SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRELIMINARY
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-11(c) orss.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)
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and 0-11.
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statement number, or the Form or Schedule and the date of its filing.
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1
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION
[Letterhead of CBL & Associates Properties, Inc.]
CBL Center, Suite 500
2030 Hamilton Place Boulevard
Chattanooga, TN 37421-6000
March 18, 2003
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders
which will be held at The Chattanoogan, 1201 South Broad Street, Chattanooga,
Tennessee, on Monday, May 5, 2003 at 4:00 p.m.(EDT).
The Notice and Proxy Statement on the following pages contain details
concerning the business to come before the meeting. Management will report on
current operations and there will be an opportunity for discussion concerning
the Company and its activities. Please sign and return your proxy card in the
enclosed envelope to ensure that your shares will be represented and voted at
the meeting even if you cannot attend. You are urged to sign and return the
enclosed proxy card even if you plan to attend the meeting.
I look forward to personally meeting all stockholders who are able to
attend.
Sincerely,
/s/ Charles B. Lebovitz
Chairman of the Board and
Chief Executive Officer
Phone 423 / 855-0001 Fax 423 490 8662
2
CBL & ASSOCIATES PROPERTIES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 5, 2003
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of CBL &
Associates Properties, Inc., a Delaware corporation (the "Company"), will be
held at The Chattanoogan, 1201 South Broad Street, Chattanooga, Tennessee, on
Monday, May 5, 2003 at 4:00 p.m. (EDT) for the following purposes:
1. To re-elect three directors to serve for a term of three years and until
their respective successors are elected and qualified;
2. To act upon a proposal to approve an amendment to the Company's Amended and
Restated Certificate of Incorporation to increase the number of authorized
shares of the Company's preferred stock, $.01 par value, from 5,000,000
shares to 15,000,000 shares;
3. To act upon a proposal to approve the adoption of an Amended and Restated
Stock Incentive Plan for the Company (herein referred to as the "Amended
and Restated Stock Incentive Plan" and sometimes as the "Amended and
Restated Plan");
4. To act upon a proposal to ratify the selection of Deloitte & Touche LLP as
the independent public accountants for the Company's fiscal year ending
December 31, 2003; and
5. To consider and act upon any other matters which may properly come before
the meeting or any adjournment thereof.
In accordance with the provisions of the Company's Bylaws, the Board of
Directors has fixed the close of business on March 10, 2003 as the record date
for the determination of the stockholders entitled to notice of, and to vote at,
the Annual Meeting.
Your attention is directed to the accompanying Proxy Statement.
Whether or not you plan to attend the meeting, we urge you to sign, date
and promptly return the enclosed Proxy 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. Returning your Proxy will not
prevent you from voting your shares at the meeting if you desire to do so, as
your Proxy is revocable at your option.
By Order of the Board of Directors
/s/ Stephen D. Lebovitz
President and Secretary
Chattanooga, Tennessee
March 18, 2003
3
PROXY STATEMENT
CBL & ASSOCIATES PROPERTIES, INC.
2030 Hamilton Place Blvd.
Suite 500
CBL Center
Chattanooga, Tennessee 37421
ANNUAL MEETING OF STOCKHOLDERS
May 5, 2003
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"),
for use at the annual meeting of stockholders (the "Annual Meeting") of the
Company to be held at The Chattanoogan, 1201 South Broad Street, Chattanooga,
Tennessee, on Monday, May 5, 2003, at 4:00 p.m. (EDT) and at any and all
postponements or adjournments thereof. 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, officers and regular employees of the Company may solicit proxies from
stockholders by telephone, telegram or personal interview but will not receive
additional compensation for such services. In addition, the Company's investor
relations firm, Corporate Communications, Inc., will assist in the preparation
and delivery of the proxies to the Company stockholders and the solicitation of
proxies. The Company expects to pay to Corporate Communications, Inc. a fee for
proxy solicitation services totaling approximately $12,000. 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.
The Company anticipates mailing proxy materials and the Annual Report for
the Company's fiscal year ended December 31, 2002, on or about March 18, 2003 to
stockholders of record as of March 10, 2003.
VOTING SECURITIES
RECORD DATE AND SHARES ENTITLED TO VOTE
Only stockholders of record at the close of business on March 10, 2003, 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 29,869,905
shares. The number of shares of the Company's 9.0% Series A Cumulative
Redeemable Preferred Stock, par value $0.01 per share (the "Series A Preferred
Stock"), outstanding as of March 10, 2003 was 2,675,000 shares. The number of
shares of the Company's 8.75% Series B Cumulative Redeemable Preferred Stock,
par value $0.01 share (the "Series B Preferred Stock"), outstanding as of March
10, 2003 was 2,000,000 shares. The Series A Preferred Stock and the Series B
Preferred Stock (collectively, the "Preferred Stock") were the only series of
Preferred Stock outstanding as of March 10, 2003.
4
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.
The presence in person or by proxy of holders of record of a majority of
the outstanding shares of Preferred Stock is required for a quorum to transact
business at the Annual Meeting with respect to those matters requiring approval
by the holders of Preferred Stock. If such a quorum of the holders of Preferred
Stock should not be present, then the Annual Meeting may be adjourned with
respect to those matters requiring approval by the holders of Preferred Stock
from time to time until a quorum is obtained.
VOTES NECESSARY TO APPROVE THE PROPOSALS
The affirmative vote of the holders of a plurality of the shares of the
Common Stock present or represented at the Annual Meeting is required for the
election of directors.
The approval of the proposed amendment to the Company's Certificate of
Incorporation will require (i) the affirmative vote of the holders of a majority
of the Company's issued and outstanding shares of Common Stock, voting as a
class, and (ii) the affirmative vote of the holders of a majority of the total
votes entitled to be cast by the Company's issued and outstanding shares of
Preferred Stock, voting as a class.
The affirmative vote of the holders of a majority of the shares of Common
Stock present or represented at the Annual Meeting is required for the approval
of the adoption of the Company's Amended and Restated Stock Incentive Plan and
for the ratification of the selection of the independent public accountants.
Each share of Common Stock is entitled to one vote with respect to those
matters upon which such share is to be voted. Each share of Preferred Stock is
entitled to one vote for each $25 of stated liquidation preference with respect
to those matters upon which such share is to be voted, so that each share of
Series A Preferred Stock is entitled to one vote per share and each share of
Series B Preferred Stock is entitled to two votes per share.
VOTING PROCEDURES
White proxy cards are being mailed to holders of shares of the Company's
Common Stock for voting solely with respect to their shares of Common Stock.
Green proxy cards are being mailed to holders of shares of the Company's Series
A Preferred Stock for voting solely with respect to their shares of Series A
Preferred Stock. Yellow proxy cards are being mailed to holders of shares of the
Company's Series B Preferred Stock for voting solely with respect to their
shares of Series B Preferred Stock. Stockholders holding shares of both Common
Stock and Preferred Stock or holding shares of both Series A Preferred Stock and
Series B Preferred Stock should complete, sign and return to the Company the
sets of proxy cards corresponding to the types of shares that they hold.
