board of the California Science Center Museum. He also spent six years on the Los Angeles Memorial Coliseum Commission, serving as President in 2002. Mr. Chapman received his Bachelor of Business degree in finance and banking from Texas Tech University.

 

 

 

 


12


 

DIRECTOR NOMINEE

 

BIOGRAPHICAL INFORMATION

 

 

 

Matthew S. Dominski

Director since 2005

Age – 65

 

Matthew S. Dominski joined the Company as a director on February 2, 2005.  Mr. Dominski serves as Lead Independent Director and is Chairman of the Compensation Committee and a member of the Audit Committee of the Company’s Board of Directors.  From 1993 through 2000, Mr. Dominski served as Chief Executive Officer of Urban Shopping Centers (“Urban”), formerly one of the largest regional mall property companies in the United States and a publicly traded REIT listed on the NYSE and the Chicago Exchange.  Previously, he also served in various management positions at JMB Realty Corporation.  Following the purchase of Urban by Rodamco North America in 2000, Mr. Dominski served as Urban’s President until 2002.  

 

Mr. Dominski operated, as a joint owner, Polaris Capital, LLC, a Chicago, Illinois based real estate investment firm, from 2003 through 2013.  Mr. Dominski currently serves as a director of First Industrial Realty Trust, a NYSE-listed REIT which buys, sells, leases, develops and manages industrial real estate, and also serves on its Investment and Nominating/Corporate Governance Committees.  From 1998 until 2004, Mr. Dominski served as a member of the Board of Trustees of the ICSC.  Mr. Dominski received his Bachelor of Arts degree in Economics from Trinity College and a Master of Business Administration degree from the University of Chicago.

 

 

 

John D. Griffith

Director since 2015

Age – 58

 

John D. Griffith joined the Company as a director on January 7, 2015.  Mr. Griffith is a member of the Compensation and Nominating/Corporate Governance Committees of the Company’s Board of Directors.  In February 2019, Mr. Griffith was appointed as Senior Vice President of Real Estate and Development for Life Time, Inc., which operates a chain of health clubs in the United States and Canada.  Mr. Griffith currently serves as Managing Partner of Griffith Real Estate LLC, a commercial real estate development firm.  He also served as Head of Global Operations for the American Refugee Committee, an international organization dedicated to serving refugees in fragile states, from July 2016 through July 2018.  Mr. Griffith retired from Target Corporation (“Target”) in May 2014, having served most recently as Executive Vice President of Property Development from 2005 until his retirement, and as a member of Target’s Executive Committee.  He started with Target in 1999 as the Vice President of Construction.  As the Executive Vice President of Property Development at Target, Mr. Griffith was responsible for the management of Target’s real estate, consisting of over 300 million square feet valued at $30 billion, and had responsibility for 3,500 full time employees.  During his time at Target, he doubled the retail footprint from approximately 900 locations to more than 1,900.  

 

Mr. Griffith served as the Governor’s appointed Commissioner on the Minnesota Sports Facilities Authority to build a new NFL stadium for the Minnesota Vikings.  He is a past trustee of the ICSC, having served on the Executive Committee, and also is a past trustee of Bethel University.  Mr. Griffith holds a Bachelor of Arts degree in Business and Economics from Bethel College and a Master of Business Administration degree from the University of Minnesota, Carlson School of Management.

 

 

 

Richard J. Lieb

Director since 2016

Age – 60

 

Richard J. Lieb joined the Company as a director on February 10, 2016.  Mr. Lieb is a member of the Audit and Nominating/Corporate Governance Committees of the Company’s Board of Directors, as well as a member of the Board’s Capital Allocation Committee.  Since January 1, 2019, Mr. Lieb has served as Senior Advisor at Greenhill & Co., LLC, a publicly traded independent investment banking firm he joined in 2005.  From 2005 through 2018, Mr. Lieb was a Managing Director and also served as Chairman of Real Estate of Greenhill.  He served as Greenhill’s Chief Financial Officer from 2008 to 2012 and also served as a member of the firm’s Management Committee from 2008 to 2015.  Mr. Lieb has also served at various times during his tenure at Greenhill as head of the firm’s Restructuring business and as head of North American Corporate Advisory services.  Prior to joining Greenhill, Mr. Lieb spent more than 20 years with Goldman Sachs, where he headed that firm’s Real Estate Investment Banking

13


 

DIRECTOR NOMINEE

 

BIOGRAPHICAL INFORMATION

 

 

 

Richard J. Lieb

[Continued]

 

 

Department from 2000 to 2005.  Overall, Mr. Lieb has more than 30 years of experience as a strategic advisor to participants in the real estate industry, spanning nearly all property sectors.  Mr. Lieb is licensed with FINRA and holds Series 7/General Securities, Series 63 and Series 24 licenses.  Mr. Lieb serves as a director, and as Chairman of the Audit Committee and a member of the Compensation Committee, of VEREIT, Inc., a REIT with a diversified portfolio of retail, restaurant, office and industrial real estate assets.  Mr. Lieb also serves as a director and a member of the Audit Committee and the Compensation Committee of AvalonBay Communities, Inc., an apartment REIT.  He also serves as a director and a member of the Compensation Committee and the chair of the Investment Committee of iStar Inc., a real estate investment company.

 

Mr. Lieb is an active member of the American Jewish Committee (AJC) and has served as a member of Wesleyan University’s Career Advisory Counsel.  He holds a Bachelor of Arts degree from Wesleyan University and a Master of Business Administration degree from Harvard Business School.

 

 

 

Kathleen M. Nelson

Director since 2009

Age – 74

 

Kathleen M. Nelson joined the Company as a director on May 5, 2009.  Ms. Nelson is Chairman of the Nominating/Corporate Governance Committee and a member of the Executive Committee of the Company’s Board of Directors. She has an extensive background in commercial real estate and financial services with over 40 years of experience, including 36 years at TIAA-CREF. Ms. Nelson held the position of Managing Director/Group Leader and Chief Administrative Officer for TIAA-CREF’s Mortgage and Real Estate Division. TIAA-CREF’s mortgage and real estate portfolio totaled over $53.0 billion and was invested in all sectors of real estate, of which approximately 25% was invested in retail. Ms. Nelson developed and staffed TIAA-CREF’s Real Estate Research Department and created the pre-eminent commercial mortgage loan sales model for TIAA-CREF, generating over $10.0 billion in mortgage sales. She retired from this position in 2004 and currently serves as President and Founder of KMN Associates LLC (KMN), a commercial real estate investment advisory and consulting firm which advises clients in a variety of commercial real estate transactions including portfolio strategy and capital sourcing. In 2009, Ms. Nelson co-founded and currently serves as Managing Principal of Bay Hollow Associates, LLC, a commercial real estate consulting firm, which provides counsel to institutional investors.  

 

Ms. Nelson has previously served as Chairman of the ICSC, has been an ICSC Trustee since 1991, and served as the Treasurer and Chairman for the 1996 ICSC Annual Convention. Ms. Nelson is a director, Chairman of the Nominating and Corporate Governance Committee and a member of the Audit, Compensation and Human Resources, and Redevelopment and Construction Committees, of Apartment Investment and Management Company (AIMCO), a publicly held REIT that owns and manages multi-family residential properties. Ms. Nelson also serves as Lead Director, and as a member of the Compensation and Human Resources, Executive, Risk, and Strategic Planning Committees, of Dime Community Bancshares, Inc., a publicly traded bank holding company based in Brooklyn, New York. She also serves as an unaffiliated Director of the J.P. Morgan U.S. Real Estate Income & Growth Fund, the Beverly Willis Architectural Foundation Advisory Board and is a member of the Anglo American Real Property Institute. She has served on the Board of Advisors to the Rand Institute Center for Terrorism Risk Management Policy. Ms. Nelson is a graduate of Indiana University with a Bachelor of Science degree in Real Estate, the University of Chicago Executive Management Program, and the Aspen Institute Leadership Seminar.

 

 

 

 


14


 

 

DIRECTOR NOMINEE

 

BIOGRAPHICAL INFORMATION

 

 

 

Carolyn B. Tiffany

Director since 2019

Age – 53

 

Carolyn B. Tiffany joined the Company as a director on November 1, 2019. Ms. Tiffany is a member of the Audit and Compensation Committees of the Company’s Board of Directors. Ms. Tiffany has been active in commercial real estate investment, operations and management for over 25 years. She was a member of the Board of Trustees and President of Winthrop Realty Trust, a New York Stock Exchange listed REIT with direct and indirect investments in over $1.0 billion of assets, from 2009 until her retirement in June 2017.  She also previously served as a trustee to its successor, Winthrop Realty Liquidating Trust, through the conclusion of that company’s orderly liquidation process by year-end 2019. Ms. Tiffany previously served as Winthrop’s Chief Operating Officer and Secretary from January 2004 to January 2007, during which period Winthrop had the highest total return of any real estate investment trust.  

 

From 2009 until July 2017, Ms. Tiffany served as an executive officer for Winthrop Realty Partners, L.P., First Winthrop Corporation and related entities (the “Winthrop Group”), which owned, operated and managed real estate assets throughout the United States. From February 2017 to July 2017, Ms. Tiffany was integrally involved the Winthrop Group’s serving as the external advisor for New York REIT Inc., a NYSE listed real estate investment trust. From February 2007 through March 2008, Ms. Tiffany served as a principal and the Chief Operating Officer for High Street Equity Advisors, a private equity real estate firm specializing in institutional quality industrial assets that had acquired $863 million of industrial properties with over $300 million equity from both private and institutional investors. Ms. Tiffany was also a member of the Investment Committee, which directed the real estate acquisitions of the investment funds. Ms. Tiffany served as the Chief Operating Officer of Winthrop Financial Associates from 1996 to 2006, as well as Chief Operating Officer and Secretary of NYSE listed REIT Newkirk Realty Trust Inc., where she had a significant role in the execution of its initial public offering. Newkirk Realty Trust was a leading owner of net leased properties which, in 2006, merged into Lexington Property Trust, another NYSE listed REIT. Prior to joining Winthrop in 1992, Ms. Tiffany was a certified public accountant with the firm Kenneth Leventhal & Co., a nationally recognized accounting firm specializing in real estate. In 1995 Kenneth Leventhal & Co. joined with E&Y to form the E&Y Kenneth Leventhal Real Estate Group. Ms. Tiffany holds a Bachelor of Arts degree from Emanuel College.

 

 

 

 

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS

A VOTE “FOR” THE RE-ELECTION OF THE NINE

DIRECTOR NOMINEES NAMED ABOVE

 

15


 

Additional Executive Officers

 

Set forth below is information with respect to those individuals serving as executive officers of the Company as of March 13, 2020 (other than Charles B. Lebovitz and Stephen D. Lebovitz):

 

Name

Age

Current Position (1)

Jeffery V. Curry

59

Chief Legal Officer and Secretary

Michael C. Harrison, Jr.

51

Executive Vice President – Operations

Farzana Khaleel

68

Executive Vice President – Chief Financial Officer and Treasurer

Ben S. Landress

92

Executive Vice President – Management

Alan L. Lebovitz

52

Executive Vice President – Management

Michael I. Lebovitz

56

President

Katie A. Reinsmidt

41

Executive Vice President – Chief Investment Officer

 

 

(1)

The position shown represents the individual’s position with the Company and with the Management Company.

 

Jeffery V. Curry serves as Chief Legal Officer and Secretary of the Company.  Mr. Curry initially was appointed to serve as Interim Chief Legal Officer of the Company simultaneously with the creation of the Chief Legal Officer position by the Board in February 2012, which appointment was made permanent effective April 3, 2012.  He was appointed Secretary of the Company effective September 10, 2012. Mr. Curry also serves as the Company’s Compliance Officer.  He previously had served since 1986 as a legal advisor to the Company.  Prior to joining the Company, Mr. Curry was a partner in the national law firm of Husch Blackwell LLP, counsel to the Company, a position he held since 2006 when he joined the local office of that firm along with a group of lawyers relocating from a firm that formerly provided legal services to the Company.  Mr. Curry received his Doctor of Jurisprudence degree in 1985 from the University of Memphis Cecil C. Humphreys School of Law, where he was on the Editorial Board of the Law Review, and received a LL.M. in Taxation from New York University School of Law in 1986.  Mr. Curry is a member of Nareit.  He also serves as a vice president and a member of the board of directors for Chattanooga Inner City Outreach, Inc., a local non-profit organization, and he is a member of the Chattanooga Bar Association and the Tennessee Bar Association.

 

Michael C. Harrison, Jr. serves as Executive Vice President – Operations of the Company.  Mr. Harrison joined the Company as Senior Vice President - Strategic and Technology Initiatives in October 2013, to provide leadership and oversight of new strategic initiatives and technology solutions, and served in that position through February 2018, when he was promoted to his current position.  Prior to joining CBL, Mr. Harrison served for two years as Senior Vice President Real Estate and Chief Financial Officer for a private real estate developer, owner and operator. Mr. Harrison’s prior experience also includes 18 years of senior level consulting practice focused on strategic management in the real estate industry at RealFoundations, Inc. as well as serving as a former principal and managing director at KPMG LLP. Mr. Harrison has served as a consultant for numerous public and private real estate companies evaluating and overseeing the execution of strategic operating and financial plans. He also served for five years as a controller for a publishing and distribution company. Mr. Harrison received his Accounting degree from Dallas Baptist University.

 

Farzana Khaleel serves as Executive Vice President – Chief Financial Officer and Treasurer of the Company and is an advisory member of the Board’s Capital Allocation Committee.  Ms. Khaleel served as Executive Vice President – Finance of the Company from January 2010 through September 10, 2012, when she was promoted to her current positions.  Previously, Ms. Khaleel served as Senior Vice President

16


 

– Finance of the Company from September 2000 through January 1, 2010.  Prior to joining the Company, Ms. Khaleel was Vice President of Equitable Real Estate (successor to Lend Lease Real Estate Investments prior to its acquisition by Morgan Stanley).  Ms. Khaleel served the Equitable and Lend Lease companies for 18 years in various senior financial positions and as Deputy Portfolio Manager for Equitable/AXA Financial’s mortgage portfolio.  From 1976 to 1982, she served as Assistant Treasurer of IRT Property Company, a former REIT.  Ms. Khaleel served from October 2010 to March 2020 on the Board of Commissioners of the Chattanooga Metropolitan Airport Authority (CMA) and served as a member of the Finance Committee of the CMA.  Ms. Khaleel received a Bachelor of Business Administration degree in Economics, a Master of Business Administration degree in Accounting and a Master of Science degree in Real Estate and Urban Affairs from Georgia State University.  She is a certified public accountant, licensed in the state of Georgia.

 

Ben S. Landress serves as Executive Vice President of the Company.  He has held that position since January 1997.  Prior to that time, Mr. Landress served as Senior Vice President – Management and prior thereto, he served in a similar capacity with CBL’s Predecessor.  Mr. Landress has been involved in the shopping center business since 1961 when he joined the Lebovitz family’s development business.  In 1970, he became affiliated with Arlen’s shopping center division, and, in 1978, joined Charles B. Lebovitz as an Associate in establishing CBL’s Predecessor.

 

Alan L. Lebovitz serves as Executive Vice President – Management of the Company.  Mr. Lebovitz served as Senior Vice President - Asset Management of the Company from February 2009 to February 2018, when he was promoted to his current position. He previously served as Vice President - Asset Management having held that position from 2002 through February 2009, and had served in various positions in management, leasing and development since joining the Company in 1995.  Prior to joining CBL in 1995, Mr. Lebovitz received his B.A. from Northwestern University in 1990, was affiliated with Goldman, Sachs & Co. from 1990 to 1992 and obtained an M.B.A. from Vanderbilt University. He has been an active community volunteer for organizations that include: Alzheimer Association’s Mid‑South Chapter, B’nai Zion Synagogue, Chattanooga Area Chamber of Commerce - Leadership Chattanooga and Workforce Development Task Force, Chattanooga Public Education Foundation, Jewish Federation of Greater Chattanooga, The McCallie School, Normal Park Museum Magnet School, and United Way of Greater Chattanooga. Alan L. Lebovitz is a son of Charles B. Lebovitz and a brother of Stephen D. Lebovitz and Michael I. Lebovitz.

 

Michael I. Lebovitz serves as President of the Company.  Mr. Lebovitz served as Executive Vice President – Development and Administration of the Company from January 2010 through June 2018, when he was promoted to his current position.  Mr. Lebovitz also served as Senior Vice President – Chief Development Officer of the Company from June 2006 through January 1, 2010.  Previously, he served the Company as Senior Vice President – Mall Projects, having held that position since January 1997.  Prior to that time, Mr. Lebovitz served as Vice President - Development and as a project manager for the Company.  Mr. Lebovitz joined CBL’s Predecessor in 1988 as a project manager overseeing the development of CoolSprings Galleria in Nashville, Tennessee, and was promoted to Vice President in 1993.  Prior to joining CBL’s Predecessor, he was affiliated with Goldman, Sachs & Co. from 1986 to 1988.  He is past president of the Jewish Community Federation of Greater Chattanooga and a past member of the national board of Hillel.  Mr. Lebovitz currently serves on the national boards of Jewish Federations of North America and the United Israel Appeal.  He formerly served on the board of the United States Holocaust Memorial Council and was National Campaign Chair for the Jewish Federations of North America from 2010 – 2011.  He is also a member of the board of the United Way of Greater Chattanooga and formerly served on the board of The McCallie School in Chattanooga.  Michael I. Lebovitz is a son of Charles B. Lebovitz and a brother of Stephen D. Lebovitz and Alan L. Lebovitz.

 

Katie A. Reinsmidt serves as Executive Vice President – Chief Investment Officer of the Company and is an advisory member of the Board’s Capital Allocation Committee.  Ms. Reinsmidt served as Senior Vice President – Investor Relations/Corporate Investments of the Company from September 2012 through February 2017, when she was promoted to her current position.  She joined the Company as Director of Investor Relations in 2004 and previously was promoted to Director – Corporate Communications and

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Investor Relations in 2008 and to Vice President – Corporate Communications and Investor Relations of the Company in 2010.  Prior to joining the Company, Ms. Reinsmidt served as an Associate Analyst at A.G. Edwards & Sons in St. Louis, Missouri, where she provided research coverage for retail, healthcare and lodging REITs.  Ms. Reinsmidt received her Bachelor of Science degree in Economics from the University of Missouri – St. Louis.  She also serves as a Trustee and Secretary of the City of Chattanooga General Pension Board, and served as its Vice Chairman from March 2011 through February 2017.

 

Other Senior Officers

 

Set forth below is information with respect to those individuals serving as senior officers of the Company, in addition to our directors and executive officers, as of March 13, 2020:

 

Name

Age

Current Position (1)

Andrew F. Cobb

51

Senior Vice President – Director of Accounting

Howard B. Grody

59

Senior Vice President – Leasing

Don Sewell

73

Senior Vice President – Management

Stuart Smith

58

Senior Vice President – Redevelopment

Justice Wade

54

Senior Vice President – Development and Mixed-Use

 

 

(1)

The position shown represents the individual’s position with the Company and with the Management Company.

 

Andrew F. Cobb serves as Senior Vice President – Director of Accounting, a position to which he was promoted in February 2015.  He joined CBL in June 2002, as Vice President – Accounting.  In February 2007, he was promoted to Vice President and Director of Accounting.  Prior to joining the Company, Mr. Cobb was with Arthur Andersen LLP from 1991 to 2002, serving as an audit manager from 1996 to 2002. Mr. Cobb is a certified public accountant, licensed in the State of Tennessee and a member of the Tennessee Society of Certified Public Accountants.  Mr. Cobb received a Bachelor of Science in Accounting from Tennessee Technological University.

 

Howard B. Grody serves as Senior Vice President – Leasing of the Company.  He was promoted to that position in June 2008.  Previously, Mr. Grody had served as Vice President – Mall Leasing of the Company since 2000.  Mr. Grody joined CBL in 1991 as a Leasing Manager for the Turtle Creek Mall development in Hattiesburg, Mississippi, and subsequently was promoted to the position of Senior Leasing Manager, where he had leasing responsibility for many of the Company’s properties throughout the country.  Prior to joining CBL, Mr. Grody worked in the real estate industry with Sizeler Real Estate Properties.  Mr. Grody was awarded the designation of Certified Leasing Specialist as recognized by ICSC in 1994, the program’s inaugural year, and was awarded the designation of Senior Certified Leasing Specialist in 2008.  Mr. Grody has served two terms on the ICSC Certified Leasing Specialist Committee.  Mr. Grody received his Bachelor of Science in Management degree from Tulane University.

 

Don Sewell serves as Senior Vice President – Management of the Company.  He was promoted to that position in February 2018, having previously served CBL as Vice President – Mall Management since February 2000 and in various prior property management positions with both the Company and Arlen since 1973.  In his current position, Mr. Sewell oversees the management and operational duties for CBL’s portfolio of enclosed regional malls.  He holds the designations of Certified Shopping Center Manager and Certified Marketing Director as recognized by the ICSC.

 

Stuart Smith serves as Senior Vice president – Redevelopment, a position to which he was promoted in February 2015. He joined CBL as Director of Tenant Coordination in January 2001, and then became Director – Tenant Design and Development in April 2003.  He was promoted to Vice President – Redevelopment in February 2007.  Mr. Smith is responsible for creating redevelopment opportunities and solutions throughout the portfolio.  This includes the initial vision along with securing new and existing

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anchor deals and approvals. Mr. Smith started his shopping center career as an Owner's Representative with U.S. Lend Lease in 1986 located in Tampa, Florida.  He subsequently served eight years with Dusco Property Management in Lancaster, Pennsylvania overseeing mall renovation projects throughout the country, and then four years with Arbor Property Trust in Philadelphia, Pennsylvania as Director of Construction.  He received his Business degree from Pennsylvania State University.

 

Justice Wade serves as Senior Vice President – Development and Mixed-Use of the Company, overseeing the development leasing, entertainment leasing and peripheral property divisions. He was promoted to that position in November 2019. Mr. Wade joined CBL in November 2002 as a Senior Leasing Manager, he was promoted to Regional Leasing Director in 2005, to Senior Director – Development Leasing in June 2006, and to Vice President - Development Leasing and Peripheral Property in 2008. Prior to joining CBL, Mr. Wade served as Vice President, Director of Leasing for Aronov Realty where he was responsible for leasing a regional mall and community center portfolio of more than 14 million square feet. Mr. Wade also spent 11 years as Vice President, Director of Retail for Peppermint Music, a regional chain based in the southeast.  Mr. Wade was awarded the designation of Certified Leasing Specialist as recognized by ICSC in 1998.

 

Operation of the Company’s Business; Certain Aspects of the Company’s Capital Structure

 

Our Company operates through its two wholly-owned subsidiaries, CBL Holdings I, Inc., a Delaware corporation (“CBL Holdings I”), and CBL Holdings II, Inc., a Delaware corporation (“CBL Holdings II”).  As of the March 13, 2020, record date for the Annual Meeting, through the referenced subsidiaries, our Company currently holds a 1.0% sole general partner interest and a 94.2% limited partner interest in CBL & Associates Limited Partnership, a Delaware limited partnership (the “Operating Partnership”).  See “Certain Relationships and Related Person Transactions – Operating Partnership Agreement; CBL Rights”.  Our Company conducts substantially all of its business through the Operating Partnership.  Our Company conducts its property management and development activities through the Management Company, which is a taxable REIT subsidiary of the Operating Partnership, to comply with certain technical requirements of the Internal Revenue Code of 1986, as amended.

 

CORPORATE GOVERNANCE MATTERS

 

Our Board has adopted guidelines on corporate governance (including director independence criteria), committee charters, and a code of business conduct and ethics setting forth the Company’s corporate governance principles and practices.  Effective as of January 1, 2006, our Company adopted amended and restated guidelines on corporate governance incorporating all previous guidelines on corporate governance and including additional policy statements, which were further amended (i) effective January 1, 2012 with respect to minimum stock ownership levels for Non‑Employee Directors (directors who are not employees of the Company, currently, the Independent Directors), (ii) effective January 1, 2015 with respect to implementation of a majority vote policy for uncontested director elections, (iii) effective March 17, 2015 to increase the minimum stock ownership level for the Chief Executive Officer, (iv) effective November 2, 2018 to limit the minimum stock ownership requirements for officers to our policy-making executive officers, and provide alternatives for valuation and compliance testing and establish a procedure for handling exception requests with respect to minimum stock ownership requirements for non-employee directors and executive officers, and (v) effective August 7, 2019 to further revise the additional policy statements to eliminate the requirement that a director must tender his/her resignation on a change of principal occupation or business association and, in lieu thereof, require that a director, on the occurrence of such events, must notify the Chairperson of the Nominating/Corporate Governance Committee, which Committee will review whether it is appropriate and in the best interests of the Company for such Director to continue to serve on the Board and then make a recommendation to the Board (the guidelines, as amended and restated, collectively including the revisions described above, are referred to herein as the “Corporate Governance Guidelines”).  See “Corporate Governance Matters – Additional Policy Statements.”  These documents can be accessed in the “Invest – Investor Relations – Governance Documents” and “Invest – Investor Relations – Committee Charting” sections of the Company’s website at cblproperties.com.  

 

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Director Independence

 

Our Board has adopted a set of director independence standards (“Director Independence Standards”) for evaluating the independence of each of the directors in accordance with the requirements of the Securities and Exchange Commission (“SEC”) and of the NYSE corporate governance standards.  The Director Independence Standards are included as an exhibit to our Company’s Corporate Governance Guidelines, which can be found in the “Invest – Investor Relations – Governance Documents” section of the Company’s website at cblproperties.com.  Pursuant to NYSE Rule 303A.02(a) and the provisions of our Company’s Director Independence Standards (as set forth below), our Board has reviewed whether any director has any relationship with the Company’s independent auditors that would preclude independence under SEC and NYSE rules, or any material relationship with our Company (either directly or as a partner, member, shareholder or officer of an organization that has a relationship with the Company) which could (directly or indirectly) materially impact the ability of such director or nominee to exert his or her independent judgment and analysis as a member of our Board.  As a result of this review, our Board affirmatively determined that seven of our Company’s nine current directors were independent under the standards of the SEC and NYSE and as set forth in our Company’s Director Independence Standards.  Messrs. Charles B. Lebovitz and Stephen D. Lebovitz, who are executive officers of our Company and employees of the Management Company, were deemed not independent.  In making the independence determinations with respect to the other seven directors, the Board considered the terms of the Exeter Standstill Agreement as described above under “ELECTION OF DIRECTORS – Director Nominees” and determined that they did not interfere with the independence of Mr. Ashner and Ms. Tiffany.

 

Additional Policy Statements

 

Effective as of January 1, 2006, and as further amended with regard to the matters described above effective January 1, 2012, January 1, 2015, March 17, 2015, November 2, 2018 and August 7, 2019, the Company has included additional policy statements as part of the Corporate Governance Guidelines.  A summary of these policy statements, as so amended and currently in effect, is as follows:

 

Director Resignation Policy – a policy statement that requires a director who is nominated in an uncontested election but does not receive a “majority vote” to immediately tender his or her resignation to the Board of Directors for consideration.  A “majority vote” means that the number of shares voted “for” a director must exceed the number of votes “withheld” with respect to the election of that director.  The policy provides that if a director does not receive a “majority vote” and tenders his or her resignation, the Nominating/Corporate Governance Committee will make a recommendation to our Board of Directors on whether to accept or reject the resignation. The Board will then consider the Nominating/Corporate Governance Committee’s recommendation and publicly disclose its decision to either accept or reject the resignation within 90 days from the date of certification of the election results. The director whose resignation is being considered will not participate in the recommendation of the Nominating/Corporate Governance Committee or the decision of the Board of Directors.

 

Limits on Other Board Participation – a policy statement that limits to four (4) the number of other public company boards (not counting the Company’s Board) upon which a director may serve at any given time.

 

Minimum Stock Ownership for Non-Employee Directors – as amended, a policy statement that provides that by five (5) years from the later of (i) January 1, 2012 or (ii) becoming a member of the Company’s Board, a Non‑Employee Director (a director that is not an employee of the Company, currently, the Independent Directors) must own at least an amount of shares of the Company’s common stock having a value, determined as set forth in the policy statement, equal to not less than three (3) times the amount of annual cash compensation that such Non‑Employee director shall receive from the Company.  This policy statement includes an exemption for any Non‑Employee director who is prohibited by law or by the regulations of his or her employer from having an ownership interest in the Company’s securities.

 

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Minimum Stock Ownership for Executive Officers – a policy statement that provides that by five (5) years from the later of (i) the adoption of the policy or (ii) becoming an executive officer, such officer must own an amount of the Company’s Common Stock, determined as set forth in the policy statement, having a value at least equal to the following formula amounts:

 

Executive Officer

 

Level of Stock Ownership

Chief Executive Officer

 

10x prior calendar year’s annual base salary

President

 

2x prior calendar year’s annual base salary

Chief Financial Officer

 

2x prior calendar year’s annual base salary

Executive Vice President*

 

2x prior calendar year’s annual base salary

 

*The Company also applies this requirement to our Chief Legal Officer.

 

2018 Updates to Minimum Stock Ownership Requirements for Non-Employee Directors and Executive Officers – In November 2018, the Board of Directors, upon the recommendation of the Nominating/Corporate Governance Committee, approved the following updates to the stock ownership requirements described above: (i) since these requirements were originally meant to apply to executive officers and Non-Employee Directors of CBL, and the senior vice presidents no longer qualify as executive officers due to the policy making authority vested in our executive vice presidents, the ownership requirement for senior vice presidents was eliminated; (ii) a valuation formula was added for purposes of annual compliance testing under these policies that provides that shares of the Company’s Common Stock will be “valued” for such purpose at the greater of (A) their actual cost basis, for shares purchased by a Non-Employee Director or executive officer, (B) the tax basis for shares awarded to Non-Employee Directors and executive officers on a compensatory basis or (C) the average value of the Company’s Common Stock for the calendar year preceding the year in which such testing occurs, determined by using the average of the closing prices of the Company’s Common Stock on the NYSE on each trading day in the preceding calendar year; and (iii) a provision stating that any exceptions to the required minimum stock ownership levels for any Non-Employee Director or executive officer will be subject to review and discretionary approval by the Chairman of the Board’s Compensation Committee (or by the Chairman of the Nominating/Corporate Governance Committee, if such exception involves the Chairman of the Compensation Committee).

 

Changes in Director’s Principal Occupation or Business Association – as amended, a policy statement that provides that when the principal occupation or business association of a member of the Board of Directors changes substantially from the position he or she held when originally invited to join the Board of Directors, such director shall promptly notify, in writing, the Chairperson of the Nominating/Corporate Governance Committee (or the other members of the Nominating/Corporate Governance Committee, if such affected director is the Chairperson).  The Nominating/Corporate Governance Committee shall then review – with the affected director abstaining if he or she is a member – whether it is appropriate and in the best interests of the Company to allow the continued participation of such director as a member of the Board of Directors of the Company.  If the Nominating/Corporate Governance Committee recommends that such director should no longer serve as a member of the Board of Directors of the Company as a result of such change, and the full Board of Directors (excluding the director at issue) ratifies such recommendation, then the Board of Directors shall request that the affected director submit a letter of resignation.

 

Initial Term of Director Appointed to Fill a Board Vacancy – a policy statement that provides that any director appointed by the Board of Directors of the Company to fill a vacancy created by the departure of another director shall serve only until the next regularly scheduled annual meeting of the Company’s shareholders.  In order for such director to continue to serve thereafter, he or she must be nominated and duly elected for another full term.

 

Executive Sessions for Independent Directors

 

In accordance with the NYSE Rule 303A.03, the Independent Directors of the Company meet from time to time in scheduled executive sessions without management participation.  Matthew S. Dominski chairs these executive sessions in his capacity as the Company’s Lead Independent Director.  The Independent Directors met in four executive sessions during 2019.

 

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Board Leadership Structure

 

Our Board of Directors has no formal policy with respect to the separation of the offices of Chairman and Chief Executive Officer.  Prior to January 1, 2010, Charles B. Lebovitz had served as Chairman of the Board and Chief Executive Officer of the Company since the completion of its initial public offering in November 1993.  During the fourth quarter of 2009, the Board determined that Stephen D. Lebovitz should be promoted to serve as Chief Executive Officer of the Company effective January 1, 2010.  The Board determined that it was appropriate to separate these positions at that time.

 

Additionally, our Board of Directors believes that the leadership provided to the Company by the two current executive directors (Chairman Charles B. Lebovitz and Chief Executive Officer Stephen D. Lebovitz) is appropriately complemented by a strong leadership and oversight role played by the Company’s Independent Directors, which may be summarized as follows:

 

 

Both our Certificate of Incorporation and Bylaws require that a majority of our Board be comprised of Independent Directors; historically this requirement has been satisfied at all times, and seven of the nine current members of the Company’s Board satisfy this requirement as described above.

 

The Independent Directors are a sophisticated group of professionals, all of whom have significant experience in the commercial real estate industry in addition to possessing a variety of other expertise and skills, and many of whom either are currently, or have been, leaders of major companies or institutions.

 

Our Board has established three standing Committees composed solely of Independent Directors — the Audit Committee, the Compensation Committee and the Nominating/Corporate Governance Committee — each with a different Committee chair, and each with responsibility for overseeing key aspects of CBL’s corporate governance (see “Board of Directors Meetings and Committees” below).  

 

As described above, the Independent Directors regularly meet in executive sessions without the presence of management, with the Lead Independent Director presiding over such sessions.

 

The Independent Directors, as well as our full Board, have complete access to the Company’s management team.  The Board and its committees receive regular reports from management on the business and affairs of the Company and related strategic planning considerations.

 

Under the Company’s Corporate Governance Guidelines, all Company directors are to have full access to the executive officers of the Company (including the Company’s Chief Legal Officer), the Company’s independent counsel, independent registered public accountants, and any other advisors that the Board or any director deems necessary or appropriate.

 

Board and Management Role in Risk Oversight

 

Assessing and managing risk is the responsibility of the management of our Company.  Our Board is responsible for overseeing our risk management.  The Board administers its risk oversight function through (1) the review and discussion of regular periodic reports to the Board and its committees on topics relating to the risks that the Company faces, including, among others, market conditions, tenant concentrations and credit worthiness, leasing activity, the status of current and anticipated development projects, compliance with debt covenants, management of debt maturities, access to debt and equity capital markets, environmental and social matters, cyber-security risks and threat mitigation related to our technology and information systems, existing and potential legal claims against the Company and various other matters relating to the Company’s business; (2) the required approval by the Board of Directors (or a committee thereof) of significant transactions that entail the expenditure of funds or incurrence of debt or liability in amounts in excess of certain threshold dollar amounts; (3) the review and discussion of regular periodic reports to the Board and its committees from the Company’s independent registered public accountants regarding various areas of potential risk, including, among others, those relating to the qualification of the Company as a REIT for tax purposes; and (4) the direct oversight of specific areas of the Company’s business by the Compensation, Audit and Nominating/Corporate Governance Committees.