Abstentions and broker non-votes (shares held by a broker or nominee which
are represented at the Annual Meeting, but with respect to which such broker or
nominee does not have discretionary authority to vote on a particular proposal)
will be counted as present at the Annual Meeting for the purpose of determining
whether or not a quorum exists. Abstentions and broker non-votes will generally
not be counted for any other purpose, except that abstentions with respect to
any proposal, other than the election of directors, will be treated as negative
votes.
Unless contrary instructions are indicated on the accompanying proxy, the
shares represented thereby will be voted in accordance with the recommendations
of the Board of Directors.
5
ELECTION OF DIRECTORS
The Board of Directors currently consists of nine members divided into
three classes (having two, three and four members, respectively) serving
staggered three-year terms. Under the Company's Amended and Restated Certificate
of Incorporation (the "Certificate of Incorporation") and Amended and Restated
Bylaws (the "Bylaws"), a majority of the directors must be unaffiliated
("Independent Directors") with the Company and its predecessor entity, CBL &
Associates, Inc. and its affiliates ("CBL's Predecessor"). Each year the term of
office of one class of directors expires.
Upon the recommendation of the Company's Nominating/Corporate Governance
Committee, the Board of Directors intends to present for action at the Annual
Meeting the re-election of John N. Foy, Martin J. Cleary and William J. Poorvu,
whose present terms expire in 2003, to serve for a term of three years and until
their successors are duly elected and shall qualify. Mr. Poorvu and Mr. Cleary
are two of the Company's Independent Directors.
Unless authority to vote for such directors is withheld, the enclosed proxy
will be voted for such persons, 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.
NOMINEES
Set forth below is information with respect to the nominees for election:
Name Age Current Position*
--------------------- ----------- ----------------------------------------------
John N. Foy 59 Vice Chairman of the Board of Directors, Chief
Financial Officer and Treasurer
Martin J. Cleary 67 Director
William J. Poorvu 67 Director
--------------------
* The position shown represents the individual's position 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.
JOHN N. FOY has served as Vice Chairman of the Board of Directors and
Treasurer of the Company since February 1999 and as a Director and Chief
Financial Officer of the Company since the completion of its initial public
offering in 1993. Until February 1999, he served as Executive Vice President -
Finance and Secretary of the Company. Mr. Foy is a member of the Executive
Committee of the Board of Directors. Prior to the Company's formation, he served
in similar executive capacities with CBL's Predecessor. Mr. Foy has been
involved in the shopping center industry since 1968 when he joined the Lebovitz
family's shopping center development business. In 1970, he became affiliated
with the shopping center division of Arlen, and, in 1978, joined Charles B.
Lebovitz as an Associate in establishing CBL's Predecessor. Mr. Foy served as
Chairman of the Board of First Fidelity Savings Bank in Crossville, Tennessee
from December 1985 until April 1994. Mr. Foy currently serves as a member of the
Advisory Board of AmSouth Bank of Chattanooga, Tennessee, as Chairman of the
Chattanooga Airport Authority and as a Director of Chattanooga Neighborhood
Enterprise. Mr. Foy is also a member of the Board of Governors of the National
Association of Real Estate Investment Trusts (NAREIT).
6
MARTIN J. CLEARY joined the Company as Director on January 31, 2001 in
accordance with the terms of the Company's acquisition of a portfolio of
properties from Jacobs Realty Investors Limited Partnership and certain of its
affiliates and partners (the "Jacobs Acquisition"). Mr. Cleary is a member of
the Company's Compensation Committee. Mr. Cleary is the former President and
Chief Operating Officer of The Richard E. Jacobs Group, Inc. He is currently a
Director of Guardian Life Insurance Company and a Director and member of the
Audit Committee of the Lamson & Sessions Company. Mr. Cleary is also an
ex-officio Trustee and former Chairman of the ICSC.
WILLIAM J. POORVU has served as a Director of the Company since the
completion of the Company's initial public offering. He is Chairman of the
Company's Nominating/Corporate Governance Committee and a member of the
Compensation and Audit Committees of the Board of Directors. Mr. Poorvu was a
professor at Harvard Business School specializing in real estate courses from
1981 to mid-2002 and is currently Professor Emeritus at the school. Mr. Poorvu
is also managing partner in several private real estate companies and has
authored a number of books on real estate subjects. He is Co-Chairman of the
Board of Advisors of Baupost Group, L.L.C. and a Trustee/Director and Chairman
of the Audit Committee of certain mutual funds in the Massachusetts Financial
Services Group of Funds. Mr. Poorvu serves as a Life Trustee for the Boston
Symphony Orchestra, as Trustee and Treasurer for the Gardner Museum in Boston,
Massachusetts and as Trustee and Vice-Chairman of the National Public Radio
Foundation.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE "FOR" THE ELECTION OF THE
THREE DIRECTORS NAMED ABOVE
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DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is information with respect to the directors (in addition
to John N. Foy, Martin J. Cleary and William J. Poorvu) and executive officers
(in addition to John N. Foy) of the Company:
Term
Name Expires (1) Age Current Position(2)
---- ----------- --- -------------------
Charles B. Lebovitz 2005 66 Chairman of the Board of Directors and Chief
Executive Officer
Stephen D. Lebovitz 2004 42 Director, President and Secretary
Claude M. Ballard 2005 73 Director
Gary L. Bryenton 2005 63 Director
Leo Fields 2005 74 Director
Winston W. Walker 2004 59 Director
Ben S. Landress -- 75 Executive Vice President - Management
Ronald L. Fullam -- 60 Senior Vice President - Development
Ronald S. Gimple -- 63 Senior Vice President and General Counsel
Michael I. Lebovitz -- 39 Senior Vice President - Mall Projects
Farzana K. Mitchell -- 51 Senior Vice President - Finance
Jerry L. Sink -- 52 Senior Vice President - Mall Management
Eric P. Snyder -- 53 Senior Vice President and Director of Corporate
Leasing
Augustus N. Stephas -- 60 Senior Vice President - Accounting and Controller
R. Stephen Tingle -- 57 Senior Vice President - Community Center
Development
Charles W.A. Willett, Jr. -- 53 Senior Vice President - Real Estate Finance
------------------
(1) Indicates expiration of term as a director.
(2) The position shown represents the individual's position with the Company and
with the Management Company.
8
CHARLES B. LEBOVITZ has served as Chairman of the Board and Chief Executive
Officer of the Company since the completion of its initial public offering and
is Chairman of the Executive Committee of the Board of Directors. Mr. Lebovitz
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 (the "Associates"), including John N. Foy and Ben
S. Landress. Mr. Lebovitz is an Advisory Director of First Tennessee Bank, N.A.,
Chattanooga, Tennessee and a National Vice Chairman of the United Jewish Appeal.
Mr. Lebovitz has previously served as a Trustee, Vice President (Southern
Division) and Chairman of the International Council of Shopping Centers
("ICSC").