 

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In addition, under its charter, the Audit Committee is specifically responsible for reviewing and discussing management’s policies with respect to risk assessment and risk management.  The Company’s Director of Internal Audit meets regularly in executive sessions with the Audit Committee (at least quarterly and more frequently if necessary), for discussions of the Company’s oversight of risk through the internal audit function, including an annual review of the Company’s internal audit plan, which is focused on significant areas of financial, operating, and compliance risk, and periodic updates on the results of completed internal audits of these significant areas of risk.  The Audit Committee also monitors the Company’s SEC disclosure compliance, and any related reporting risks, and receives regular reports from the Company’s Compliance Committee which assist the Audit Committee in exercising certain oversight responsibilities concerning (i) the Company’s use of interest rate hedging instruments to manage our exposure to interest rate risk (including but not limited to entering swaps for such purpose and the exemption of any such swaps from applicable execution and clearing requirements) and (ii) compliance with the Company’s Related Party Transactions Policy as described herein under the section entitled “Certain Relationships and Related Person Transactions.”

 

Communicating With the Board of Directors

 

The Company provides a process for shareholders and other interested parties to send communications to the Board or any of our directors.  Such persons may send written communications to the Board or any of the directors c/o the Company’s Executive Vice President – Chief Investment Officer, CBL Properties, 2030 Hamilton Place Blvd., Suite 500, CBL Center, Chattanooga, Tennessee, 37421-6000.  All communications will be compiled by the Company’s Executive Vice President – Chief Investment Officer and submitted to the Board or to the individual director(s) to whom such communication is addressed. It is the Company’s policy that all directors attend the Annual Meeting unless they are prevented from attending due to scheduling conflicts or important personal or business reasons; provided, however, it is the Company’s policy that a majority of the directors (including a majority of the Company’s Independent Directors) attend each Annual Meeting.  All of the Company’s current directors attended the 2019 Annual Meeting of Shareholders.

 

Code of Business Conduct and Ethics

 

Our Board has adopted a Third Amended and Restated Code of Business Conduct and Ethics (the “Code of Business Conduct”) that applies to all directors, officers and employees, including the Company’s principal executive officer, principal financial officer and principal accounting officer.  The Code of Business Conduct is available in the “Invest – Investor Relations – Governance Documents” section of the Company’s website at cblproperties.com, or at no charge by directing a written request for a copy to the Company at CBL Properties, CBL Center, Suite 500, 2030 Hamilton Place Blvd., Chattanooga, Tennessee 37421-6000, Attention: Executive Vice President – Chief Investment Officer.  The purpose of the Code of Business Conduct is to provide a codification of standards that is reasonably designed to deter wrongdoing and to promote accountability for and adherence to the standards of the Code, including honest and ethical conduct, as well as the prompt internal reporting to an appropriate person or persons of violations of the Code; the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; full, fair, accurate, timely and understandable disclosure in the Company’s filings with the SEC and in other public communications by the Company; and compliance with all applicable rules and regulations that apply to the Company and to its directors, officers and employees.

 

Board of Directors’ Meetings and Committees

 

The Company’s Board of Directors met sixteen times and took action by unanimous written consent three times during 2019.  Each director attended more than 75% of the aggregate of (i) the total number of Board meetings and (ii) the total number of meetings of Board committees on which the director served at the time during 2019.  

 

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Our Board of Directors has established standing Executive, Audit, Compensation and Nominating/ Corporate Governance Committees, as described in more detail below.  Copies of each of the three committee charter documents referenced below are available and can be accessed in the “Invest – Investor Relations – Committee Charting” section of the Company’s website at cblproperties.com, or at no charge by written request to the Company’s Executive Vice President – Chief Investment Officer at the address provided above.  Additionally, as described above, in connection with entering into the Exeter Standstill Agreement, the Board of Directors established a Capital Allocation Committee, the function of which is to review and evaluate, and make advisory recommendations to the Board concerning, the Company’s capital structure, equity and debt sourcing, financial strategies, capital allocation plans and distribution policies.  The members of this Committee are directors Michael L. Ashner (Chairman), Stephen D. Lebovitz and Richard J. Lieb, with our Executive Vice President – Chief Financial Officer and Treasurer, and our Executive Vice President – Chief Investment Officer, serving as additional advisory members.  

 

Additional information with respect to the four standing committees of the Company’s Board of Directors is as follows:

 

The Executive Committee

Members:

Charles B. Lebovitz (Chair)

Michael L. Ashner

Stephen D. Lebovitz

Kathleen M. Nelson

 

2019 Committee
Actions:

4 meetings

2 actions by unanimous written consent

 

 

The Executive Committee may exercise all the powers and authority of the Board of Directors of the Company in the management of the business and affairs of the Company as permitted by law; provided, however, unless specifically authorized by the Board of Directors, the Executive Committee may not exercise the power and authority of the Board of Directors with respect to (i) the declaration of dividends, (ii) issuance of stock, (iii) amendment to the Company’s Certificate of Incorporation or Bylaws, (iv) filling vacancies on the Board of Directors, (v) approval of borrowings in excess of $40 million per transaction or series of related transactions, (vi) hiring executive officers, (vii) approval of acquisitions or dispositions of property or assets in excess of $40 million per transaction and (viii) certain transactions between the Company and its directors and officers and certain sales of real estate and reductions of debt that produce disproportionate tax allocations to CBL’s Predecessor pursuant to the Company’s Bylaws.

 

The Audit Committee

Members:

A. Larry Chapman (Chair)

Matthew S. Dominski

Richard J. Lieb

Carolyn B. Tiffany

 

2019 Committee
Actions:

9 meetings

 

 

Governing Document:

Second Amended and Restated Charter adopted August 14, 2013

 

 

The Audit Committee is responsible for the engagement of the independent auditors and the plans and results of the audit engagement.  The Audit Committee approves audit and non-audit services provided by the independent auditors and the fees for such services and reviews the adequacy of the Company’s internal accounting controls as well as the Company’s accounting policies and results and management’s policies with respect to risk assessment and risk management.  The Audit Committee also exercises certain oversight responsibilities concerning the Company’s use of interest rate hedging instruments to manage our exposure to interest rate risk (including but not limited to entering swaps for such purpose and the exemption of any such swaps from applicable execution and clearing requirements), and under the Company’s Related Party Transactions Policy, as described herein under the section entitled “Certain Relationships and Related Person Transactions.”

The Board of Directors has determined that each member of the Audit Committee is an Independent Director pursuant to the independence requirements of Sections 303A.02 and 303A.07(b) of the listing standards of the NYSE as currently applicable, and also has determined that each of A. Larry Chapman, Matthew S. Dominski, Richard J. Lieb and Carolyn B. Tiffany qualify as an “audit committee financial expert” as such term is defined by the SEC.

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The Compensation Committee

Members:

Matthew S. Dominski (Chair)

A. Larry Chapman

John D. Griffith

Carolyn B. Tiffany

 

2019 Committee
Actions:

3 meetings

 

 

Governing Document:

Amended and Restated Charter adopted May 14, 2013

 

 

The Compensation Committee generally reviews and approves compensation programs and, specifically, reviews and approves salaries, bonuses, stock awards and stock options for officers of the Company of the level of senior vice president or higher.  The Compensation Committee administers the CBL & Associates Properties, Inc. 2012 Stock Incentive Plan, as amended (the “2012 Stock Incentive Plan”), but typically delegates the responsibility for routine, ministerial functions related to that plan, such as the documentation and record-keeping functions concerning awards issued under such plan, to employees in the Company’s accounting and finance departments, with assistance from Company counsel.  The Compensation Committee also approves and oversees the Annual Incentive Plan and Long-Term Incentive Program components of the Company’s current incentive programs for its Named Executive Officers, developed in 2015 in conjunction with the Compensation Committee’s initial engagement of the independent compensation consulting firm FPL Associates, L.P. (“FPL”).  In evaluating our current NEO compensation program following the first three years of its operation, the Compensation Committee, with the assistance of an evaluation it commissioned from FPL, determined to make certain changes to the program for 2018 as discussed herein under the section entitled “Executive Compensation – Compensation Discussion and Analysis” which, together with the section entitled “Director Compensation,” provides additional information concerning the Compensation Committee’s processes and procedures for setting director and executive officer compensation.

The Board of Directors has determined that each member of the Compensation Committee is an Independent Director pursuant to the independence requirements of Sections 303A.02 and 303A.05(a) of the listing standards of the NYSE as currently applicable.  


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The Nominating/Corporate Governance Committee

Members:

Kathleen M. Nelson (Chair)

John D. Griffith

Richard J. Lieb

 

2019 Committee
Actions:

3 meetings

 

 

Governing Document:

Amended and Restated Charter adopted
August 14, 2013

 

 

The Nominating/Corporate Governance Committee reviews and makes recommendations to the Board of Directors regarding various aspects of the Board of Directors’ and the Company’s governance processes and procedures.  The Nominating/Corporate Governance Committee also evaluates and recommends candidates for election to fill vacancies on the Board, including consideration of the renominations of members whose terms are due to expire.  

The Nominating/Corporate Governance Committee requires a majority of the Company’s directors to be “independent” in accordance with applicable requirements of the Company’s Certificate of Incorporation and Bylaws as well as rules of the SEC and NYSE (including certain additional independence requirements for Audit Committee and Compensation Committee members).  A set of uniform Director Independence Standards, which was used in making all such Independent Director determinations, is included in the Company’s Corporate Governance Guidelines, a copy of which is available in the “Invest – Investor Relations – Governance Documents” section of the Company’s website at cblproperties.com.  In addition and as part of the evaluation of potential candidates, the Nominating/Corporate Governance Committee considers the breadth of a candidate’s business and professional skills and experiences, reputation for personal integrity, and ability to devote sufficient time to Board service, as well as the Company’s needs for particular skills, insight and/or talents on the Board of Directors.  Neither the Nominating/Corporate Governance Committee nor the Board has a specific policy with regard to the consideration of diversity in identifying director nominees, although both may consider whether a director candidate, if elected, assists in achieving a mix of Board members that represents a diversity of perspective, background, gender and experience.  For incumbent directors, the Nominating/Corporate Governance Committee reviews such directors’ overall service during their term, including the number of meetings attended, level of participation and quality of performance.  With respect to the Board seats presently held by Mr. Ashner and Ms. Tiffany, the Nominating/Corporate Governance Committee also considered the terms of the Exeter Standstill Agreement as described above.

The Nominating/Corporate Governance Committee will consider candidates for Board of Directors’ seats proposed by shareholders.  Any such proposals should be made in writing to CBL Properties, 2030 Hamilton Place Blvd., Suite 500, CBL Center, Chattanooga, Tennessee, 37421-6000, Attention:  Corporate Secretary, and must be received no later than December 7, 2020, in order to be considered for inclusion in the Company’s proxy statement for the 2021 Annual Meeting.  In order to be considered by the Nominating/Corporate Governance Committee, any candidate proposed by shareholders will be required to submit appropriate biographical and other information equivalent to that required of all other director candidates, including consent to an initial background check.  The Nominating/Corporate Governance Committee does not intend to alter the manner in which it evaluates candidates on the criteria set forth above regardless of whether the candidate was recommended by a shareholder or by the Company.  For deadlines applicable to the nomination of director candidates pursuant to the proxy access procedures adopted by the Company in February 2016 and set forth in 2.8 of our Bylaws, see the section of this proxy statement entitled “Date For Submission of Shareholder Proposals And Related Matters” below.

The Board of Directors has determined that each member of the Nominating/Corporate Governance Committee is an Independent Director pursuant to the independence requirements of Sections 303A.02 of the listing standards of the NYSE as currently applicable.  

 

 

  

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL

OWNERS AND MANAGEMENT

The following table sets forth information available to the Company as of March 13, 2020, with respect to the ownership of Common Stock by (i) each person known to the Company to be the beneficial owner of more than 5% of the outstanding Common Stock, (ii) each director of the Company, (iii) each Named Executive Officer of the Company, as defined below, and (iv) all directors and executive officers as a group.  Except as otherwise indicated, each person named below has sole investment and voting power with respect to the securities shown.  Except as otherwise indicated, the address of each beneficial owner of more than 5% of the outstanding Common Stock is the Company’s address.

 

 

Number of

Shares(1)

Rule 13d-3

Percentage(1)

Fully-Diluted

Percentage(2)

BlackRock, Inc. (3)

55 East 52nd Street

New York, NY  10055

26,543,278

13.83%

13.16%

Exeter Capital Investors, L.P. (4)

7 Bulfinch Place, Suite 500

Boston, MA 02114

14,100,000

7.35%

6.99%

CBL & Associates, Inc.(“CBL’s Predecessor”) (5)

16,764,484

8.73%

8.31%

Charles B. Lebovitz (6)

19,281,973

9.97%

9.56%

Stephen D. Lebovitz (7)

2,144,628

  1.12%

1.06%

Farzana Khaleel (8)

442,841

*

*

Michael I. Lebovitz (9)

832,154

*

*

Jeffery V. Curry (10)

273,042

*

*

Michael L. Ashner (11)

14,133,091

7.36%

7.01%

A. Larry Chapman (12)

180,551

*

*

Matthew S. Dominski (13)

189,430

*

*

John D. Griffith (14)

184,238

*

*

Richard J. Lieb (15)

168,663

*

*

Kathleen M. Nelson (16)

187,085

*

*

Carolyn B. Tiffany (17)

33,091

*

*

All executive officers and directors and director nominees
(16 persons) as a group (18)

39,983,835

20.12%

19.33%

 

* Less than 1%

 

(1)

The Company conducts all of its business activities through the Operating Partnership.  Pursuant to the Operating Partnership Agreement, each of the partners of the Operating Partnership, which include, among others, CBL’s Predecessor and certain of the Company officers named in this Proxy Statement, has the right, pursuant to the exercise of CBL Rights as described above, to exchange all or a portion of such partner’s Common Units or Special Common Units (as applicable) in the Operating Partnership for shares of Common Stock or their cash equivalent, at the Company’s election.  Under the terms of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), shares

27


 

of Common Stock that may be acquired within 60 days are deemed outstanding for purposes of computing the percentage of Common Stock owned by a shareholder.  Therefore, for purposes of Rule 13d-3 of the Exchange Act, percentage ownership of the Common Stock is computed based on the sum of (i) 191,966,991 shares of Common Stock actually outstanding as of March 13, 2020 and (ii) as described in the accompanying footnotes, each individual’s or entity’s share of 9,740,019 shares of Common Stock that may be acquired upon exercise of CBL Rights by the individual or entity whose percentage of share ownership is being computed (but not taking account of the exercise of CBL Rights by any other person or entity).  Amounts shown were determined without regard to applicable ownership limits contained in the Company’s Certificate of Incorporation.

 

(2)

The Fully-Diluted Percentage calculation is based on (i) 191,966,991 shares of Common Stock outstanding and (ii) assumes the full exercise of all CBL Rights for shares of Common Stock by all holders of Common Units and Special Common Units of the Operating Partnership (in each case, without regard to applicable ownership limits), for an aggregate of 201,707,010 shares of Common Stock.

 

(3)

In a Schedule 13G/A filed on February 4, 2020 by BlackRock, Inc. (“BlackRock”), BlackRock reported that as of December 31, 2019, it beneficially owned 26,543,278 shares of Common Stock, or 13.83% of the total shares outstanding as of March 13, 2020.  BlackRock reported that it possessed sole dispositive power with respect to all of such shares of Common Stock, and sole voting power with respect to 26,206,674 of the shares of Common Stock beneficially owned.

 

(4)

In a Schedule 13D/A filed on December 5, 2019 by Exeter Capital Investors, L.P. (“Exeter”) and a group of its affiliates (including Company director Michael L. Ashner), as supplemented by a Form 4 filed by Mr. Ashner on February 26, 2020, Exeter reported that it beneficially owned 14,100,000 shares of Common Stock, or 7.35% of the total shares outstanding as of March 13,2020.  Each of Exeter, Exeter Capital GP LLC (“GP”) (the general partner of Exeter), WEM Exeter LLC (the managing member of GP, and Mr. Ashner indicated they possessed shared voting and shared dispositive power with respect to all of such shares. A Form 4 filed by Mr. Ashner on March 19, 2020, subsequent to the record date for the Annual Meeting, reported that Exeter’s ownership had increased to 15,216,909 shares of Common Stock.

 

(5)

Includes (i) 16,555,809 shares of Common Stock owned directly and (ii) 208,675 shares of Common Stock that may be acquired by four entities controlled by CBL’s Predecessor (CBL Employees Partnership/Conway, Foothills Plaza Partnership, Girvin Road Partnership and Warehouse Partnership) upon the exercise of CBL Rights.

 

(6)

Includes (i) 944,486 shares of unrestricted Common Stock owned directly; (ii) 274,564 shares of restricted Common Stock that Charles B. Lebovitz received under the 2012 Stock Incentive Plan; (iii) 26,566 shares owned by Mr. Lebovitz’ wife and 26,452 shares held in trusts for the benefit of his grandchildren (of which Mr. Lebovitz disclaims beneficial ownership), all as to which Mr. Lebovitz may be deemed to share voting and investment power; (iv) 756,350 shares of Common Stock that may be acquired by Mr. Lebovitz upon the exercise of CBL Rights; (v) 16,764,484 shares of Common Stock beneficially owned by CBL’s Predecessor as described in Note (6) above, which Mr. Lebovitz may be deemed to beneficially own by virtue of his control of CBL’s Predecessor; and (vi) 489,071 shares of Common Stock that may be acquired by College Station Associates, an entity controlled by Mr. Lebovitz, upon the exercise of CBL Rights.

 

(7)

Includes (i) 1,546,827 shares of unrestricted Common Stock owned directly, (ii) 510,678 shares of restricted Common Stock that Stephen D. Lebovitz received under the 2012 Stock Incentive Plan, (iii) 1,150 shares owned by Mr. Lebovitz’ wife; (iv) 31,818 shares held in trusts for the benefit of his children (of which Mr. Lebovitz disclaims beneficial ownership); and (v) 54,155 shares of Common Stock owned by a trust, as to which Mr. Lebovitz serves as trustee, for the benefit of the children of one of his brothers (of which Mr. Lebovitz disclaims beneficial ownership).

 

(8)

Includes (i) 271,544 shares of unrestricted Common Stock owned directly, (ii) 9,073 shares of Common Stock owned by Ms. Khaleel’s individual retirement account, and (iii) 162,224 shares of restricted Common Stock that Ms. Khaleel received under the 2012 Stock Incentive Plan.

 

(9)

Includes (i) 692,127 shares of unrestricted Common Stock owned directly; (ii) 162,224 shares of restricted Common Stock that Mr. Lebovitz received under the 2012 Stock Incentive Plan; (iii) 1,830 shares owned

28


 

by Mr. Lebovitz’ wife; and (iv) 49,365 shares owned and 52,980 shares of Common Stock that may be acquired upon the exercise of CBL Rights by trusts, as to which Mr. Lebovitz serves as trustee, for the benefit of the children of two of his brothers (of which Mr. Lebovitz disclaims beneficial ownership).

 

(10)

Includes (i) 103,334 shares of unrestricted Common Stock owned directly (including 7,458 shares which Mr. Curry holds in a joint account with his wife and 7,511 shares held in Mr. Curry’s Individual Retirement Account) and (ii) 169,708 shares of restricted Common Stock that Mr. Curry received under the 2012 Stock Incentive Plan.

 

(11)

Includes (i) 33,091 shares of restricted Common Stock granted to Mr. Ashner under the 2012 Stock Incentive Plan and (ii) 14,100,000 shares of Common Stock beneficially owned by Exeter as described in Note (4) above (with Mr. Ashner having reported that, on a fully diluted basis, he owns 1,895,040 of such shares held as of March 13, 2020).

 

(12)

Includes 180,551 shares of restricted Common Stock granted to Mr. Chapman under the 2012 Stock Incentive Plan.

 

(13)

Includes (i) 129 shares of unrestricted Common Stock owned directly and (ii) 189,301 shares of restricted Common Stock granted to Mr. Dominski under the 2012 Stock Incentive Plan.

 

(14)

Includes (i) 11,687 shares of unrestricted Common Stock owned directly and (ii) 172,551 shares of restricted Common Stock granted to Mr. Griffith under the 2012 Stock Incentive Plan.

 

(15)

Includes (i) 112 shares of unrestricted Common Stock owned directly and (ii) 168,551 shares of restricted Common Stock granted to Mr. Lieb under the 2012 Stock Incentive Plan.

 

(16)

Includes (i) 34 shares of unrestricted Common Stock owned directly and (ii) 187,051 shares of restricted Common Stock granted to Ms. Nelson under the 2012 Stock Incentive Plan.

 

(17)

Includes 33,091 shares of restricted Common Stock granted to Ms. Tiffany under the 2012 Stock Incentive Plan.

 

(18)

Includes an aggregate of (i) 34,897,892 shares of unrestricted Common Stock beneficially owned directly or indirectly by members of such group, (ii) 2,302,540 shares of restricted Common Stock that members of such group received under the 2012 Stock Incentive Plan and (iii) 1,783,403 shares of Common Stock that may be acquired by members of such group upon the exercise of CBL Rights which they hold directly or indirectly through other entities.

  

Delinquent Section 16(a) Reports

 

Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who own more than ten percent of a registered class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in beneficial ownership of Common Stock and other equity securities of the Company.  Officers, directors and greater than ten percent shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) reports they file.

 

Based solely upon the Company’s review of copies of such reports furnished to it through the date hereof, or written representations that no other reports were required to be filed, the Company believes that during the fiscal year ended December 31, 2019 all officers, directors and ten percent shareholders complied with the filing requirements applicable to them, except for the following late filings for the following reporting persons: (i) one report concerning shares withheld for taxes in connection with the vesting of restricted stock that inadvertently misstated the number of shares withheld had to be amended for each of Stephen D. Lebovitz and Katie A. Reinsmidt, (ii) one report concerning shares withheld for taxes in connection with the vesting of restricted stock was filed late for Jeffery V. Curry and (iii) the initial Form 3 report filed for Michael L. Ashner had to be amended to add shares of preferred stock that were inadvertently omitted from the initial filing.

 

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EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

Introduction

 

This Compensation Discussion and Analysis reviews the factors, objectives and policies underlying each element of compensation paid for fiscal year 2019, and certain elements of our 2020 compensation program, for the following five individuals who are “named executive officers” as determined under SEC rules (the “Named Executive Officers” or “NEOs”):

 

 

Charles B. Lebovitz, Chairman of the Board,

 

Stephen D. Lebovitz, Chief Executive Officer

 

Farzana Khaleel, Executive Vice President – Chief Financial Officer and Treasurer

 

Michael I. Lebovitz, President

 

Jeffery V. Curry, Chief Legal Officer and Secretary

 

Executive Compensation Design and “Say-on-Pay” Advisory Vote

 

We provide shareholders with an annual “say-on-pay” advisory vote on the Company’s compensation program for its Named Executive Officers.  Five years ago, after extensive shareholder feedback, the Compensation Committee worked with an independent compensation consulting firm, FPL Associates L.P. (“FPL”), to re-design the NEO base and incentive compensation program.  Since then, our shareholders have expressed strong support for the program with annual “say-on-pay” advisory vote approval ranging between 91-97%.

 

 

We believe this strong expression of support by our shareholders over recent years has validated that our compensation programs are well designed and aligned with performance.  In recognition of this strong support, the Committee has maintained a generally consistent plan design.

 

Even with strong shareholder support as demonstrated by a five-year average approval rating of over 94%, as discussed in further detail below, the Committee accepted senior management’s recommendation to proactively reduce executive compensation expense in recognition of the challenges the Company faces by making the following adjustments:

 

maintain NEO base salaries at reduced levels (page 37);

 

maintain AIP and LTIP bonus targets at reduced levels (page 33-34);

 

reduce qualitative LTIP restricted stock payouts to 50% of target levels (page 45-46); and

 

cap AIP payout for 2019 adjusted FFO per share at 75% of target (vs. 81.3% earned) (page 40).

 

30


 

The Committee will continue to consider the outcome of say-on-pay votes when making future executive compensation decisions and we will disclose the impact of this consideration in future filings.

 

While shareholders have shown approval of our existing compensation program, beginning in 2018 the Compensation Committee, with input from FPL, modified the Long-Term Incentive Program (“LTIP”) in order to better align with market practices, as illustrated below:

 

 

While maintaining overall pay levels that are relatively conservative within our industry, the Compensation Committee has structured the incentive program for our Named Executive Officers around the following key principles:

 

     The NEO incentive program includes both short-term and long-term components, balancing incentives for performance across multiple periods.

Our Named Executive Officers are compensated separately for short-term performance through cash awards under an Annual Incentive Plan (“AIP”), and rewarded for value creation over a multi-year period through an LTIP that maintains accountability for the achievement of longer-term, sustained performance.

     The largest component of NEO equity awards is based on a long-term (in excess of one year) performance metric that emphasizes shareholder alignment.

To provide direct alignment with investors, a majority of the NEO equity awards under our LTIP is predicated on our three‑year total shareholder return, or “TSR” (stock price change plus dividends paid, assuming dividend reinvestment).  LTIP awards made through 2017 were focused on the Company outperforming our closest peers in the public REIT retail sector (the “FTSE Nareit Retail Index”) for the NEOs to earn the targeted compensation under this component of our LTIP awards.  Beginning with the 2018 LTIP awards, the majority (or two-thirds (2/3)) of this quantitative component of the LTIP continues to be based on such relative performance and one-third (1/3) is based on absolute TSR targets for the Company.  In each case, once earned, 40% of the awards are subject to vesting over an additional two-year period.

     The NEO incentive program is largely based on objective performance criteria.

A majority of both AIP cash bonuses and LTIP awards are tied to specifically defined and communicated performance criteria commonly used in our industry and supported by our shareholders:

 

AIP Criteria:          Funds From Operations (“FFO”) per diluted share, as adjusted

                             Same-center Net Operating Income (“NOI”) growth

 

LTIP Criteria:        Total shareholder return performance

 

In conjunction with the adoption of our current NEO incentive program in 2015, we also increased the stock ownership guidelines for our Chief Executive Officer from shares having a value equal to 3x his prior calendar year’s annual base salary to shares having a value equal to 10x his prior calendar year’s annual base salary.  As discussed further below, we also proactively adopted a clawback policy in conjunction with the NEO incentive program in 2015 and, in February 2016, our Board added an anti-hedging policy applicable to CBL’s officers and directors.  

 

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Additional details concerning CBL’s Named Executive Officer compensation during 2019, as well as our NEO incentive program for 2020, are provided below.  The Compensation Committee believes the overall compensation program for our Named Executive Officers, including our NEO incentive program, appropriately balances (i) compensation based on short-term vs. long-term performance and (ii) compensation based on operational goals vs. compensation based on stock price performance, while providing an appropriate level of objectivity and retaining some subjectivity to support the Company’s business plans and strategy.  We believe these programs will continue to allow us to attract and retain highly qualified personnel, while also serving our overall objective of linking senior management’s long-term economic interests with those of CBL’s shareholders.

 

CBL 2019 Performance Considerations

 

CBL is a self-managed, self-administered, fully integrated REIT that owns, develops, acquires, leases, manages, and operates regional shopping malls, open-air and mixed-use centers, outlet centers, associated centers, community centers and office properties located in 26 states, primarily in the southeastern and midwestern United States.  CBL faced ongoing challenges in 2019 as retailers struggle to succeed in an increasingly competitive and fast-changing industry. Despite these challenges, CBL ended 2019 with financial results at the high-end of the issued guidance range, including same-center NOI declining 6.5% and FFO, as adjusted, of $1.36 per share.  Revenues and occupancy were significantly impacted by retailer bankruptcies and store closings, including the liquidation or reorganization of several major retailers.  CBL also made significant progress on replacing the more than 40 anchor closures that resulted from the Sears and Bon-Ton bankruptcies in 2018, with more than two-thirds of that space replaced with dynamic new traffic-driving users.  Replacement tenants include many non-traditional uses – such as educational uses, fitness centers, casinos, new-to-market entertainment, fast casual and sit-down restaurants and in-demand value retail – which better attract today’s consumers. Many of these projects include mixed-uses such as hotels, multi-family, medical, office and storage.

 

In 2019, management continued to place significant emphasis on effectively executing strategies designed to mitigate rent loss through preserving occupancy, as well as focusing new leasing efforts on repurposing vacated spaces to diversify the Company’s rental revenues by providing more dynamic and vibrant uses, such as entertainment, dining and other non-apparel tenants, which better attract today's consumers.  Accordingly, over 76% of the Company’s total new leasing in 2019 was executed with non-apparel tenants.  These leasing strategies contributed to slightly improved sales performance in spite of the overall market headwinds during 2019, as same-center sales per square foot at the Company’s stabilized malls increased to $386 as compared to $379 for the prior year.  

 

In order to provide the Company with greater financial flexibility to execute on these operational and redevelopment goals, the Company closed on a new $1.185 billion secured facility with 16 banks that replaced all unsecured term loans and the Company’s unsecured line of credit.  The new secured facility matures in June 2023 and has allowed the Company to address all of our unsecured debt maturities through December 2023.  Additional factors relative to the Company’s overall 2019 performance that were considered by the Compensation Committee in making its decisions concerning the subjectively determined elements of 2019 NEO compensation (in addition to the individual factors outlined below for each Named Executive Officer) included the following:

 

 

The Company’s FFO, as adjusted, per diluted share of $1.36 for 2019, within the Company’s issued guidance range.1

 

A decline in portfolio same-center NOI of approximately 6.5% for 2019 as compared to the prior year period, which was slightly above the better end of the Company’s issued guidance range.1

 

1 

FFO, as adjusted, and same-center NOI are non-GAAP measures.  For a description of FFO, FFO, as adjusted, a reconciliation of these measures to GAAP net income and an explanation of why we believe they are useful performance measures, see “Non-GAAP Measure — Funds from Operations” beginning on page 69 within the “Liquidity and Capital Resources” section of Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019.  For a description of same-center NOI, a reconciliation from GAAP net income to same-center NOI and an explanation of why we believe this is a useful performance measure, see “Non-GAAP Measure — Same–center Net Operating Income” beginning on page 53 within the “Results of Operations” section of Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019.

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The Company’s successful execution of approximately 3.9 million square feet of new and renewal leases in the operating portfolio during 2019, including approximately 76% of new leases having been executed with non-apparel tenants.

 

Opening 10 projects, comprising over 497,000 square feet of new retail development and redevelopments, representing a total pro forma investment of nearly $80 million.

 

Significant progress made on successful execution of the Company’s “capital lite” approach to redevelopment, which allows for the replacement of a number of anchor locations with little-to-no investment by the Company.

 

The Company completed more than $185 million in gross disposition activity, including the sale of two Tier 3 malls and interests in two outlet centers.

 

The successful execution of a $1.185 billion secured credit facility, which addressed all of the Company’s unsecured debt maturities through December 2023.

Despite the Company achieving results that were in-line or better than issued guidance in a challenging operating environment, senior management made recommendations to the Compensation Committee, which were accepted, to reduce certain payouts awarded under the plan in recognition of the challenges that the Company continues to face and overall efforts to control and reduce expenses.  These reductions are outlined further in the discussion below.

 

Pay for Performance Alignment and Compensation Highlights

 

A significant portion of our NEOs’ compensation is tied to predefined objectives that align with shareholder interests.  In light of Company performance in recent periods, the Compensation Committee took the actions reflected in the following table in 2018, 2019 and early 2020, to appropriately align the pay opportunities and incentives provided to our CEO and our other NEOs with the creation of long-term shareholder value by working to reposition our properties to overcome continuing challenges in today’s retail environment:

 

 

 

2018 Compensation
Committee Actions

2019 Compensation
Committee Actions

2020 Compensation
Committee Actions

NEO Base Salaries

Base salaries maintained at 2017 levels to help contain baseline executive compensation expense

NEO base salaries reduced
by 5%, consistent with senior management recommendation
(Executive Chairman agreed
to a 50% reduction to
his base salary)

NEO base salaries maintained at reduced
levels approved for 2019,
consistent with senior management recommendation

NEO Annual
Incentive Plan (AIP) Opportunities

2018 AIP targets adjusted to incentivize achieving published guidance ranges for the FFO, as adjusted, per diluted share and same-center NOI metrics
in a challenging environment

 

Cash bonus targets increased by 7.5%, making a greater proportion of the NEOs’ annual cash compensation dependent on performance relative to the AIP criteria

2019 AIP targets also established with reference to published guidance ranges for FFO, as adjusted, per diluted share and same-center
NOI metrics

2019 cash bonus payout targets reduced by 5% (50% for our Executive Chairman of the Board), commensurate with the 2019 reductions to NEO base salaries

Performance target for 2019 FFO per share metric adjusted to reflect mid-year adjustment to published FFO guidance range

2020 AIP targets also established with reference to published guidance ranges for FFO, as adjusted, per diluted share
and same-center NOI metrics

 

In February 2020, cash bonus payout for adjusted 2019 FFO per share metric capped at 75% of Target (vs. achievement of 81.3% of Target), consistent with senior management recommendation, to reduce cost by capping payment at original “Target” value

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2018 Compensation
Committee Actions

2019 Compensation
Committee Actions

2020 Compensation
Committee Actions

NEO Long-Term
Incentive Plan (LTIP) Opportunities

LTIP focus remains on the creation of significant longer-term shareholder value.

 

All potential performance-based shares forfeited under 2016-2018 LTIP, as threshold levels were not achieved over the three-year performance period

Accepted senior management
February 2019 recommendation to reduce shares issued for 2018 performance under time-based vesting component of the LTIP to only 50% of original targeted value, to further contain executive compensation expenses and in light of CBL stock price declines

 

All potential performance-based shares forfeited under 2017-2019 LTIP, as threshold levels were not achieved over the three-year performance period

Accepted senior management
February 2020 recommendation to again reduce shares issued for 2019 performance under time-based vesting component of the LTIP to only 50% of original
targeted value, to further contain executive compensation expenses and in light of CBL stock price declines

 

CEO Pay Highlights

 

We tie a significant portion of our Chief Executive Officer’s and other NEOs’ variable incentive pay to stock price and to operational performance metrics that are directly aligned with the Company’s short- and long-term business plans.  A few noteworthy items relating to our compensation program and our Chief Executive Officer’s pay are as follows:

 

 

Base salary was unchanged between 2017 and 2018, and was reduced by 5% starting in 2019 and maintained at the same reduced level for 2020.

 

The vast majority of pay (81.2%) is at-risk, tied to either specific performance objectives across short- and long-term objectives and/or fluctuations in stock price.

 

Based on rigorous performance objectives, below target AIP payouts have occurred for each of 2017 and 2018, with “Target” level achieved for 2019 (paid out in early 2018, 2019 and 2020, respectively).

 

As a result of our recent stock price performance, no awards have funded under our multi-year TSR based long-term incentive program; additionally, our time-based equity grants have decreased in value, further aligning our CEO’s pay with stock performance.

 

As illustrated below, 80.4% of our CEO Compensation is Performance-based/At Risk:

 

 

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CEO Realized Pay Overview

 

Since 2015 and the redesign of our executive compensation program, which has consistently received strong shareholder support by investors through our “say-on-pay” vote, our CEO has participated in five consecutive multi-year award programs in which the performance components are based exclusively on the Company’s three-year absolute and relative TSR to directly align our CEO’s compensation to that of shareholder returns. As of December 31, 2019, the 2015-2017, 2016-2018 and 2017-2019 programs have concluded resulting in no (0%) payout and the remaining outstanding programs covering 2018-2020 and 2019-2021 are tracking at no (0%) payout.