STEPHEN D. LEBOVITZ has served as President and Secretary of the Company
since February 1999 and as a Director of the Company since the completion of its
initial public offering in November 1993. 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. He is
President of the Boston Jewish Family and Children's Service, a member of the
Board of Directors of the Combined Jewish Philanthropic, Boston, Massachusetts
and a member of the Board of Directors of the Children's Hospital Trust, Boston,
Massachusetts. He is a Trustee and Divisional Vice President of the ICSC.
Stephen D. Lebovitz is a son of Charles B. Lebovitz and a brother of Michael I.
Lebovitz.
CLAUDE M. BALLARD, CRE, M.A.I. has served as a Director of the Company
since the completion of its initial public offering and is Chairman of the
Compensation Committee and a member of the Audit and Nominating/Corporate
Governance Committees of the Board of Directors. Mr. Ballard has served as a
general partner, limited partner and senior consultant of Goldman Sachs & Co.
and as a Senior Vice President in the real estate division of the Prudential
Insurance Company of America. He is currently a Director of Quapaw Council, Boy
Scouts of America, Horizon Hotel Corp. and Research Solutions, Inc. Mr. Ballard
is a member of the Board of Directors of St. Vincent's Infirmary, Little Rock,
Arkansas. In 1999, the United States Tax Court determined that Mr. Ballard had
underpaid federal taxes and underreported income over a period of years ending
in 1989 as result of participation in transactions found by the Tax Court to
have involved serious financial improprieties. (Investment Research Associates,
Ltd. and Subsidiaries, et al v. Commissioner of Internal Revenue Service, T.C.
Memo 1999-407). Because of the nature of the transactions, the Tax Court upheld
the imposition of penalties under Internal Revenue Code Section 6663 and its
predecessors and the Tax Court's decision was upheld by the United States Court
of Appeals for the Eleventh Circuit on February 13, 2003. Mr. Ballard has paid
the taxes, penalties and interest at issue.
GARY L. BRYENTON joined the Company as a Director on January 31, 2001 in
accordance with the terms of the Jacobs Acquisition. Mr. Bryenton is a member of
the Company's Audit and Nominating/Corporate Governance Committees. Mr. Bryenton
is the executive partner of the law firm of Baker & Hostetler LLP. He currently
serves as Chairman of the Board of Trustees of Heidelberg College and is a
member of the Board of Directors of the Cleveland Orchestra, the National
Conference for Community and Justice, the Rock and Roll Hall of Fame and Museum
and Cleveland Tomorrow, Inc., a local executive group advising the city of
Cleveland, Ohio.
LEO FIELDS has served as a Director of the Company since the completion of
its initial public offering and is a member of the Executive Committee of the
Board of Directors. Mr. Fields is Co-Chairman of Weisberg & Fields, Inc., an
investment advisory firm he started in 1991. From 1984 through 1991, Mr. Fields
directed Leo Fields Interests, a private investment firm. He was affiliated with
Zale Corporation from 1947 until his retirement in 1984, serving, from 1981 to
1984, as Vice Chairman and a member of Zale's Executive Committee. He is
chairman of the Dallas Home for the Jewish Aged Endowment Foundation and a
Director of the M. B. and Edna Zale Foundation.
9
WINSTON W. WALKER has served as a Director of the Company since the
completion of its initial public offering. He is a member of the Compensation
and Nominating/Corporate Governance Committees of the Board of Directors and is
Chairman of the Company's Audit Committee. Mr. Walker served as President and
Chief Executive Officer of Provident Life and Accident Insurance Company of
America ("Provident") from 1987 until October 1, 1993, and served in various
other capacities with Provident from 1974 to 1987. Mr. Walker is a Director of
Olan Mills, Inc. of Chattanooga, Tennessee.
BEN S. LANDRESS serves as Executive Vice President - Management 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 directs the
day-to-day management of the Company's properties and is responsible for general
corporate administration. 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 Mr. Lebovitz as an Associate in establishing CBL's Predecessor.
RONALD L. FULLAM serves as Senior Vice President - Development of the
Company. He has held that position since January 1997. Prior to that time, Mr.
Fullam served as Vice President - Development of the Company. Mr. Fullam joined
Arlen's shopping center development division as a project manager in August 1977
and CBL's Predecessor as a Vice President upon its formation in 1978.
RONALD S. GIMPLE serves as Senior Vice President and General Counsel of the
Company. He has held these positions since January 1997. Mr. Gimple joined the
Company in 1994 as Vice President - Development. Prior to joining the Company,
Mr. Gimple served as a Vice President of The Edward J. DeBartolo Corporation,
from 1987 to 1994, and, prior to 1987, he served as General Counsel of Petrie
Store Corporation, Vice President and Real Estate Counsel of BATUS Retail Group
and Vice President and General Counsel of General Growth Company.
MICHAEL I. LEBOVITZ serves as Senior Vice President - Mall Projects of the
Company. He has 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 for
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 President of the Jewish Community
Federation of Greater Chattanooga, serves as Vice Chairman and a Board Member of
United Jewish Communities and is a Board Member of the Chattanooga United Way.
Michael I. Lebovitz is a son of Charles B. Lebovitz and a brother of Stephen D.
Lebovitz.
FARZANA K. MITCHELL serves as Senior Vice President - Finance of the
Company. She has held that position since September 2000. Prior to joining the
Company, Ms. Mitchell was an officer of Lend Lease Real Estate Investments in
Atlanta, Georgia, having joined that company in 1983 and during her tenure there
for 1994-1995, she served as Deputy Portfolio Manager for the Equitable Life
Assurance Society portfolio of real estate mortgages. From 1976 to 1982, Ms.
Mitchell served as Assistant Treasurer of IRT Property Company, a real estate
investment trust.
JERRY L. SINK, C.S.M. serves as Senior Vice President - Mall Management for
the Company. He has held that position since February 1998. Prior to that time,
Mr. Sink served as Vice President - Mall Management. Prior to joining the
Company, Mr. Sink served as Vice President of Retail Asset Management for
Equitable Real Estate, Chicago, Illinois, from January 1988 to June 1993 and
prior to June 1988, he was affiliated with General Growth Companies, Inc. as
Vice President of Management.
10
ERIC P. SNYDER serves as Senior Vice President and Director of Corporate
Leasing for the Company. He has held these positions since January 1997. Mr.
Snyder joined CBL's Predecessor as a project manager in 1978 and was promoted to
Vice President in 1984 and to Vice President and Director of Corporate Leasing
in 1992. From 1974 to 1978, Mr. Snyder was a leasing agent and project manager
for Arlen's shopping centers.
AUGUSTUS N. STEPHAS serves as Senior Vice President - Accounting and
Controller for the Company. He has held these positions since January 1997. Mr.
Stephas joined CBL's Predecessor in July 1978 as Controller and was promoted to
Vice President in 1984. From 1970 to 1978, Mr. Stephas was affiliated with the
shopping center division of Arlen, first as accountant and later as assistant
controller.
R. STEPHEN TINGLE serves as Senior Vice President - Community Center
Development for the Company. He has held that position since January 2000. Prior
to that time, Mr. Tingle served as Vice President and Director of Community
Center Development - Chattanooga Office. Mr. Tingle joined CBL's Predecessor in
1986 as a project manager for community and neighborhood shopping centers and
was promoted to Vice President of Development in 1988. From 1978 to 1986, Mr.