 

The Summary Compensation Table requires the initial grant date fair market value of equity grants to be disclosed, which may or may not ultimately be earned.  As noted above, the majority of our compensation system is at risk, and the largest component is tied to multiple TSR metrics.  The amount of compensation that has ultimately been realized is significantly less than what appears in the Summary Compensation Table.  In order to provide a more accurate depiction for analyzing pay and performance, we have prepared the table below, which compares the actual “As Reported” value of our CEO’s compensation in the Summary Compensation Table to the amount of compensation our CEO realized for the applicable year.  The main difference between the two comparisons in the table below is that the amount in “Realized” contains the equity value realized upon vesting in a year, from both time-based vesting of overlapping historical grants and the amount earned under performance-based awards that have concluded (as previously noted, none of these have funded).

 

As shown in the chart below, across the three years reflected in the Summary Compensation Table in this proxy statement (2017 – 2019), only 54% of the total As Reported compensation (based on grant date fair value of equity awards) was ultimately realized and earned from that which has been reported.

 

CEO Reported Pay vs. CEO Realized Pay (2017-2019):

 

 

 


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Elements of Compensation for the Company’s Named Executive Officers

 

An overview illustrating the key features and operation of the AIP and LTIP is provided below, followed by detailed information concerning awards to the NEOs under the AIP and LTIP for both 2019 and 2020, as well as information concerning the NEOs base salary determinations.

 

Compensation Elements for CBL’s Named Executive Officers:  What We Pay and Why

 

Element

Objectives

Key Features

Base Salary

      Attract and retain high performing executives

     Provide competitive fixed pay that takes into consideration each individual’s level of responsibility, experience, and tenure with the Company

      Fixed element of compensation

Annual Incentive Plan (AIP)

      On an annual basis, motivates the achievement of company and individual strategic objectives

      Balances objectivity with subjectivity to support the Company’s annual business plan and operating goals

      Drives annual performance that ultimately creates shareholder value

      Objective measures include FFO, as adjusted per share and same-center NOI growth  

      Subjective goals vary per individual based on responsibilities

 

Long-Term Incentive Program (LTIP)

      Encourages executives to create shareholder value, aligning the interests of executives and shareholders over a longer-term

      Provides a retention mechanism

      A majority of the award is predicated on our TSR. Beginning with the 2018 LTIP awards, 100% of the quantitative component continued to be based on TSR; with 1/3 of the quantitative component of the LTIP is based on CBL’s absolute TSR performance, with the remaining 2/3 based on our TSR vs. our closest peers (the FTSE Nareit Retail Index).
A portion (40%) of any award earned is subject to further vesting over an additional two‑year period.

      A minority of the award is based on subjective performance reviews and continued service, vesting over 5 years to enhance retention (shares vest 20% on issuance following the year for which the award is earned and 20% per year thereafter).

 

36


 

Base Salaries for the Named Executive Officers

 

In reviewing and establishing the base salaries shown below, the Compensation Committee considers each Named Executive Officer’s level of responsibility, experience and tenure with the Company, as well as such officer’s performance in carrying out his or her responsibilities and overseeing those under his or her supervision.  In order to contain baseline executive compensation expense during a challenging period and in conjunction with a broader program to reduce general and administrative expenses, the Compensation Committee approved senior management’s recommendations to modify 2019 base salaries as detailed below (including accepting a recommendation from senior management with which our Executive Chairman, Charles B. Lebovitz, concurred, to reduce his base salary by 50% in light of the Company’s needs), and to maintain 2020 base salaries at the same reduced levels approved for 2019:

 

Named Executive Officer

 

2018 Base  Salary

 

2019  Base  Salary

 

2020  Base  Salary

Stephen D. Lebovitz

 

$707,000

 

$672,315

 

$672,315

Farzana Khaleel

 

$534,279

 

$507,565

 

$507,565

Charles B. Lebovitz

 

$681,750

 

$340,875

 

$340,875

Michael I. Lebovitz

 

$426,287

 

$404,973

 

$404,973

Jeffery V. Curry

 

$415,374

 

$394,605

 

$394,605

 

The base salaries reflected above took effect as of January 1 for each year.

 

Annual Incentive Plan (AIP) for Named Executive Officers

 

Rigorous AIP Metrics

 

Each year and in conjunction with management, the Compensation Committee establishes rigorous financial and operational metrics that are used to evaluate the quantitative component and also establishes individual qualitative measures that are tailored for each executive.  As illustrated in the chart below, since our revamped compensation became effective for fiscal year 2015, the average payout under our AIP has been below target:

 

 

37


 

2019 Annual Incentive Program for Named Executive Officers

 

The AIP adopted on February 11, 2019 rewards the Named Executive Officers for the achievement of two annual quantitative operational goals, and for the achievement of qualitative individual performance objectives as assessed by the Compensation Committee. For our Chief Executive Officer, 70% of his total AIP opportunity is based on the quantitative portion and the remaining 30% is based on individual performance objectives.  For the other Named Executive Officers, 60% of the total award is based on the quantitative portion and the remaining 40% is based on individual performance objectives.  

 

The quantitative portion of the award is allocated between two performance measures, each with a 50% weighting: (1) FFO, as adjusted per diluted share, as reported in the Company’s periodic reports (Forms 10-K and 10-Q) filed with the SEC (the “Periodic Reports”) and (2) Same-center NOI growth, as reported in the Periodic Reports.  The remaining portion of awards under the AIP is based on specific individual performance goals under the qualitative portion.  A visual overview of the structure of the AIP for the CEO and the other named executives officers is provided below:

 

 

 

 

 

 

Other

 

 

 

 

 

CEO

 

NEO

 

Quantitative Measures

•     FFO, as adjusted, per share

•     Same-center NOI Growth

 

 

 

 

 

 

 

 

 

 

70%

 

60%

 

 

 

 

 

 

AIP Opportunity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Qualitative Measures

•     Individual Goals

 

 

 

30%

 

40%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For cash bonus awards based on performance in relation to the quantitative metrics under the AIP:

 

Performance that meets threshold requirements will result in a 50% (of target) payout of the quantitative portion of the award based on that performance metric.

 

Achievement of target performance for a metric will result in a 100% (of target) payout of the quantitative portion of the award based on that performance metric.  

 

Achievement of the maximum performance for a metric will result in a 150% (of target) payout of the quantitative portion of the award based on that performance metric.  

 

Performance achieved between threshold and maximum level for either metric will result in a prorated bonus payout.  

 

There will be no payout for the portion of any award that is based on a performance metric for which less than the threshold level of performance is achieved.  

In setting the quantitative performance targets under our 2019 AIP, the Compensation Committee considered that during 2018, the Company experienced an elevated number of retailer bankruptcy filings, which resulted in significant revenue and occupancy loss.  This included more than 40 anchor store closures resulting from the bankruptcies of Sears and Bon-Ton, in addition to numerous mall shop bankruptcy filings.  Given the persistent weakness in the overall retail environment, and the expected impact on 2019 same-center NOI as a result of the store closings and rent modifications related to the 2018 bankruptcies and other restructurings by retailers, the Compensation Committee set performance targets for 2019 same-center NOI at amounts lower than 2018, but at levels which would require significant management effort and expertise to achieve, and which were consistent with the Company’s 2019 budget and publicly issued guidance.  Similarly, due to these same factors as well as dilution from dispositions completed in 2018, the Compensation Committee set performance targets for 2019 FFO, as adjusted per share, at levels lower than 2018, but still deemed to be rigorous.  

 

38


 

The Compensation Committee has the ability to further adjust each metric, if appropriate, to account for significant unbudgeted transactions or events such as acquisitions, dispositions or capital market transactions that materially impact the Company’s performance as to the particular metric.  During 2019, the Compensation Committee determined it was appropriate to reduce the FFO performance metric targets originally established in February 2019 by five cents per share, to reflect mid-year adjustments to the published FFO guidance range as a result of a deliberate shift in management strategy towards retaining and/or ground leasing outparcels vs. selling outparcels.  The decision to reduce outparcel sales was intended to generate greater long-term return for shareholders, despite the expected impact to 2019 FFO by reducing budgeted gains on outparcel sales for the year.  Same-center NOI Growth targets were not affected.  

 

The resulting 2019 FFO performance metric targets were as follows:

 

FFO, as adjusted, per share Targets

Same-center NOI Growth Targets

Threshold

Target

Maximum

Threshold

Target

Maximum

$1.31

$1.39

$1.47

– 8.0%

– 7.0%

– 6.0%

 

The qualitative component of the 2019 AIP bonus opportunity for each Named Executive Officer was based on the Compensation Committee’s subjective evaluation of each Named Executive Officer’s performance in relation to the 2019 qualitative performance objectives established by the Compensation Committee and outlined below for each such officer:  

 

Named
Executive Officer

2019 Individual Performance Objectives

Stephen D. Lebovitz

(1)   refining, enhancing and executing the Company’s strategic and business plans

(2)   effective communications and interactions with the investment community

(3)   regular communication and interaction with the Board

(4)   maintain and enhance key retailer, financial and other relationships

(5)   effective corporate and executive team communication, motivation and management

Farzana Khaleel

(1)   successful execution of the Company’s balance sheet strategy (as presented in the quarterly liquidity plans) including maintaining/improving key credit metrics and effective interactions with rating agencies, banks and other financial entities

(2)   effective management and oversight of the Company’s financial services and accounting divisions

(3)   maintain and improve key financial and joint venture partner relationships

(4)   improve interactions with the investment community through earnings calls, presentations and investor conferences/meetings

(5)   support the CEO in implementing organizational changes as well as developing and executing the Company’s strategic and business plans

Charles B. Lebovitz

(1)   effective Board management

(2)   maintain and enhance key retailer and other relationships

(3)   broad involvement and stewardship of the Company’s strategic objectives and business performance

(4)   support the CEO in developing and executing the Company’s strategic and business plans

39


 

Named
Executive Officer

2019 Individual Performance Objectives

Michael I. Lebovitz

(1)   supervision of redevelopment projects to achieve approved pro forma returns and scheduled openings

(2)   manage and enhance joint venture partner relationships and greater involvement with financial institutions and the investment community

(3)   effective oversight of the implementation of technology and organizational initiatives including supporting the CEO in implementing organizational changes

(4)   effective management and team building for the Development, Human Resources and Information Technology divisions of the Company and closer working relationships with other areas of the Company

(5)   support the CEO in developing and executing the Company’s strategic and business plans

Jeffery V. Curry

(1)   oversight of litigation that the Company is facing

(2)   effective management and oversight of the legal department

(3)   continued involvement in Board material preparation and Board support as necessary

(4)   coordination with and support for other members of the senior Executive team

(5)   support the CEO in developing and executing the Company’s strategic and business plans

 

The tables set forth below illustrate the actual 2019 AIP cash bonus payouts approved by the Compensation Committee for each Named Executive Officer, in relation to the level achieved for each AIP performance objective. As reflected in the table, the Compensation Committee accepted senior management’s recommendation to cap the cash bonus payout for the adjusted 2019 FFO per share metric at 75% of Target in recognition of efforts to reduce overall expenses given the ongoing challenges the Company faces:

 

Performance Objective

Weighting

Results in Relation to Target Values for Each Metric

CEO

Other NEOs

Results

 

FFO, as adjusted, per share*

35%

30%

$1.36

Between "Threshold" and "Target" –
Resulting payout = 75% of Target Value*

Same-Center NOI Growth

35%

30%

-6.5%

Between "Target" and “Maximum” –
Resulting payout = 125% of Target Value

Individual Performance Goals

30%

40%

 

Determined per Individual

 

*Reflects 75% of Target (vs. achievement of 81.3% of Target).

 

Named Executive Officer

Actual
Company
Performance
Award
(Quantitative
Measures)

Actual
Individual
Achievement
Award
(Qualitative
Measures)

Total Award

Target Award

Percent of
Target

Stephen D. Lebovitz

$675,557

$277,943

$953,500

$965,081

99%

Farzana Khaleel

$193,016

$120,957

$313,973

$321,694

98%

Charles B. Lebovitz

$253,969

$160,847

$414,816

$423,282

98%

Michael I. Lebovitz

$193,016

$120,957

$313,973

$321,694

98%

Jeffery V. Curry

$125,685

$75,411

$201,096

$209,475

96%

 

40


 

Establishment of 2020 Annual Incentive Program for Named Executive Officers

 

In February 2020, the Compensation Committee approved a 2020 AIP, the terms of which are substantially identical to those described above for the 2019 AIP, including maintaining from last year the same 5% reduction as compared to 2018 AIP compensation targets (50% in the case of our Executive Chairman of the Board), other than with respect to Mr. Curry, who entered the program for the first time in 2019.  This reduction in AIP cash bonus targets is commensurate with maintaining the Compensation Committee’s 2019 reductions to the NEO’s base salaries, thereby helping the Company reduce cash executive compensation expense and maintaining the same proportional relationship between the NEO’s base salaries and AIP bonus opportunities for 2020.  

 

Under the 2020 AIP, the quantitative portion of each Named Executive Officer’s annual bonus award will be determined by reference to the same two performance metrics utilized under the 2019 AIP, with 50% weighting allocated to the Company’s performance with respect to FFO, as adjusted, per diluted share, and the remaining 50% weighting allocated to the Company’s performance with respect to same-center NOI, each as reported in the Company’s Periodic Reports.  

 




Named Executive Officer

Total
2020 Target Cash Bonus
Award ($)



Quantitative Allocation(1)


Qualitative/
Individual Allocation

Stephen D. Lebovitz, Chief Executive Officer

965,081

70%

30%

Farzana Khaleel, Executive Vice President – Chief Financial Officer and Treasurer

321,694

60%

40%

Charles B. Lebovitz,
Chairman of the Board

423,282

60%

40%

Michael I. Lebovitz, President

321,694

60%

40%

Jeffery V. Curry, Chief Legal Officer and Secretary

209,475

60%

40%

 

(1)

The cash bonus awards ultimately received by each Named Executive Officer based on quantitative metrics under the 2020 AIP will be determined in relation to the threshold, target and maximum performance levels established for each metric by the Compensation Committee, as described above for prior years.

 

The qualitative component of the cash bonus awards received by each Named Executive Officer under the 2020 AIP will be determined by the Compensation Committee’s subjective evaluation of each officer’s performance in relation to 2020 individual performance goals established by the Compensation Committee in the same manner as the 2019 individual performance objectives that were utilized in determining qualitative performance bonuses under the 2019 AIP.

 

Long-Term Incentive Program (LTIP) for Named Executive Officers

 

Design and Structure of the Long-Term Incentive Program

 

When the LTIP program was established for our Named Executive Officers beginning with the Company’s 2015 fiscal year, it was designed to reward them for the achievement of long-term relative Total Shareholder Return (“TSR”) performance versus the FTSE Nareit Retail Index.  

 

Beginning with LTIP awards granted in February 2018 (for the 2018-2020 performance cycle), the Compensation Committee determined to link one third of the quantitative portion of the LTIP awards to the achievement of absolute TSR metrics specified for the Company, while maintaining the use of the same relative TSR metric for the remaining two thirds.  The LTIP also carves out a limited portion for time-based vesting restricted stock awards that may be granted based on the Compensation Committee’s subjective review of performance.  For our Chief Executive Officer, 65% of his total LTIP opportunity each year is based on the TSR criteria and the remaining 35% is time-based.  For the other Named Executive Officers, 60% of the total award is based on the TSR criteria and the remaining 40% is time-based.  

 

41


 

A visual overview of the LTIP for the CEO and the other named executive officers is provided below:

 

 

The target value of the performance-based portion of the LTIP is translated into an award of performance stock units (“PSUs”) under the 2012 Stock Incentive Plan based on the market price for the Company’s Common Stock at the date of grant.  At the end of the applicable three-year performance period, one share of the Company’s Common Stock will be issued for each PSU earned by the Named Executive Officers. Subject to additional changes described below to maintain the incentive compensation value of the LTIP awards while also maintaining compliance with applicable annual equity grant limits, the number of PSUs earned with respect to achievement of each of the performance levels specified above will be determined as illustrated below:

 

 

PSUs Allocated to
Relative TSR vs.
Nareit Retail
Index Metric
(66.67% of Total PSU
Opportunity
)

Threshold
Performance
Level Achieved

Target
Performance
Level Achieved

Maximum
Performance
Level Achieved

50% of Allocated PSUs Earned

100% of Allocated PSUs Earned

200% of Allocated PSUs Earned

 

 

PSUs Allocated to
3-Year Absolute
Cumulative CBL
TSR Metric
(33.33% of Total PSU
Opportunity
)

Threshold
Performance
Level Achieved

Target
Performance
Level Achieved

High
Performance
Level Achieved

Maximum
Performance
Level Achieved

50% of Allocated
PSUs Earned

100% of Allocated
PSUs Earned

150% of Allocated
PSUs Earned

200% of Allocated PSUs Earned

 

 

Each allocated portion of the PSU awards described in the preceding tables is also subject to scaled pro-ration for performance that falls between the threshold and maximum levels designated by the Compensation Committee.  As has been the case since the inception of LTIP awards to our NEOs, there will be no payout for that portion of the PSU award based on either such criteria where less than the threshold level of performance is achieved, and any shares of Common Stock issued based upon PSUs earned will vest 60% at the conclusion of the three-year performance period, while the remaining 40% of any such shares will vest 20% on each of the first two anniversaries thereafter.

 

Vesting Conditions Applicable to Performance-Based and Time-Based LTIP Awards

 

Shares earned pursuant to the PSUs vest 60% at the conclusion of the performance period while the remaining 40% of such shares vest in two equal installments on each of the first two anniversaries thereafter.  In total, the performance-based awards, inclusive of the three-year performance period plus subsequent vesting over two additional years, span a five-year period, as follows:

 

42


 

 

Shares of Common Stock subject to the time-vested stock awards are issued pursuant to the Compensation Committee’s determination that a Named Executive Officer earned such shares based upon the performance of such officer and the Company during the prior year.  Accordingly, such shares vest 20% on the date that the Compensation Committee determines how much of the value of each such award has been earned, as described above, with the remainder vesting in four equal annual installments.

 

Dividends will be paid, and voting rights will apply only with respect to shares of Common Stock constituting the time-vested portion of these LTIP awards (including the 40% of shares issued pursuant to any performance based award that vest over two additional years).  Shares potentially issuable pursuant to the performance based portion of these awards will not have any voting rights, or be subject to the payment of any dividends, until such shares are earned and issued pursuant to the award.

 

Impact of Grant Limits on LTIP Awards for Named Executive Officers

 

The Compensation Committee has also made the following revisions to the PSU awards to ensure compliance with applicable annual equity grant limits:

 

 

Beginning with the 2018 grant, the Compensation Committee altered the PSUs to maintain their intended incentive compensation value while also maintaining compliance with a 200,000 share annual equity grant limit (the “Section 162(m) Grant Limit”) that was included in the 2012 Stock Incentive Plan to satisfy the “qualified performance-based compensation” exception to the deduction limits for certain executive compensation under Section 162(m) of the Code.  This change provided that, if a grant of PSUs could result in the issuance of a number of shares to the NEO at the conclusion of the performance period that, when coupled with the number of shares of time-vesting restricted stock approved for issuance under the LTIP in the same year the PSUs were granted, would exceed the Section 162(m) Grant Limit, any such excess will be instead converted to a cash bonus award.  

 

 

In conjunction with the February 2020 approval of the 2020 LTIP grants for our Named Executive Officers described below, the Compensation Committee recommended (and our Board approved) an amendment to the 2012 Stock Incentive Plan to remove the Section 162(m) Grant Limit, which no longer served its original purpose because the “qualified performance-based compensation” exception to the Section 162(m) deduction limits was repealed by the 2017 tax reform legislation. The Compensation Committee made this change to increase the effective proportion of NEO compensation delivered in the form of performance-based equity grants, as opposed to cash payments, to further align the economic interests of our NEOs with our investors. However, NYSE rules also include an annual equity grant limit which effectively limits the number of shares that can be subject to stock awards to any individual NEO, without additional shareholder approval, to one percent (1%) of the total number of outstanding shares of the Company’s Common Stock (the “NYSE Annual Grant Limit”).  To maintain NYSE compliance following elimination of the Section 162(m) Grant Limit, the Compensation Committee revised PSU awards under the LTIP, beginning in 2020, to provide that if a grant of PSUs could result in the issuance of a number of shares to a NEO at the conclusion of the 3-year performance period that would exceed the NYSE Annual Grant Limit, when coupled with the number of shares subject to other stock awards (e.g., the time-vesting restricted stock component of the LTIP) issued in the same year that such PSUs were issued, any such excess will instead be converted to a cash bonus award, while remaining subject to vesting conditions as described below.

43


 

 

While the NYSE Annual Grant Limit will permit a much greater proportion of the value of any PSUs earned to be delivered in stock as compared to the prior Section 162(m) Grant Limit, they both operate in a similar manner.  In each case, the amount of any applicable cash bonus will be determined by multiplying the number of shares of Common Stock otherwise earned in excess of the applicable limit by the average of the high and low trading prices reported for our Common Stock on the NYSE on the date such shares would have been issuable.  Any such portion of the value of the PSUs earned that is payable as a cash bonus will be subject to the same vesting provisions as the issuance of Common Stock pursuant to the PSUs.  In addition, to the extent any such cash is to be paid, the cash will be paid first relative to the above-referenced vesting schedule, ahead of the issuance of shares of Common Stock with respect to the balance of any such PSUs earned.

 

2019 LTIP Award Decisions for the Named Executive Officers and Tracked PSU Values

 

As discussed further below, the Company’s cumulative TSR performance relative to the FTSE Nareit Retail Index over the respective 2016-2018 and 2017-2019 performance periods, resulted in no PSUs being earned by the Named Executive Officers pursuant to the LTIP awards granted in 2016 or 2017.  The target values of the total LTIP awards granted to each Named Executive Officer for 2018 and 2019 are shown in the following table.  This includes:

 

 

the target value of the performance-based awards, under the revised criteria adopted by the Compensation Committee in 2018, for each of the 2018-2020 and 2019-2021 performance periods (with an adjustment to the CBL Absolute TSR targets for the 2019-2021 performance period as noted below) and

 

 

the target value that was utilized for the time-vested restricted stock awards for the 2018 and 2019 performance periods, which the Compensation Committee considered along with its subjective evaluation of Company performance to determine the number of shares actually issued at the payout of such awards in February 2019 and February 2020.  

 

The table below reflects the targeted levels of absolute cumulative TSR for holders of the Company’s Common Stock that will determine one third (33.33%) of the number of PSUs earned by the Named Executive Officers for the 2019-2021 performance cycle, which require that a significant Threshold level of absolute cumulative TSR must be achieved before any portion of such PSUs will be earned:

 

3-Year Absolute
Cumulative CBL
TSR Metric for
2019-2021
Performance
Period

Threshold

Target

High

Maximum

40%

60%

70%

80%

 

The performance targets that will determine the remaining two thirds (66.67%) of the PSUs earned by the Named Executive Officers, based on the Company’s TSR performance relative to the first, second and third quartiles of the Nareit Retail Index as described above, are as follows:

 

Relative TSR vs.
Nareit Retail
Index Metric

Threshold

Target

Maximum

3rd Quartile

No less than 26th Percentile

2nd Quartile

No less than 51st Percentile

1st Quartile

At least 76th Percentile

 

As in the case of targeted cash bonus amounts under the 2019 AIP, the Compensation Committee agreed with senior management’s recommendation that, in the interest of helping to contain executive compensation expense during this challenging period for the Company, the targeted value of 2019 LTIP awards for each continuing Named Executive Officer – other than Mr. Curry, who entered the program for the first time in 2019 – should be reduced by 5% as compared to their 2018 targets (and by 50% in the case of our Executive Chairman of the Board).  

 

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As also discussed above, in light of the significant decline experienced in the Company’s Common Stock price in recent periods, and in an effort to further contain near-term executive compensation expenses, the Compensation Committee decided in February 2019, in line with management’s recommendation, to issue shares with a value equal to only 50% of the targeted value of the time-based vesting component of the LTIP awards with respect to 2018 performance.  As the Company’s Common Stock price has continued to suffer throughout the most recent year, the Compensation Committee (again in line with management’s recommendation) followed the same approach in February 2020, issuing shares with a value equal to only 50% of the targeted value of the time-based vesting component of the LTIP awards with respect to 2019 performance.  

 






Named Executive Officer

Year of Grant/
Base Year for LTIP Performance Period


Target Value of Long-Term Incentive Award
($)


Target Value of Performance Based Award ($)(1)(2)



Target Value of Time-Vested Award
($)(3)

Stephen D. Lebovitz,
Chief Executive Officer

2019

1,930,163

1,254,606

675,557

2018

2,031,750

1,320,637

711,113

Farzana Khaleel,
Executive Vice President – Chief Financial Officer and Treasurer

2019

   536,156

   321,694

214,462

2018

   564,375

   338,625

225,750

Charles B. Lebovitz,
Executive Chairman of the Board

2019

   705,469

   423,281

282,188

2018

1,410,938

   846,563

564,375

Michael I. Lebovitz,
President (4)

2019

   536,156

   321,694

214,462

2018

   564,375

   338,625

225,750

Jeffery V. Curry,
Chief Legal Officer and Secretary (5)

2019

   536,156

   321,694

214,462

2018

N/A

N/A

N/A

 

(1)

The number of PSUs granted in relation to the target value of the performance based award is determined by dividing such value by the average of the high and low prices reported for the Company’s Common Stock on the NYSE on the initial date of grant.  For 2018 awards, the number of PSUs issued was determined by dividing the Target Value of the Performance Based LTIP Award by $4.29, the average of the high and low prices reported for the Company’s Common Stock on the NYSE on February 12, 2018.  For 2019 awards, the number of PSUs issued was determined by dividing the Target Value of the Performance Based LTIP Award by $2.395, the average of the high and low prices reported for the Company’s Common Stock on the NYSE on February 11, 2019.  

 

(2)

Pursuant to the terms incorporated in the PSU awards granted in 2018 and 2019 to preserve their incentive value while also maintaining compliance with the 200,000 share Section 162(m) Grant Limit in the 2012 Stock Incentive Plan at the time of such grants, the maximum number of shares of Common Stock that could be issued to NEOs affected by the operation of this limit is as follows:

 

Stephen D. Lebovitz:  For the 2018 PSU Grant, 45,804 shares (valued at $196,499 on the February 12, 2018 grant date).  For the 2019 PSU Grant, 51,542 shares (valued at $123,443 on the February 11, 2019 grant date).

 

Charles B. Lebovitz:  For the 2018 PSU Grant, 77,622 shares (valued at $332,998 on the February 12, 2018 grant date).  For the 2019 PSU Grant, 82,176 shares (valued at $196,812 on the February 11, 2019 grant date).

 

Farzana Khaleel, Michael I. Lebovitz and Jeffery V. Curry:  For each of these officers, for their 2019 PSU grants only, 152,870 shares (valued at $366,124 on the February 11, 2019 grant date).

To the extent that any such Named Executive Officer should have earned PSUs in excess of those amounts at the conclusion of the three year performance period applicable to the 2018 or the 2019 grants (as applicable), he or she would be entitled to receive the value of any such excess PSUs in cash as described above.

 

(3)

The number of shares of Common Stock issued in relation to each time-vested stock award is determined by dividing the amount of the targeted value of each such award that the Compensation Committee ultimately determines that each Named Executive Officer has earned, based on the Compensation Committee’s subjective

45


 

evaluation of the Company’s and the officer’s performance during the just completed fiscal year, by the average of the high and low prices reported for the Company’s Common Stock on the NYSE on the date that the Compensation Committee makes such determination.  

 

Based on consideration of the Company’s overall performance, as well as consideration of each Named Executive Officer’s individual performance and of the stock price performance and executive compensation expense issues described above, the Compensation Committee determined on February 11, 2019, that each Named Executive Officer should receive 50% of the Target Value of the time-vested component of the LTIP stock award for 2018 performance.  The Compensation Committee made a similar determination on February 10, 2020, concerning a 50% reduction with respect to the Target Value of the time-vested component of the LTIP stock award for 2019 performance.  Accordingly, the number and then-current market value of shares issued to each of our continuing Named Executive Officers for his or her time-vested award was as follows, determined (i) for the 2018 LTIP, by dividing such reduced Target Value by $2.395, the average of the high and low prices reported for the Company’s Common Stock on the NYSE on February 11, 2019 and (ii) for the 2019 LTIP, by dividing such reduced Target Value by $0.7755, the average of the high and low prices reported for the Company’s Common Stock on the NYSE on February 10, 2020:  

 


Named Executive Officer

Time-Vested Shares Issued in February 2019 Based on 2018 Performance

Time-Vested Shares Issued in February 2020 Based on
2019 Performance

Stephen D. Lebovitz

Shares issued

148,458

Shares issued

435,563

Market Value
on 2/11/2019

$355,557

Market Value
on 2/10/2020

$337,779

Farzana Khaleel

Shares issued

47,130

Shares issued

138,274

Market Value
on 2/11/2019

$112,876

Market Value
on 2/10/2020

$107,231

Charles B. Lebovitz

Shares issued

117,824

Shares issued

181,940

Market Value
on 2/11/2019

$282,188

Market Value
on 2/10/2020

$141,094

Michael I. Lebovitz

Shares issued

47,130

Shares issued

138,274

Market Value
on 2/11/2019

$112,876

Market Value
on 2/10/2020

$107,231

Jeffery V. Curry*

Shares issued

47,130*

Shares issued

138,274

Market Value
on 2/11/2019

$112,876*

Market Value
on 2/10/2020

$107,231

 

*Mr. Curry, who was not included in the 2018 LTIP grants since he qualified as a Named Executive Officer for the first time in conjunction with the 2019 proxy statement, was awarded 47,130 shares of restricted stock in February 2019 with respect to his performance as an executive officer during 2018, which will vest in equal 20% annual installments over a five-year period.

 

(4)

Prior to his promotion to President, effective June 22, 2018, Michael I. Lebovitz served as the Company’s Executive Vice President – Development and Administration.

 

(5)

Mr. Curry did not participate in the 2018 LTIP grant for Named Executive Officers, since he qualified as a Named Executive Officer for the first time in conjunction with the 2019 proxy statement.

 

Demonstrating the strong alignment of executive pay and performance, no PSUs were earned by the Named Executive Officers for the prior two performance periods (2016-2018 and 2017-2019) as the Company’s cumulative TSR performance relative to that of the FTSE Nareit Retail Index over the applicable performance periods fell below the threshold levels established by the Compensation Committee.  In addition, the currently outstanding performance periods (2018-2020 and 2019-2021) are tracking below threshold, which would result in no payout.  The following table illustrates this alignment of the economic interests of our Named Executive Officers with those of the Company’s shareholders.

 

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As illustrated above, notwithstanding their original “target” value, the PSUs have no actual economic value to our NEOs unless at least the Threshold level of TSR performance is achieved with respect to the relevant criteria for each applicable 3-year performance period.  The actual value of the PSUs at the conclusion of each of the 2018-2020 and 2019-2021 performance periods, and the resulting number of shares earned by each of our NEOs, will be reported (i) in our proxy statement for next year’s Annual Meeting, for the 2018-2020 performance period and (ii) in the proxy statement for our 2021 Annual Meeting, for the 2019-2021 performance period.

 

2020 LTIP Grants for Named Executive Officers

 

The target values of the total LTIP awards granted to each continuing Named Executive Officer for 2020 are shown in the table below.  This includes (i) the target value of the performance-based awards, under the criteria describe above for the 2020-2022 performance period (with a further adjustment to the CBL Absolute TSR targets for the 2020-2022 performance period as noted below) and (ii) the target value of the time-vested awards for 2020 performance that may be granted in February 2021.  As in the case of targeted cash bonus amounts under the 2020 AIP, the Compensation Committee again agreed with senior management’s recommendation that, in the interest of helping to contain executive compensation expense during this challenging period for the Company, the targeted value of 2020 LTIP awards for each Named Executive Officer should be held at a level that is reduced by 5% as compared to their 2018 targets (and by 50% in the case of our Executive Chairman of the Board).  






Named Executive Officer

Year of Grant/
Base Year for LTIP Performance Period


Target Value of Long-Term Incentive Award
($)


Target Value of Performance Based Award ($)(1)



Target Value of Time-Vested Award
($)(2)

Stephen D. Lebovitz,
Chief Executive Officer

2020

1,930,163

1,254,606

675,557

Farzana Khaleel,
Executive Vice President – Chief Financial Officer and Treasurer

2020

536,156

321,694

214,462

Charles B. Lebovitz,
Executive Chairman of the Board

2020

705,469

423,281

282,188

Michael I. Lebovitz,
President

2020

536,156

321,694

214,462

Jeffery V. Curry,
Chief Legal Officer and Secretary

2020

536,156

321,694

214,462

 

(1)

The number of PSUs granted in relation to the target value of the performance based award is determined by dividing such value by the average of the high and low prices reported for the Company’s Common Stock on the NYSE on the initial date of grant.  For 2020 awards, the number of PSUs issued was determined by dividing the

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Target Value of the Performance Based LTIP Award by $0.7755, the average of the high and low prices reported for the Company’s Common Stock on the NYSE on February 10, 2020.  Pursuant to the terms incorporated in the PSU awards granted in 2020 to preserve their incentive value while also while also maintaining compliance with the NYSE Annual Grant Limit as discussed above, the maximum number of shares of Common Stock that could be issued to Stephen D. Lebovitz based on PSUs he was granted in 2020 is 1,310,534 shares (valued at $1,015,664 as of February 10, 2020). To the extent that Mr. Lebovitz should have earned PSUs in excess of such amount at the conclusion of the three year performance period applicable to the 2020 grants, he would be entitled to receive the value of any such excess PSUs in cash as described above.

 

(2)

The number of shares of Common Stock issued in relation to each time-vested stock award is determined by dividing the amount of the targeted value of each such award that the Compensation Committee ultimately determines that each Named Executive Officer has earned, based on the Compensation Committee’s subjective evaluation of the Company’s performance during the just completed fiscal year, by the average of the high and low prices reported for the Company’s Common Stock on the NYSE on the date that the Compensation Committee makes such determination.

 

In light of the current suspension of dividends on our Common Stock, implemented during 2019 and continuing in 2020, to conserve liquidity and invest in the repositioning of our properties, the Compensation Committee adjusted the targeted levels of absolute cumulative TSR for holders of the Company’s Common Stock that will determine one third (33.33%) of the number of PSUs earned by the Named Executive Officers for the 2020-2022 performance cycle, as compared with targeted levels for the 2019-2021 performance cycle, as reflected in the table below.  Nevertheless, based on information received from the independent compensation consulting firm FPL following a review of 2019 REIT peer disclosures, we believe the Threshold level of absolute cumulative TSR which must be achieved under this component of the LTIP is more than double the median level utilized for this metric by other REITs in structuring long-term incentive compensation goals.  Accordingly, we believe these revised targets continue to appropriately challenge the Company’s NEOs to generate significant absolute TSR for our shareholders over the performance period before any of such PSUs would be earned.