Tingle engaged in the practice of law.
CHARLES W.A. WILLETT, JR. serves as Senior Vice President - Real Estate
Finance for the Company. He has held that position since January 2002. Mr.
Willett was promoted to Vice President - Real Estate Finance in 1996 and held
that position until his promotion to Senior Vice President as stated above.
Prior to 1996, Mr. Willett participated in the Company's finance department and
he served in a similar capacity with CBL's Predecessor prior to 1993. Mr.
Willett joined CBL's Predecessor in 1978 and prior thereto, he was affiliated
with Arlen in its finance and accounting departments.
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
The Board of Directors has established standing Executive, Audit,
Compensation and Nominating/ Corporate Governance Committees. The Board of
Directors met eight times and took action by written consent two times during
2002. Each director attended more than 75% of the total number of Board meetings
and meetings of Board committees on which the director served at the time during
fiscal year 2002.
EXECUTIVE COMMITTEE. The Executive Committee is composed of Charles B.
Lebovitz (Chairman), John N. Foy and Leo Fields, who replaced Winston W. Walker
as a member of the Executive Committee during 2002. 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 Executive Committee met four times and took action by unanimous
written consent three times during 2002.
AUDIT COMMITTEE. The Audit Committee is composed of Winston W. Walker
(Chairman), Claude M. Ballard, William J. Poorvu and Gary L. Bryenton, all of
whom are Independent Directors. Mr. Walker replaced Leo Fields as Chairman of
the Audit Committee during 2002. The Audit Committee is responsible for the
engagement of independent public accountants and the plans and results of the
audit engagement. The Audit Committee approves audit and non-audit services
provided by the independent public accountants and the fees therefor and reviews
the adequacy of the Company's internal accounting controls as well as the
Company's accounting policies and results. The Audit Committee met seven times
during 2002.
11
COMPENSATION COMMITTEE. The Compensation Committee is composed of Claude M.
Ballard (Chairman), William J. Poorvu, Winston W. Walker and Martin J. Cleary,
all of whom are Independent Directors. The Compensation Committee reviews and
approves compensation programs generally and, specifically, salaries, bonuses,
stock awards and stock options for officers of the Company of the level of vice
president or higher. The Compensation Committee administers the CBL & Associates
Properties, Inc. 1993 Stock Incentive Plan (the "Stock Incentive Plan"). The
Compensation Committee met two times and took action by unanimous written
consent one time during 2002.
NOMINATING/CORPORATE GOVERNANCE COMMITTEE. The Company's Nominating/
Corporate Governance Committee was established by the Board of Directors in
October 2002 and is composed of William J. Poorvu (Chairman), Claude M. Ballard,
Gary L. Bryenton and Winston W. Walker, all of whom are Independent Directors.
The 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 Committee recommends candidates for
election to fill vacancies on the Board, including renominations of members
whose terms are due to expire. The Committee will consider candidates for Board
of Directors' seats proposed by stockholders. Any such proposals should be made
in writing to CBL & Associates Properties, Inc., 2030 Hamilton Place Blvd.,
Suite 500, CBL Center, Chattanooga, Tennessee, 37421-6000, Attention: Corporate
Secretary. The Nominating/Corporate Governance Committee held its first meeting
in February 2003.
COMPENSATION OF DIRECTORS
During 2002, each Director not employed by the Company (a "Non-Employee
Director") received from the Company an annual fee of $22,500. In addition to
the annual fee, each Non-Employee Director received a meeting fee of $1,000 for
each Board, Audit and Compensation Committee meeting attended and $500 for each
telephonic Board meeting attended and reimbursement of expenses incurred in
attending meetings. Each Non-Employee Director serving as a member of the
Executive Committee received from the Company a monthly fee of $500 in lieu of
meeting fees for his participation on the Executive Committee.
Effective as of January 1, 2003, fees to Non-Employee Directors were
increased such that each Non-Employee Director shall receive from the Company an
annual fee of $25,000 and a fee of $1,500 for each Board, Compensation and
Nominating/Corporate Governance Committee meeting attended. In addition, but
with the exception of the Non-Employee Director who is Chairman of the Audit
Committee, each Non-Employee Director shall receive from the Company a fee of
$1,500 for each Audit Committee meeting attended. Each Non-Employee Director
shall receive a fee of $500 for each telephonic Board meeting attended plus
reimbursement of expenses incurred in attending meetings. Effective as of
January 1, 2003, each Non-Employee Director serving as a member of the Executive
Committee and the Non-Employee Director serving as Chairman of the Audit
Committee shall receive from the Company a monthly fee of $750 in lieu of
meeting fees for their participation on the Executive and Audit Committees.
On December 31 of each fiscal year of the Company, each Non-Employee
Director automatically receives an annual grant of options to purchase 500
shares of Common Stock having an exercise price equal to 100% of the fair market
value of the shares of Common Stock on the date of grant of such option. The
options granted to the Non-Employee Directors on December 31, 2002 have an
exercise price equal to $39.80 per share (based upon the average of the high and
low sales prices of the Common Stock on the New York Stock Exchange ("NYSE") on
December 31, 2002, the last trading day of 2002). Each holder of a Non-Employee
Director option granted pursuant to this arrangement also has the same rights as
other holders of options in the event of a change in control. Options granted to
the Non-Employee Directors (i) shall have a term of 10 years from date of grant,
(ii) are 100% vested upon grant, (iii) are non-forfeitable prior to the
expiration of the term except upon the Non-Employee Director's conviction for
any criminal activity involving the Company or, if non-exercised, within one
year following the date the Non-Employee Director ceases to be a director of the
Company, and (iv) are non-transferable. In addition, any person who becomes a
Non-Employee Director will receive an initial grant of 500 shares of Common
Stock upon joining the Board of Directors. The transfer of such shares is
restricted during the Non-Employee Director's term and for one year thereafter
pursuant to the Stock Incentive Plan.
12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information available to the Company as of
March 10, 2003, 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 person is the Company's
address.
Number of Rule 13d-3 Fully-Diluted
Shares(1) Percentage(1) Percentage(2)
------------- -------------- ---------------
Cohen & Steers Capital Management, Inc.(3)............ 2,397,775 8.03% 4.32%
757 Third Avenue
New York, New York 10017-2013
FMR Corporation (4) .................................. 1,747,949 5.85% 3.15%
82 Devonshire St.
Boston, Massachusetts 02109
CBL & Associates, Inc.("CBL's Predecessor")(5)........ 8,805,243 23.73% 14.02%
Charles B. Lebovitz(6)................................ 9,803,929 25.74% 15.37%
John N. Foy(7)........................................ 516,369 1.71% *
Stephen D. Lebovitz(8)................................ 558,860 1.84% *
Eric P. Snyder(9)..................................... 164,216 * *
Augustus N. Stephas(10)............................... 86,231 * *
Claude M. Ballard(11)................................. 38,500 * *
1800 Deerfield Road
Dripping Springs, Texas 78620
William J. Poorvu(11)................................. 25,393 * *
c/o Investment Resource Group
44 Brattle Street
Cambridge, Massachusetts 02138
Winston W. Walker(11)................................. 48,000 * *
13450 N. Kachina Drive
Tucson, Arizona 85737
Leo Fields(12)........................................ 64,300 * *
c/o Weisberg & Fields, Inc.