 

3-Year Absolute Cumulative CBL
TSR Metric for
2019-2021 Performance Period

(33.33% of Total PSU Opportunity)

Threshold

Target

High

Maximum

30%

45%

55%

65%

 

The performance targets that will determine the remaining two thirds (66.67%) of the PSUs earned by the Named Executive Officers, based on the Company’s TSR performance relative to the first, second and third quartiles of the Nareit Retail Index as described above, remain unchanged for the 2020-2022 performance cycle.

 

LTIP Compensation Mix

 

We believe that the structure of the long-term component of our NEO incentive programs, as outlined above, will contribute to our Company’s achievements and drive shareholder value creation.  Further, we believe that its structure, which emphasizes objectivity and transparency, with some (limited) subjective elements, results in a balanced approach.  

 

Additional Compensation Policies and Practices

 

Role of Senior Management in Compensation Decisions

 

The Compensation Committee receives recommendations from CBL’s senior management as to all elements of compensation for CBL’s Named Executive Officers and considers such recommendations in establishing base salary levels, as well as both the targeted award levels and the performance criteria utilized in determining AIP and LTIP awards under the incentive compensation programs described above.  

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Stephen D. Lebovitz has the primary responsibility for presenting management’s recommendations as well as evaluating performance of the other executive officers.  Stephen D. Lebovitz regularly participates in the Compensation Committee meetings to provide this information.  In making compensation decisions for the Named Executive Officers, the Compensation Committee gives significant weight to the recommendations made by the Company’s senior management, but the Compensation Committee is not bound by management’s recommendations and makes its own determinations as to these matters. The Compensation Committee also considers management’s recommendations in light of such issues as historical compensation levels for each officer, the relationship of each officer’s compensation to the overall compensation of the Company’s officers and the performance of the Company’s business for the year in question.  

 

General Review of Peer Compensation Levels

 

The Compensation Committee’s determination of each Named Executive Officer’s compensation also includes a review (for informational purposes only) of compensation for executives of comparable publicly traded retail-focused REITs, to provide the Compensation Committee with a general sense of the manner in which the compensation of the Named Executive Officers compares with similarly-situated executive officers at these industry peers, and an understanding of whether the Company is competitive in the compensation paid to the Named Executive Officers (taking into account differences in size and scope of operations between the Company and certain of its peers).  The Compensation Committee has not set specific competitive pay targets or objectives in this review, or otherwise engaged in formal “benchmarking” comparisons of the compensation of the Company’s Named Executive Officers against that of the executives of these peer companies.  The eight publicly traded retail REITs used for this comparison during 2019 were:

 

 

Company Name

Ticker
Symbol

The Macerich Company

MAC

Pennsylvania Real Estate Investment Trust

PEI

Regency Centers Corporation

REG

SITE Centers Corp.

SITC

Tanger Factory Outlet Centers, Inc.

SKT

Taubman Centers, Inc.

TCO

Washington Prime Group Inc.

WPG

Weingarten Realty Investors

WRI

 

 

Clawback Policy

 

In conjunction with the implementation of new annual and long-term incentive programs for the Company’s Named Executive Officers in 2015, the Company’s Board of Directors and Compensation Committee also implemented a clawback policy applicable to the Company’s Named Executive Officers.  Under this policy, the Company shall require reimbursement of any incentive compensation paid to a Named Executive Officer where:  (i) the incentive compensation was predicated upon achieving certain financial results that were subsequently the subject of a substantial restatement of the Company’s financial statements filed with the SEC; (ii) the Board determines, after a thorough investigation involving, if necessary, independent legal counsel, and after considering the totality of the circumstances and the information gleaned from such investigation, that the Named Executive Officer engaged in intentional misconduct that caused or substantially caused the need for the substantial restatement; and (iii) a lower amount of incentive compensation would have been paid to the Named Executive Officer based upon the restated financial results.  In each such instance, the Company will, to the extent practicable, seek to recover from the Named Executive Officer the amount by which the Named Executive Officer’s incentive

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compensation for the relevant period exceeded the lower amount of incentive compensation that would have been paid to such Named Executive Officer based on the restated financial results.

 

Anti-Hedging Policy

 

In February 2016, the Company’s Board of Directors adopted a policy prohibiting CBL’s officers and directors from engaging in “hedging” transactions involving any stock or securities of the Company.  Specifically, except for indirect transactions not effectively under the control of a covered officer or director (such as transactions carried out by a mutual fund or similar vehicle in which an officer or director may invest, pursuant to investment decisions made by an independent third party manager), the policy prohibits the Company’s directors and officers of the Company or any of its subsidiaries of the level of vice president or above from engaging in hedging or monetization activities through transactions in Company securities or through the use of financial instruments designed for such purposes (including without limitation short-sales, options, puts, calls, and sales against the box, as well as derivative transactions including swaps, forwards, futures, collars and exchange funds).  Under the policy, such individuals are generally prohibited from (i) owning financial instruments or participating in investment strategies that represent a direct or indirect hedge of the economic risk of owning Company securities or (ii) owning or participating in any other securities, instruments, contracts, arrangements or understandings that give the holder any rights to acquire any such Company securities.  

 

Corporate Aircraft Usage

 

Pursuant to a policy adopted by the Company’s Board of Directors, upon approval by the Independent Directors (including the members of the Compensation Committee), and subject to the requirements and limitations of the Federal Aviation Regulations as currently interpreted by the Federal Aviation Administration’s Chief Counsel, Company executives who utilize a private aircraft owned and/or leased by the Management Company for personal transportation (as specified in such policy) reimburse the Company in connection with such usage.  Prior to 2018, such reimbursement was in an amount equal to the pro rata cost of owning, operating, and maintaining the aircraft (including fixed and variable costs).  In an effort to better align the Company’s policy with SEC guidance and current industry practice, since February 12, 2018, such reimbursement has been in an amount equal to aggregate incremental cost to the Company of such flights (including the variable direct costs of each flight, such as fuel, airport and landing fees, supplies and catering, direct crew costs, and a proportionate share of operating costs for airframe and engines and the cost of repositioning or “deadhead” flights, but excluding costs that do not vary with each flight, such as pilots’ salaries and training, insurance, hangar expense at home base and depreciation, capital and leasing costs associated with the aircraft).  As such, the Company was reimbursed for the cost of all trips that were of a personal nature taken by a Named Executive Officer.  This policy, however, does not require such reimbursement in certain instances, including but not limited to travel between Company offices, where the trip is primarily for a business purpose that benefits the Company.  In these instances, allowing the use of aircraft owned or leased by the Company for executive travel serves the Company’s business purposes by enhancing the executive’s security and ability to attend to business matters while in transit, notwithstanding the fact that current SEC rules may require disclosure of the aggregate incremental cost attributable to such trips as additional “perquisite” compensation for the Named Executive Officers.  As detailed in the Summary Compensation Table below, for 2019 Stephen D. Lebovitz received $183,287 of compensation attributable to such aircraft usage.

 

Retiree Insurance Programs

 

The Company has three programs in place for providing limited post-retirement coverage under the Company’s group medical insurance plan for certain eligible employees – (1) the Tier I Legacy Retiree Program, which applies to Company employees who retire with 30 or more years of service with the Company and/or its affiliates or predecessors; (2) the Tier II Legacy Retiree Program, which applies to Company employees who retire at age 60, but less than age 65, with a total of 20 or more (but less than 30) years of service; and (3) the Tier III Post-65 Retiree Program, which provides certain limited enhancements to the post-retirement health insurance coverage available to Company officers at the level of senior vice president and above who retire at age 65 or above with 40 or more years of service to the

50


 

Company and/or its affiliates or predecessors. The details of the Tier I and Tier III programs, which are currently the only two levels applicable to at least one of the Company’s NEOs, are described herein under the heading “Executive Compensation – Potential Payments Upon Termination.”

 

Severance Provisions for Jeffery V. Curry

As an inducement to Jeffery V. Curry to surrender his partnership in a national law firm to join the Company as its Chief Legal Officer in 2012, the Board of Directors approved an offer to Mr. Curry that included limited base salary continuation benefits and the vesting of any outstanding restricted stock in the event of certain other than “for cause” terminations of Mr. Curry’s employment, as described below in the Executive Compensation section under the heading “Potential Payments Upon Termination or Change in Control – Additional Terms of Employment of Jeffery V. Curry.”

 

Effect of Regulatory Requirements on Executive Compensation  

 

Accounting Treatment and Tax Deductibility of Executive Compensation.  The Committee generally considers the accounting treatment and tax implications of the compensation awarded or paid to our executives. Grants of equity compensation awards under our long-term incentive program are accounted for under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718.  Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) imposes a $1,000,000 ceiling on a publicly traded corporation’s federal income tax deduction for compensation paid in a taxable year to the corporation’s chief executive officer and certain other executive officers.  Prior to passage of the Tax Cuts and Jobs Act in December 2017 (the “2017 Tax Act”), this limitation did not apply to any compensation that satisfies certain requirements to be treated as “performance-based compensation” under Section 162(m) and the related regulations.  Following the 2017 Tax Act, this “performance-based” exclusion only applies to certain contracts in effect on November 2, 2017 and not materially modified thereafter.  

 

Because substantially all services performed by the Company’s executive officers are rendered on behalf of our Operating Partnership and/or the Management Company, our executive officers receive all of their compensation as employees of the Management Company.  We believe the compensation paid to our executive officers is not subject to Section 162(m) of the Code to the extent such compensation is attributable to services rendered for the Operating Partnership and/or the Management Company.  Further, since we have elected to qualify as a REIT under the Code, we generally will not be subject to federal income tax.  Thus, the deduction limit contained in Section 162(m) of the Code for compensation paid to CEOs and certain other public company executive officers is not material to the design and structure of our executive compensation program.  

 

Section 409A.  Section 409A of the Code generally affects the federal income tax treatment of most forms of deferred compensation (subject to limited grandfathering for certain deferred compensation arrangements in place on or prior to October 3, 2004) by accelerating the timing of the inclusion of the deferred compensation to the recipient for federal income tax purposes and imposing an additional federal income tax on the recipient equal to 20% of the amount of the accelerated income.  Management and the Compensation Committee consider the potential adverse federal income tax impact of Section 409A of the Code in determining the form and timing of compensation paid to the Company’s executive officers and other employees.

 


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Summary Compensation Table

 

The following table sets forth information regarding the compensation of the Company’s Named Executive Officers (as determined pursuant to SEC rules) for the Company’s fiscal years ended December 31, 2017, 2018 and 2019:

 

Summary Compensation Table (1)

 

Name and Principal

Position(2)

Year

Salary($) (3)

Bonus($) (4)

Stock

Award(s)

($) (5)

Non-equity

Incentive Plan

Compensation

($) (6)

All

Other

Compensation

($) (7)

Total

Compensation

($)

Stephen D. Lebovitz,

Director,
Chief Executive Officer

2019

672,315

277,943

1,611,066

675,557

196,471

3,433,352

2018

707,000

292,572

1,471,139

675,557

326,120

3,472,388

2017

707,000

277,830

1,259,260

339,885

2,583,975

Farzana Khaleel,

Executive Vice
President – Chief Financial Officer and Treasurer

2019

507,565

120,957

   434,795

193,016

    7,000

1,263,333

2018

534,279

131,387

   417,600

193,016

    6,875

1,283,157

2017

534,279

119,700

   428,399

    6,625

1,089,003

Charles B. Lebovitz,

Chairman of the Board

2019

340,875

160,847

   705,777

253,969

  10,946

1,472,414

2018

681,750

325,080

1,044,001

482,541

    6,875

2,540,247

2017

681,750

308,700

1,070,986

    6,625

2,068,061

Michael I. Lebovitz,

President

2019

404,973

120,957

   434,795

193,016

13,184

1,166,925

2018

426,287

130,032

   417,600

193,016

    6,875

1,173,810

2017

426,287

120,960

   428,399

    6,625

   982,271

Jeffery V. Curry,

Chief Legal Officer and
Secretary

2019

394,605

  75,411

   434,795

125,685

   7,000

1,037,496

2018

415,374

220,500

     85,800

    6,875

   728,549

 

 

 

(1)

All compensation cost resulting from amounts paid to the Named Executive Officers as shown in this table is recognized by the Management Company, which is a taxable REIT subsidiary of the Company.

 

(2)

The position shown represents the individual’s position with the Company and the Management Company.

 

(3)

Each of the Named Executive Officers also elected to contribute a portion of his or her salary to the CBL & Associates Management, Inc. 401(k) Profit Sharing Plan and Trust (the “401(k) Plan”) during 2017, 2018 and 2019.

 

(4)

Represents the qualitative component of each Named Executive Officer’s cash bonus paid under the 2019 Annual Incentive Plan (as described above in the “Compensation Discussion and Analysis” section) and under the similarly structured 2018 Annual Incentive Plan and 2017 Annual Incentive Plan.  Since Mr. Curry qualified as a Named Executive Officer for the first time in conjunction with last year’s proxy statement, his 2018 qualitative bonus was determined based on the Compensation Committee’s subjective evaluation of his performance outside of the terms of the 2018 Annual Incentive Plan.

 

(5)

We report all equity awards at their full grant date fair value in accordance with Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 718.  For the time-vested restricted Common Stock component of awards under the Company’s current LTIP, such value is calculated based on the NYSE market price for shares of our Common Stock subject to the award on the grant date for the award.  For PSUs awarded under the Company’s LTIP, the fair value was estimated on the date of grant using a Monte Carlo Simulation model.  Such valuation consisted of computing the fair value using the Company’s simulated stock price as well

52


 

as TSR over the performance period (i) from January 1, 2017 through December 31, 2019, for awards made in 2017; (ii) from January 1, 2018 through December 31, 2020, for awards made in 2018 and (iii) from January 1, 2019 through December 31, 2021, for awards made in 2019.  The award is modeled as a contingent claim in that the expected return on the underlying shares is risk-free and the rate of discounting the payoff of the award is also risk-free.  For the PSUs granted on February 7, 2017, this resulted in a grant-date fair value of $5.62 per PSU for Stephen D. Lebovitz and $7.74 per PSU for each of Charles B. Lebovitz, Farzana Khaleel, Augustus N. Stephas and Michael I. Lebovitz.  For the PSUs granted on February 12, 2018, this resulted in a weighted average grant-date fair value (based on the fact that 2/3 of the PSUs granted in 2018 will vest based on the relative TSR metric and 1/3 of the PSUs granted in 2018 will vest based on the absolute cumulative CBL TSR metric) of $2.63 per PSU for each Named Executive Officer.  For the PSUs granted on February 11, 2019, this resulted in a weighted average grant-date fair value (based on the fact that 2/3 of the PSUs granted in 2019 will vest based on the relative TSR metric and 1/3 of the PSUs granted in 2019 will vest based on the absolute cumulative CBL TSR metric) of $2.40 per PSU for each Named Executive Officer.  Generally, the aggregate grant date fair value represents the amount that the Company expects to expense in its financial statements over the award’s vesting schedule and does not correspond to the actual value that will be realized by each Named Executive Officer.  For additional information, refer to Note 17 – Share-Based Compensation in the Company’s audited financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC, that accompanies this Proxy Statement.

 

(6)

For fiscal year 2019, amounts shown include the following amounts paid as annual incentive compensation to the Named Executive Officers pursuant to (i) the quantitative bonus based on the FFO, as adjusted, per share metric (“FFO Bonus”) and (ii) the quantitative bonus based on the same-center NOI Growth metric (“NOI Bonus”) under the terms of the Company’s 2019 AIP as described above in the “Compensation Discussion and Analysis” section:

 

Stephen D. Lebovitz ($253,334 FFO Bonus and $422,223 NOI Bonus)

 

Farzana Khaleel ($72,381 FFO Bonus and $120,635 NOI Bonus)

 

Charles B. Lebovitz ($95,238 FFO Bonus and $158,731 NOI Bonus)

 

Michael I. Lebovitz ($72,381 FFO Bonus and $120,635 NOI Bonus)

 

Jeffery V. Curry ($47,132 FFO Bonus and $78,553 NOI Bonus)

 

(7)

For fiscal year 2019, amounts shown include matching contributions by the Management Company under the 401(k) Plan for each of the Named Executive Officers.  Also includes the following amounts for three of the Named Executive Officers, representing the value of an incremental portion of his health insurance premiums that are paid by the Management Company, rather than by each such officer, pursuant to an arrangement put in place in a prior year that effectively grandfathered the total cost of health insurance premiums for a broad group of both officer and non-officer employees: $6,184 for Stephen D. Lebovitz; $3,946 for Charles B. Lebovitz; and $6,184 for Michael I. Lebovitz.  For Stephen D. Lebovitz, also includes $183,287 reflecting the incremental cost to the Company of his personal use (including use by family members accompanying the executive) of a private aircraft owned by the Management Company.  For the Management Company owned aircraft, the incremental cost is determined by estimating the variable portion of the Company’s per hour cost of owning, operating and maintaining such aircraft (including those items listed above for the chartered aircraft), less any portion reimbursed by the executives.  Since the Management Company owned aircraft is used primarily for business travel, our Company does not include the fixed costs that do not change based on usage, such as management fees and acquisition costs.  Depending on availability, family members of executive officers also are permitted to ride along on the corporate aircraft when it is already going to a specific destination for a business purpose.  We consider this use to have no incremental cost to the Company, since the business flight would have occurred regardless of the additional passengers.