8750 North Central Expressway
Suite 1010
Dallas, Texas 75231-6409
Gary L. Bryenton(11).................................. 2,100 * *
Baker & Hostetler LLP
3200 National City Center
1900 East 9th Street
Cleveland, Ohio 44114-3485
Martin J. Cleary (11)(13)............................. 1,500 * *
619 Ocean Avenue
Sea Girt, New Jersey 08750
All executive officers and directors as a group (19 12,011,931 30.31% 18.39%
persons)..............................................
* - Less than 1%
13
(1) The Company conducts all of its business activities through CBL &
Associates Limited Partnership, a Delaware limited partnership (the
"Operating Partnership"). Pursuant to the second amended and restated
partnership agreement of the Operating Partnership (the "Partnership
Agreement"), each of the partners of the Operating Partnership, which
include, among others, CBL's Predecessor and certain of the executive
officers named in this Proxy Statement, has the right ("CBL Rights") to
exchange all or a portion of its common partnership units in the Operating
Partnership for shares of Common Stock or their cash equivalent, at the
Company's election. Additionally, on January 31, 2001 and in March, 2002,
the Operating Partnership issued to certain affiliates of Jacobs Realty
Investors Limited Partnership 12,358,187 and 499,730, respectively, special
common units of the Operating Partnership ("SCUs"). SCUs may, at any time
after the earlier of (i) January 31, 2004, or (ii) the death of the
beneficial owner of the SCUs (the "Exchange Date"), be exchanged for cash,
shares of the Company's Common Stock (on a one-for-one basis) or any
combination of cash or shares of Common Stock, 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 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 stockholder. Therefore,
percentage ownership of the Common Stock is computed based on the sum of
(i) 29,869,905 shares of Common Stock actually outstanding as of March 10,
2003, (ii) 8,549,359 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) and (iii) 1,212,760 shares of
Common Stock that may be acquired within 60 days of March 10, 2003 upon the
exercise of outstanding options. Amounts shown were determined without
regard to applicable Ownership Limits. Because of the restriction on
exchange of SCUs prior to the Exchange Date, percentage ownership of Common
Stock is computed without taking into account any exchange of SCUs for
shares of Common Stock.
(2) Calculated based on 29,869,905 shares of Common Stock outstanding and
assuming full exercise of all CBL Rights for shares of Common Stock by all
holders of common units of the Operating Partnership as well as the
exchange of all SCUs for shares of Common Stock (in each case, without
regard to applicable Ownership Limits) for an aggregate of 55,552,900
shares of Common Stock. Calculation does not include 2,510,377 shares of
Common Stock subject to outstanding stock options other than, with respect
to each person whose fully-diluted percentage is being computed, shares
which may be acquired within 60 days of March 10, 2003 upon the exercise of
outstanding options.
(3) In a Schedule 13G/A filed on February 3, 2003 by Cohen & Steers Capital
Management, Inc. ("Cohen & Steers"), Cohen & Steers reported that as of
December 31, 2002, it beneficially owned 2,397,775 shares of Common Stock,
or 8.03% of the total shares outstanding as of March 10, 2003. Cohen &
Steers reported that it possesses sole voting power with respect to
2,052,775 shares of Common Stock and sole dispositive power with respect to
2,397,775 shares of Common Stock.
(4) In a Schedule 13G filed on February 13, 2003 by FMR Corporation ("FMR"),
FMR reported that as of December 31, 2002, it beneficially owned 1,747,949
shares of Common Stock, or 5.85% of the total shares outstanding as of
March 10, 2003. FMR reported that it possesses sole voting power with
respect to 661,250 shares of Common Stock and sole dispositive power with
respect to 1,747,949 shares of Common Stock.
(5) Includes (i) 1,470,054 shares of Common Stock owned directly, (ii)
7,237,823 shares of Common Stock that may be acquired upon the exercise of
CBL Rights and (iii) 97,366 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.
14
(6) Includes (i) 92,099 shares of Common Stock owned directly, (ii) 3,571
shares owned by Mr. Lebovitz' wife, 14,119 shares held in trusts for the
benefit of his step-daughter and grandchildren (of which Mr. Lebovitz
disclaims beneficial ownership) and 50,800 shares that may be acquired upon
the exercise of CBL Rights and held in a trust for the benefit of Mr.
Lebovitz, (iii) 352,903 shares of Common Stock that may be acquired upon
the exercise of CBL Rights, (iv) 257,000 shares of Common Stock subject to
options granted under the Stock Incentive Plan that are currently
exercisable or that become exercisable with respect to such shares within
sixty days of March 10, 2003, (v) 8,805,243 shares of Common Stock
beneficially owned by CBL's Predecessor, which Mr. Lebovitz may be deemed
to beneficially own by virtue of his control of CBL's Predecessor, and (vi)
228,194 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) 150,128 shares of Common Stock owned directly, (ii) 189,241
shares of Common Stock that may be acquired upon the exercise of CBL Rights
and (iii) 177,000 shares of Common Stock subject to options granted under
the Stock Incentive Plan that are currently exercisable or that become
exercisable with respect to such shares within sixty days of March 10,
2003.
(8) Includes (i) 118,924 shares owned directly, (ii) 238,936 shares of Common
Stock that may be acquired upon the exercise of CBL Rights and (iii)
201,000 shares of Common Stock subject to options granted under the Stock
Incentive Plan which are currently exercisable or that become exercisable
with respect to such shares within sixty days of March 10, 2003.
(9) Includes (i) 9,500 shares of Common Stock owned directly, (ii) 6,283 shares
of Common Stock owned by Mr. Snyder's wife and 994 shares of Common Stock
owned by Mr. Snyder's children, (iii) 48,439 shares of Common Stock that
may be acquired upon the exercise of CBL Rights and (iv) 99,000 shares of
Common Stock subject to options granted under the Stock Incentive Plan that
are currently exercisable or that become exercisable with respect to such
shares within sixty days of March 10, 2003.
(10) Includes (i) 4,530 shares of Common Stock owned directly, (ii) 31 shares of
Common Stock owned by Mr. Stephas' wife, (iii) 27,670 shares of Common
Stock that may be acquired upon the exercise of CBL Rights and (iv) 54,000
shares of Common Stock subject to options granted under the Stock Incentive
Plan that are currently exercisable or that become exercisable with respect
to such shares within sixty days of March 10, 2003.
(11) Includes 4,500 shares of Common Stock subject to immediately exercisable
stock options granted to each of Mr. Ballard, Mr. Poorvu and Mr. Walker on
December 31 of each of the years 1994 through 2002 in the amounts of 500
stock options per grant and, as to Mr. Bryenton and Mr. Cleary, 1,000
shares of Common Stock subject to immediately exercisable stock options
granted to each of Mr. Bryenton and Mr. Cleary on December 31 of each of
the years 2001 and 2002. All such grants were pursuant to the Stock
Incentive Plan.
(12) Includes (i) 23,500 shares of Common Stock owned by a family limited
partnership created by Mr. Fields and his wife on January 1, 1997 and in
which Mr. Fields serves as a general partner, (ii) 40,300 shares of Common
Stock held by members of Mr. Fields' family, with respect to which Mr.
Fields acts as investment adviser and of which Mr. Fields disclaims
beneficial ownership, and (iii) 500 shares of Common Stock subject to
immediately exercisable stock options granted under the Stock Incentive
Plan.
(13) Does not include 220,576 SCUs beneficially owned by Mr. Cleary.
15
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 Securities and
Exchange Commission ("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 stockholders 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 reports were
required to be filed, the Company believes that during the fiscal year ended
December 31, 2002 all officers, directors and ten percent stockholders complied
with the filing requirements applicable to them except that six executive
officers failed to timely file one Statement of Changes in Beneficial Ownership
on Form 4 in November 2002 following implementation of the accelerated filing
deadlines pursuant to the Sarbanes-Oxley Act of 2002. Statements of Changes in
Beneficial Ownership on Form 4 were subsequently filed on behalf of these
individuals within two days following the deadline.
16
EXECUTIVE COMPENSATION
The following table sets forth information regarding the compensation of
the Company's Chief Executive Officer and its next four most highly compensated
executive officers (these four and Charles B. Lebovitz being herein referred to
as the "named executive officers") for the Company's fiscal year ended December
31, 2002 and for the Company's fiscal years ending December 31, 2001 and 2000:
SUMMARY COMPENSATION TABLE(1)
============================================================================================================
Long Term Compensation
Annual Compensation Awards
------------------------ --------------------------
Restricted Securities All
Stock Underlying Other
Name and Principal Award(s) Options Compensation
Position(2) Year Salary($) Bonus($) ($)(3) (#) ($)
-------------------------- ----- --------- --------- ----------- ----------- -------------
Charles B. Lebovitz, 2002 496,488 -- 375,000 16,000 12,506(4)
Chairman of the Board and
Chief Executive Officer
2001 482,027 -- 325,000 16,000 9,466(4)
2000 467,987 -- 275,000 16,000 9,197(4)
------------------------------------------------------------------------------------------------------------
John N. Foy, 2002 406,320 -- 400,000 16,000 12,298(4)
Vice Chairman of the
Board, Chief 2001 386,320 -- 375,000 16,000 9,446(4)
Financial Officer
and Treasurer 2000 366,320 -- 375,000 16,000 9,197(4)
------------------------------------------------------------------------------------------------------------
Stephen D. Lebovitz 2002 375,000 -- 400,000 16,000 11,506(4)
Director, President and
Secretary 2001 325,000 300,000 75,000 16,000 9,466(4)
2000 282,223 -- 400,000 16,000 9,197(4)
------------------------------------------------------------------------------------------------------------
Eric P. Snyder 2002 351,833 225,000(5) -- 9,000 5,702(4)
Senior Vice President
and Director of 2001 331,833 200,000(5) -- 9,000 6,878(4)
Corporate Leasing
2000 311,000 150,000(5) -- 9,000 6,628(4)
------------------------------------------------------------------------------------------------------------
Augustus N. Stephas 2002 374,100 150,000 -- 9,000 5,702(4)
Senior Vice
President -- 2001 354,100 125,000 -- 9,000 6,878(4)
Accounting and Controller
2000 334,000 100,000 -- 9,000 6,628(4)
------------------------------------------------------------------------------------------------------------
-----------------------
(1) All amounts shown represent compensation paid to the named executive
officers by the Management Company.
(2) The position shown represents the individual's position with the Company
and the Management Company.
(3) Amounts shown are based upon the closing price of the Common Stock on the
NYSE as of the date of grant of the restricted stock awards. As of December
31, 2002, an aggregate of 83,353 shares of restricted stock with a value of
$3,338,288 had been awarded and were outstanding with respect to the named
executive officers. Dividends, to the extent paid on the Company's Common
Stock, will be paid on all outstanding shares of restricted stock.
17
(4) For fiscal years 2002, 2001 and 2000, amount shown represents term life
insurance premiums paid by the Management Company and matching
contributions by the Management Company under the CBL & Associates
Management, Inc. 401(k) Profit Sharing Plan and Trust (the "401(k) Plan").
For fiscal year 2002, such amounts for each named executive officer were as
follows: Charles B. Lebovitz - $7,506 in insurance premiums, $5,000 in
401(k) matching contributions; John N. Foy - $7,500 in insurance premiums,
$4,792 in 401(k) matching contributions; Stephen D. Lebovitz - $7,506 in
insurance premiums, $4,000 in 401(k) matching contributions; Eric P. Snyder
- $702 in insurance premiums, $5,000 in 401(k) matching contributions; and
Augustus N. Stephas - $702 in insurance premiums, $5,000 in 401(k) matching
contributions.
(5) Represents amount deferred at Mr. Snyder's election pursuant to a
non-qualified deferred compensation arrangement between Mr. Snyder and the
Company.
The following table sets forth information regarding grants of stock
options made during fiscal year 2002 to each of the named executive officers:
Option Grants in Last Fiscal Year
====================================================================================================================
Individual Grants
--------------------------------------------------------------------------------------------------------------------
Number of Potential Realizable Value
Securities % of Total at Assumed Annual Rates of
Underlying Options Exercise Stock Price Appreciation
Options Granted to or Base For Option Term(4)
Granted Employees in Price Expiration -----------------------------
Name (#)(1) Fiscal Year(2) ($/Sh)(3) Date 5% 10%
--------------------------- --------------- --------------- ------------ ------------- ------------- ---------------
Charles B. Lebovitz 16,000 3.75% 36.5350 05/07/12 $367,627 $931,638
John N. Foy 16,000 3.75% 36.5350 05/07/12 367,627 931,638
Stephen D. Lebovitz 16,000 3.75% 36.5350 05/07/12 367,627 931,638
Eric P. Snyder 9,000 2.11% 36.5350 05/07/12 206,790 524,046
Augustus N. Stephas 9,000 2.11% 36.5350 05/07/12 206,790 524,046
-------------------
(1) All options granted to the named executive officers were granted pursuant
to the Stock Incentive Plan. All options granted to the named executive
officers were granted on May 7, 2002 and become exercisable in five equal
annual installments beginning May 7, 2003.
(2) Percentages listed are based on options to purchase a total of 426,750
shares of Common Stock granted by the Company to certain of its officers
and employees during fiscal year 2002. Calculations do not include options
to purchase an aggregate of 3,000 shares of Common Stock granted to the
following directors in fiscal year 2002 pursuant to the Stock Incentive
Plan: Claude M. Ballard, Gary L. Bryenton, Martin J. Cleary, Leo Fields,
William J. Poorvu and Winston W. Walker.
(3) The exercise price is payable in cash.