 

 

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2019 Grants of Plan-Based Awards

 

 

 

 

 

Name of Executive

 

 

 

 

Grant Date

 

Estimated Future Payouts Under

Non-Equity Incentive

Plan Awards (1)

 

Estimated Future Payouts Under

Equity Incentive Plan

Awards (2)

All Other Stock Awards:

Number of Shares of

Stock
or Units (#) (4)

 

Grant Date Fair Value of Stock
and Option Awards ($) (5)

Threshold ($)

Target ($)

Maximum ($)

Threshold (#)(3)

Target (#)(3)

High
(#)(3)

Maximum (#)(3)

Stephen D. Lebovitz

2/11/2019

337,779

675,557

1,013,336

261,922

523,844

611,143

1,047,688

148,458

355,557

Farzana
Khaleel

2/11/2019

  96,508

193,016

289,524

67,159

134,319

156,703

268,638

47,130

112,876

Charles B. Lebovitz

2/11/2019

126,985

253,969

380,954

88,368

176,736

206,189

353,472

117,824

282,188

Michael I. Lebovitz

2/11/2019

  96,508

193,016

289,524

67,159

134,319

156,703

268,638

47,130

112,876

Jeffery V. Curry

2/11/2019

  62,843

125,685

188,528

67,159

134,319

156,703

268,638

47,130

112,876

 

 

 

(1)

These columns represent the potential value of the payout for each Named Executive Officer if the threshold, target or maximum goals are satisfied under the quantitative bonus components of the 2019 Annual Incentive Plan, as described above in the “Compensation Discussion and Analysis” section. The amounts actually earned by each NEO with respect to 2019 performance under the AIP are reported in the Bonus (for the qualitative component) and Non-Equity Incentive Plan Compensation (for the quantitative component) columns in the 2019 Summary Compensation Table above.

 

(2)

These columns represent the potential number of shares to be earned by each Named Executive Officer with respect to the PSUs granted in 2019 under the LTIP, as follows:

 

The “Threshold” column assumes achievement of Threshold level performance for both the two-thirds of the potential PSU shares earned based on the “Relative TSR vs. Nareit Retail Index Metric” and the one-third of the potential PSU shares earned based on the “3-Year Absolute Cumulative CBL TSR Metric.”

 

The “Target” column assumes achievement of Target level performance for both the two-thirds of the potential PSU shares earned based on the “Relative TSR vs. Nareit Retail Index Metric” and the one-third of the potential PSU shares earned based on the “3-Year Absolute Cumulative CBL TSR Metric.”

 

The “High” column assumes achievement of (i) Target level performance for the two-thirds of the potential PSU shares earned based on the “Relative TSR vs. Nareit Retail Index Metric” and (ii) High level performance for the one-third of the potential PSU shares earned based on the “3-Year Absolute Cumulative CBL TSR Metric.”

 

The “Maximum” column assumes achievement of Maximum level performance for both the two-thirds of the potential PSU shares earned based on the “Relative TSR vs. Nareit Retail Index Metric” and the one-third of the potential PSU shares earned based on the “3-Year Absolute Cumulative CBL TSR Metric.”

 

The actual number of shares of Common Stock issued pursuant to these PSUs will be determined as of December 31, 2021 based on the Company’s relative TSR performance over the 2019-2021 performance period, and will vest 60% at such time, with the remaining 40% of such shares vesting 20% on each of December 31, 2020 and December 31, 2021, all as described above in the “Compensation Discussion and Analysis” section.

 

(3)

Due to the 200,000 share per person annual grant limit in the 2012 Stock Incentive Plan, the maximum number of shares of Common Stock that could be issued based on the PSU performance criteria to each of the Named Executive Officers who participated in the 2019 LTIP grants (as opposed to the table values shown above for achievement of the Threshold, Target, High and Maximum levels of performance) would be as follows:

 

Stephen D. Lebovitz – 51,542 shares

 

Farzana Khaleel – 152,870 shares

 

Charles B. Lebovitz – 82,176 shares

 

Michael I. Lebovitz – 152,870 shares

 

Jeffery V. Curry – 152,870 shares

 

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To the extent that any such Named Executive Officer should have earned PSUs in excess of those amounts at the conclusion of the three year performance period applicable to the 2019 grants, he or she would be entitled to receive the economic value of any such excess PSUs, payable as a cash bonus award with a value equivalent to the number of shares of Common Stock constituting such excess times the average of the high and low trading prices reported for the Company’s Common Stock on the NYSE on the date such shares would have otherwise been issuable.

 

(4)

Represents the number of shares of restricted stock awarded to each such officer under the 2012 Stock Incentive Plan in February 2019, pursuant to the Compensation Committee’s subjective evaluation of the officer’s performance during 2018 under the time-vested component of such officer’s LTIP opportunity for the Named Executive Officers.  Such awards have the additional terms and conditions described in the narrative presented below.

 

(5)

Represents the grant date fair value of the February 2019 time-vested stock awards, granted based on 2018 performance as described above, calculated as described in footnote (6) to the Summary Compensation Table above.

 

Additional Information Concerning Executive Compensation

 

The following discussion presents additional information relevant to the compensation reported above for each of the Named Executive Officers in the Summary Compensation Table and the 2019 Grants of Plan-Based Awards Table.

 

Annual Bonus Arrangements for Named Executive Officers

 

The terms of both the quantitative and qualitative components of the bonus arrangements for the Named Executive Officers under the 2019 Annual Incentive Plan are described above in the “Compensation Discussion and Analysis” section.  

 

Terms of Performance Stock Unit Grants to the Named Executive Officers Under the LTIP

 

The terms of the PSUs granted to the Named Executive Officers during 2019 pursuant to the performance-based component of stock awards under the LTIP are detailed above in the “Compensation Discussion and Analysis” section.  As described therein, any shares of Common Stock issued pursuant to such PSUs at the conclusion of the applicable three-year performance period will vest 60% at such date, with the remaining 40% of such shares vesting in two equal installments on each of the first two anniversaries of such date.  During such two year period, the additional shares that have not yet vested will be subject to the same terms described below for shares of restricted stock issued pursuant to the time-vested component of LTIP awards (other than the five-year vesting schedule).

 

Terms of Restricted Stock Grants to NEOs Under the Time-Vested Component of the LTIP

 

Each time-vested award of restricted shares of Common Stock granted to the Named Executive Officers under the 2012 Stock Incentive Plan pursuant to the LTIP provides for the following terms:

 

 

The recipient of the award generally has all of the rights of a shareholder during the vesting/restricted period, including the right to receive dividends on the same basis and at the same rate as all other outstanding shares of Common Stock and the right to vote such shares on any matter on which holders of the Company’s Common Stock are entitled to vote.

 

The shares generally are not transferable during the restricted period, except for any transfers which may be required by law (such as pursuant to a domestic relations order).

 

If the Named Executive Officer’s employment terminates during the restricted period for any reason other than death or disability, the award agreements provide that any non-vested portion of the restricted stock award is immediately forfeited by such Named Executive Officer.  Pursuant to the terms of Jeffery V. Curry’s employment as the Company’s Chief Legal Officer and Secretary, any non-vested portion of such restricted stock awards held by Mr. Curry also would immediately become fully vested as of the date of any termination of Mr. Curry’s employment by the Company without cause, or any such termination (or resignation by Mr.

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Curry) in connection with a “change of control” (as described below under “Potential Payments Upon Termination or Change in Control – Additional Terms of Employment of Jeffery V. Curry”).

 

If employment terminates during the restricted period due to death or disability (as defined in the award), any portion of the restricted stock award that is not vested as of such date shall immediately become fully vested in the Named Executive Officer or his or her estate, as applicable.

 

The shares vest as follows: 20% of the shares granted to each Named Executive Officer are fully vested on the date of grant, and restrictions expire on an additional 20% of the shares granted annually over the next four (4) years beginning on the first anniversary of the date of grant, except that, in the event of a Change of Control of the Company (as defined in the 2012 Stock Incentive Plan), any remaining unvested portion of such shares would immediately vest.

 

Risks Arising From Design of Compensation Programs

 

Both senior management and the Compensation Committee believe that the design of the Company’s compensation programs, including our executive compensation program, does not encourage our executives or employees to take unnecessary and excessive risks, and that the risks arising from these programs are not reasonably likely to have a material adverse effect on the Company.  Factors supporting these conclusions include, among others, the following:

 

 

Both annual performance bonuses and grants of restricted stock awards under our 2012 Stock Incentive Plan are not automatic, but are granted in the discretion of senior management and the Compensation Committee and are subject to downward adjustment as the Compensation Committee or management may deem appropriate.

 

As noted above, our Board of Directors requires approval by the Board (or a committee thereof) of significant transactions that entail the expenditure of funds or incurrence of debt or liability in amounts in excess of certain threshold dollar amounts, thereby limiting the risks to which employees, or even senior management, may expose the Company without higher-level Board review.  Company policy also provides similar checks against the creation of risk by compensation-based incentives at the operational level – such as a procedure that employees compensated based in part on leasing results may have the authority to negotiate new and renewal lease terms, but the authority to approve and execute the leases rests with a higher level of management whose compensation is not subject to the same incentives.

 

Due to the scope of their authority, risk-related decisions concerning the Company’s business are primarily under the control of our executive officers.  As discussed above, we maintain stock ownership guidelines for all executive officers – supported by the features of our compensation programs that encourage our executives to achieve and maintain a significant proprietary interest in the Company.  These guidelines tend to align our senior executives’ long-term interests with those of our shareholders and serve as a disincentive to behavior that is focused only on the short-term and risks material harm to the Company.

 

Additionally, as discussed on page 49 above in the Compensation Discussion and Analysis, effective March 24, 2015 in conjunction with the implementation of new annual and long-term incentive programs for the Company’s Named Executive Officers, the Company’s Board of Directors and Compensation Committee implemented a compensation clawback policy applicable to the Company’s Named Executive Officers as described therein.

 

Non-Competition Arrangements

 

Pursuant to agreements entered into at the time of the Company’s initial public offering in November 1993, each of Charles B. Lebovitz and Stephen D. Lebovitz has agreed to refrain from competing with the Company until two years from the date of termination of his employment.  Prohibited competition includes any participation in the development, improvement or construction of any shopping center project, acquiring any interest in a shopping center project or acquiring vacant land for development as a shopping center project.  Charles B. Lebovitz and Stephen D. Lebovitz are, however, permitted to hold certain investments which they owned prior to completion of the Company’s initial public offering in November

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1993, and to hold passive investments equal to less than 1% of the outstanding securities of any publicly traded company.

 

Pay Ratio Disclosure

 

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, we are providing the following reasonable estimate of the ratio of the annual total compensation of our Chief Executive Officer (our “CEO”) to the median of the annual total compensation of our other employees.

 

For 2019, our last completed fiscal year:

 

 

the annual total compensation for our median employee was $60,723; and

 

the annual total compensation of our CEO, as reported in the Summary Compensation Table included elsewhere in this Proxy Statement, was $3,433,352.

 

Based on this information, for 2019 the ratio of annual total compensation of our CEO to the median of the annual total compensation of all employees was 57 to 1.

 

To identify the median employee, as well as to determine the annual total compensation of our median employee and our CEO, we took the following steps:

 

 

1.

We identified the median employee using our employee population as of December 31, 2019, which consisted of approximately 585 individuals, all located in the United States.

 

 

2.

To identify the “median employee” from our employee population, we examined the amount of total cash compensation (salary/wages plus any overtime pay, plus bonus compensation) of each employee (other than the CEO) as reflected in payroll records.  Salaries/wages plus any overtime were annualized for all permanent employees who were employees for less than the full year or who were on an unpaid leave of absence during a portion of the year. We did not make any cost-of-living adjustments in identifying the “median employee”.

 

 

3.

We identified our median employee using this compensation measure, which was consistently applied to all our employees included in the calculation.  

 

 

4.

Once we identified our median employee, we calculated annual total compensation for this employee of $60,723 using the same methodology we use for our CEO in the Summary Compensation Table as set forth in this Proxy Statement.  

 

 

5.

With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of our 2019 Summary Compensation Table included in this Proxy Statement.

 

This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described above.  The SEC rules for identifying the median employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.

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2019 Outstanding Equity Awards at Fiscal Year-End

 

Name

Stock Awards

Number of Shares or Units of Stock That Have Not Vested (#)(1)

Market Value of Shares or Units of Stock That Have Not Vested
($)(1)

Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
(#)(7)

Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)(8)

Stephen D. Lebovitz

254,921 (2)

267,667

415,843

436,635

Farzana Khaleel

  81,654 (3)

  85,737

106,626

111,957

Charles B. Lebovitz

196,573 (4)

206,402

187,035

196,387

Michael I. Lebovitz

  81,654 (5)

  85,737

106,626

111,957

Jeffery V. Curry

  81,745 (6)

  85,832

      67,159 (9)

  70,517

 

 

(1)

Where noted below, certain of these shares were issued as part of the Company’s annual restricted stock grants to officers and other key employees under the 2012 Stock Incentive Plan, prior to the changes made to equity awards to Named Executive Officers in March 2015 pursuant to the adoption of the LTIP.  Shares issued pursuant to each such annual restricted stock grant vest in 20% increments on each of the first through fifth anniversaries of their date of grant.  Market value shown for all unvested shares of restricted stock is calculated based on the closing price for the Company’s Common Stock on the NYSE on the last trading day of fiscal 2019 (December 31) of $1.05 per share.

 

(2)

8,250 of such shares were issued as part of the annual restricted stock grants described in Note (1) above.  Shares issued under the discretionary time‑vested component of subsequent LTIP awards include: (A) 12,436 shares granted to Mr. Lebovitz in February 2016, (B) 22,952 shares granted to Mr. Lebovitz in February 2017, (C) 92,517 shares granted to Mr. Lebovitz in February 2018 and (D) 118,766 shares granted to Mr. Lebovitz in February 2019.  The shares vest as follows: 8,250 shares vested on February 2, 2020; 12,436 shares vested on February 10, 2020; 11,476 shares vested on February 7, 2020, and 11,476 additional shares will vest on February 7, 2021; 30,839 shares vested on February 12, 2020, and 30,839 additional shares will vest on February 12 in each of the years 2021 and 2022; and 29,692 shares vested on February 11, 2020, with 29,692 additional shares vesting on February 11, 2021 and 29,691 shares vesting on February 11 in each of the years 2022 and 2023.

 

(3)

3,025 of such shares were issued as part of the annual restricted stock grants described in Note (1) above.  Shares issued under the discretionary time‑vested component of subsequent LTIP awards include: (A) 4,061 shares granted to Ms. Khaleel in February 2016, (B) 7,494 shares granted to Ms. Khaleel in February 2017, (C) 29,370 shares granted to Ms. Khaleel in February 2018 and (D) 37,704 shares granted to Ms. Khaleel in February 2019.  The shares vest as follows: 3,025 shares vested on February 2, 2020; 4,061 shares vested on February 10, 2020; 3,747 shares vested on February 7, 2020, and 3,747 additional shares will vest on February 7, 2021; 9,790 shares vested on February 12, 2020, and 9,790 additional shares will vest on February 12 in each of the years 2021 and 2022; and 9,426 shares vested on February 11, 2020, and 9,426 additional shares will vest on February 11 in each of the years 2021, 2022 and 2023.

 

(4)

Such shares were issued under the discretionary time‑vested component of LTIP awards as follows: (A) 10,152 shares were granted to Mr. Lebovitz in February 2016, (B) 18,736 shares were granted to Mr. Lebovitz in February 2017, (C) 73,426 shares granted to Mr. Lebovitz in February 2018 and (D) 94,259 shares were granted to Mr. Lebovitz in February 2019.  The shares vest as follows: 10,152 shares vested on February 10, 2020; 9,368 shares vested on February 7, 2020 and 9,368 additional shares will vest on February 7, 2021; 24,476 shares vested on February 12, 2020 and 24,475 additional shares will vest on February 12 in each of the years 2021 and 2022; 23,565 shares vested on February 11, 2020 and 23,565 additional shares will vest on February 11 in each of the years 2021 and 2022, with 23,564 shares vesting on February 11, 2023.

 

(5)

3,025 of such shares were issued as part of the annual restricted stock grants described in Note (1) above.  Shares issued under the discretionary time‑vested component of subsequent LTIP awards include: (A) 4,061 shares granted to Mr. Lebovitz in February 2016, (B) 7,494 shares granted to Mr. Lebovitz in February 2017, (C) 29,370 shares granted to Mr. Lebovitz in February 2018 and (D) 37,704 shares granted to Mr. Lebovitz in February 2019.  

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The shares vest as follows: 3,025 shares vested on February 2, 2020; 4,061 shares vested on February 10, 2020; 3,747 shares vested on February 7, 2020, and 3,747 additional shares will vest on February 7, 2021; 9,790 shares vested on February 12, 2020, and 9,790 additional shares will vest on February 12 in each of the years 2021 and 2022; and 9,426 shares vested on February 11, 2020, and 9,426 additional shares will vest on February 11 in each of the years 2021, 2022 and 2023.

 

(6)

All of such shares were issued as part of annual restricted stock grants to Mr. Curry under the 2012 Stock Incentive Plan, as described in Note 1, prior to his becoming a Named Executive Officer, and vest in 20% increments on each of the first through fifth anniversaries of their date of grant.  The shares vest as follows: 3,025 shares vested on February 2, 2020; 3,025 shares vested on February 10, 2020 and 3,025 additional shares will vest on February 10, 2021; 3,180 shares vested on February 7, 2020, and 3,180 additional shares will vest on February 7 in each of the years 2021 and 2022; 4,000 shares vested on February 12, 2020 and 4,000 additional shares will vest on February 12 in each of the years 2021, 2022 and 2023; and 9,426 shares vested on February 11, 2020 and 9,426 additional shares will vest on February 11 in each of the years 2021, 2022, 2023 and 2024.

 

(7)

Assumes performance at the Threshold level for PSUs issued under the LTIP for both