(4) Potential realizable value is calculated based on an assumption that the
fair market value of the Common Stock appreciates at the annual rates shown
(5% and 10%), compounded annually, from the date of grant until the end of
the option term (10 years). The 5% and 10% assumed rates are mandated by
the SEC for purposes of calculating realizable value and do not represent
the Company's estimate or projection of future stock prices.
18
AGGREGATED OPTION EXERCISES IN 2002 AND YEAR-END OPTION VALUES
The following table provides information regarding the number and value of
options held by each of the named executive officers at December 31, 2002.
Except for the exercise of certain options by Augustus N. Stephas in 2002 noted
below, no options were exercised by any named executive officer during the
Company's 2002 fiscal year.
Number of Securities
Underlying Unexercised Options Value of Unexercised
Shares at In-the-Money Options at
Acquired December 31, 2002 December 31, 2002(1)
on Value -------------------------------- --------------------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
------------------------- ------------ ------------- --------------- ---------------- ---------------- ---------------
Charles B. Lebovitz -0- -0- 241,200 47,800 $4,605,370 $518,806
John N. Foy -0- -0- 162,600 46,400 2,980,304 496,468
Stephen D. Lebovitz -0- -0- 185,000 48,000 3,345,223 521,997
Eric P. Snyder -0- -0- 90,000 27,000 1,663,895 293,623
Augustus N. Stephas 9,000 145,800(2) 45,000 27,000 751,520 293,623
(1) Amounts listed are based upon the $40.05 closing price for the Common
Stock on the NYSE on December 31, 2002 (last trading day in 2002).
(2) Mr. Stephas exercised options to acquire 9,000 shares on March 6,
2002.
NON-COMPETITION ARRANGEMENTS
Each of Charles B. Lebovitz, John N. Foy 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, John N. Foy and
Stephen D. Lebovitz are, however, permitted to hold certain investments which
they owned prior completion of the Company's initial public offering in November
1993.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of Claude M.
Ballard, Martin J. Cleary, William J. Poorvu and Winston W. Walker, with Mr.
Ballard serving as Chairman. None of the members of the Compensation Committee
are or have been officers or employees of the Company and each member of the
Compensation Committee is an Independent Director.
No executive officer of the Company served on any board of directors or
compensation committee of any entity (other than the Company or its
subsidiaries) with which any member of the Compensation Committee is affiliated.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
GENERAL. The Company is a self-managed, self-administered, fully-integrated
real estate company which is engaged in the ownership, marketing, management,
leasing, expansion, development, redevelopment, acquisition and financing of
regional malls and community and neighborhood centers.
The 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"). Through the referenced
subsidiaries, the Company currently holds a 1.69% sole general partner interest
and a 52.07% limited partner interest in the Operating Partnership. See "Certain
Relationships and Related Transactions - Partnership Agreement; CBL Rights". The
Company conducts substantially all of its business through the Operating
Partnership. To comply with certain technical requirements of the Internal
Revenue Code of 1986, as amended (the "Code") applicable to real estate
investment trusts, the Operating Partnership carries out the Company's property
management and development activities through the Management Company.
19
The Compensation Committee determines all matters related to the
compensation of all officers of the Company of the level of vice president or
higher and administers the Stock Incentive Plan.
PHILOSOPHY. It is the philosophy of the Company to ensure that executive
compensation be directly linked to financial objectives that the Company
believes are primary determinates of stockholder value over time. The
Compensation Committee's objectives in administering the Company's executive
compensation plan are to ensure that pay levels and incentive compensation are
(i) competitive in attracting and retaining the best personnel, (ii) properly
linked to the Company's performance, and (iii) simple in design. To fulfill
these objectives, the compensation plan for executives includes base salary,
performance based discretionary bonuses and periodic grants of stock awards and
stock options pursuant to the Stock Incentive Plan, and the Amended and Restated
Plan if approved by the stockholders. Non-executive employees of the Company are
also eligible to participate in the Stock Incentive Plan, and will be eligible
to participate in the Amended and Restated Plan if approved by the stockholders.
The Company believes that the ability to use the Stock Incentive Plan, and
the Amended and Restated Plan if approved by the stockholders, to attract and
retain key personnel has substantial value and will be essential to the growth
of the Company. The stock option and stock award elements of compensation are
designed to encourage and create ownership and retention of the Company's stock
by key employees in order to align their long-range interests with those of
stockholders and to allow the opportunity for key employees to build, through
the achievement of corporate goals, a meaningful ownership stake in the Company.
FINANCIAL CRITERIA. The Compensation Committee, based on recommendations
made by the Company, implemented an executive compensation program in 1994
pursuant to which officers of the level of vice president and higher received
during fiscal year 2002, in addition to a base salary, incentive compensation
consisting of cash, stock options and stock awards for the achievement of target
levels of performance determined by the Compensation Committee. The amount of
this additional compensation was determined for each executive officer based
upon his or her contribution to the overall success of the Company. Utilizing
the program's basic theory for incentive compensation, cash, stock options and
stock awards were granted during fiscal year 2002 to other employees of the
Company as performance-based incentive compensation.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. Charles B. Lebovitz was paid a
base salary of $496,488 for 2002 which sum included 3,523 shares of Common Stock
paid to Mr. Lebovitz as part of his salary. Mr. Lebovitz receives annual reviews
for salary increases and discretionary bonuses. Additionally, Mr. Lebovitz
participates in the Company's incentive plans, including the Stock Incentive
Plan. During fiscal year 2002 and pursuant to the Stock Incentive Plan, Mr.
Lebovitz received options to purchase 16,000 shares of Common Stock and
restricted stock awards of an aggregate of 10,317 shares of Common Stock with a
value of $375,000 on grant. The awards were determined upon the same criteria as
applied to the other executive officers of the Company.
POLICY REGARDING QUALIFYING COMPENSATION. Section 162(m) of the Code
imposes a $1,000,000 ceiling on tax-deductible remuneration paid to any of the
five most highly compensated executive officers of a publicly-held corporation.
The limitation does not apply to remuneration that qualifies as
performance-based compensation in Section 162(m) of the Code. Options granted
under the Stock Incentive Plan qualify as "performance-based compensation"
exempt from the deductibility limitations of Section 162(m) of the Code. All
other compensation to the named executive officers is below the $1,000,000
per-executive ceiling and was fully deductible by the Company.
COMPENSATION COMMITTEE
Claude M. Ballard (Chairman)
Martin J. Cleary
William J. Poorvu
Winston W. Walker
20
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The information contained in this report shall not be deemed to be
"soliciting material" or to be "filed" with the SEC, nor shall such information
or report be deemed incorporated by reference into any future filing by the
Company under the Securities Act of 1933, as amended, or the Exchange Act,
except to the extent that the Company specifically incorporates it by reference
in such filing.
The Audit Committee of the Board of Directors of the Company is composed of
four Independent Directors (Winston W. Walker, Chairman, Claude M. Ballard, Gary
L. Bryenton and William J. Poorvu) and operates under a written charter adopted
by the Board of Directors on June 9, 2000. Each of the members of the Audit
Committee is "independent" as defined in Sections 303.01(B)(2)(a) and (3) of the
listing standards of the New York Stock Exchange as currently applicable.
Management is responsible for the Company's internal controls and financial
reporting process. The Company's independent accountants are responsible for
performing an independent audit of the Company's financial statements in
accordance with auditing standards generally accepted in the United States and
for issuing a report thereon. The Audit Committee's responsibility is to monitor
and oversee these processes.
In this context, the Audit Committee has met and held discussions with
Management and the Company's independent accountants. Management reported to the
Audit Committee that the Company's consolidated financial statements for the
Company's 2002 fiscal year were prepared in accordance with accounting
principles generally accepted in the United States, and the Audit Committee has
reviewed and discussed these consolidated financial statements with Management
and the Company's independent accountants. The Audit Committee discussed with
the independent accountants the matters required to be discussed by Statement on
Auditing Standards No. 61 (Communications with Audit Committee), as amended.
The Company's independent accountants also provided to the Audit Committee
the written disclosures and the letter required by Independence Standards No. 1
(Independence Discussions with Audit Committees) and the Audit Committee
discussed with the independent accountants their firm's independence. The Audit
Committee considered whether the provision of services by the independent
accountants (other than audit services) is compatible with maintaining the
independent accountants' independence.
Pursuant to the mandates of the Sarbanes-Oxley Act of 2002, the Company's
Board of Directors has determined that Winston W. Walker, an Independent
Director and Chairman of the Audit Committee, qualifies as an "audit committee
financial expert" as such term is defined by the SEC.
Based on the Audit Committee's review and discussions referred to above,
the Audit Committee recommended that the Board of Directors include the
Company's audited consolidated financial statements in the Company's Annual
Report on Form 10-K for the year ended December 31, 2002 filed with the
Securities and Exchange Commission and to provide in such Annual Report on Form
10-K the disclosure of Winston W. Walker as an "audit committee financial
expert".
AUDIT COMMITTEE
Winston W. Walker (Chairman)
Claude M. Ballard
Gary L. Bryenton
William J. Poorvu
21
PERFORMANCE GRAPH
The graph set forth below compares the percentage change in the cumulative
stockholder return on the Common Stock with the cumulative total return of the
Standard & Poor's 500 Total Return Index ("S&P 500"), the Russell 2000 index of
small companies ("Russell 2000") and NAREIT Equity REIT Total Return Index for
the period commencing December 31, 1997 through December 31, 2002. The following
graph assumes that the value of the investment in the Company and the indices
was $100 at the beginning of the period and that dividends were reinvested. The
stock price performance presented below is not necessarily indicative of future
results:
[OBJECT OMITTED]
Period Ending
---------------------------------------------------------------------
Index 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
----------------------------------------------------------------------------------------------------------------
CBL & Associates Properties, Inc. 100.00 112.49 97.80 130.67 175.21 236.54
S&P 500 100.00 128.55 155.60 141.42 124.63 96.95
Russell 2000 100.00 97.45 118.17 114.60 117.45 93.39
NAREIT Equity REIT Index 100.00 82.50 78.69 99.44 113.29 118.08
22
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MANAGEMENT AGREEMENT
The Company is party to a management agreement with the Management Company
pursuant to which the Management Company renders management and administrative
services with respect to the Company's properties. The Company, through the
Operating Partnership, owns 100% of the preferred stock and 5% of the common
stock of the Management Company and Charles B. Lebovitz, his family and certain
of the Associates own 95% of the common stock of the Management Company. Through
the ownership of 100% of the preferred stock of the Management Company, the
Company enjoys substantially all of the economic benefits of the Management
Company's business. The Management Company also provides management services for
certain properties owned by CBL's Predecessor and certain other third parties
for which the Management Company is paid a management fee. See "Retained
Property Interests."
PARTNERSHIP AGREEMENT; CBL RIGHTS
The Company entered into the Operating Partnership Agreement with CBL's
Predecessor. The Company, through subsidiaries, serves as the sole general
partner of the Operating Partnership and owns, as of March 10, 2003, 29,869,905
common partnership units, representing a 1.69% interest as the sole general
partner and a 52.08% interest as a limited partner for an aggregate 53.77%
interest in the Operating Partnership. CBL's Predecessor owns 7,335,189 common
partnership units, representing a 13.2% limited partner interest in the
Operating Partnership. Certain executive and senior officers also own common
partnership units.
Pursuant to the Operating Partnership Agreement, the limited partners were
granted CBL Rights, consisting of the rights to exchange all or a portion of
their common partnership units in the Operating Partnership for shares of Common
Stock or their cash equivalent, at the Company's election. The CBL Rights may be
exercised at any time and from time to time to the extent that, upon exercise of
the CBL Rights, the exercising party shall not beneficially or constructively
own shares of Common Stock in excess of the applicable share ownership limits
set forth in the Company's Certificate of Incorporation. The Company, however,
may not pay in shares of Common Stock to the extent that this would result in a
limited partner beneficially or constructively owning in the aggregate more than
its applicable Ownership Limit or otherwise jeopardize, in the opinion of
counsel to the Company, the Company's qualification as a real estate investment
trust for tax purposes.
The number of shares of Common Stock received by the limited partners of
the Operating Partnership upon exercise of CBL Rights will be based upon the
equivalent number of partnership units owned by the limited partners on a
one-for-one basis and the amount of cash received by the limited partners upon
such exercise, if the Company elects to pay cash, will be based upon the trading
price of the shares of Common Stock at the time of exercise.
CBL Rights will expire in November 2043 if not exercised prior to that
date.
RETAINED PROPERTY INTERESTS
CBL's Predecessor owns interests in outparcels at certain of the Company's
malls and a minority interest in one mall, the majority interest of which is
owned by a third party. Certain members of Charles B. Lebovitz's family and his
father's estate continue to own four community and neighborhood centers and one
tract of vacant land. The properties retained by CBL's Predecessor and the
properties owned by the Lebovitz family are managed and leased by the Management
Company which receives a fee for its services. During fiscal year 2002, CBL's
Predecessor and the Lebovitz family paid the Management Company approximately
$128,000 under such arrangement.
23
AFFILIATED ENTITIES
Certain executive officers of CBL's Predecessor collectively have a
non-controlling interest in a major national construction company that built
substantially all of the properties developed by the Company and is currently
building the Company's projects under construction. Charles B. Lebovitz is also
a director of the construction company. The majority interest in the
construction company is held by the members of its senior management, none of
whom are affiliated with CBL's Predecessor or the Company. As of December 31,
2002, the Company had 20 active contracts (including contracts in respect of
each of the construction properties) with such construction company having
aggregate value of approximately $157.5 million. During fiscal year 2002, the
Company paid approximately $96.2 million to this construction company. The
Company's Audit Committee reviews the relationship between the Company and the
referenced construction company pursuant to procedures established in November
1994. These procedures include an ongoing review by the Company's independent
accountant of a cross section of the Company's contracts with the referenced
construction company for, among other things, the provisions for allocation of
cost savings between owner and contractor.
The construction company and CBL's Predecessor own all of the interests of
a partnership that owns two aircraft and a fractional interest in another
aircraft used by the personnel of the Company and the construction company. Each
partner contributes equally to fixed costs and shares variable costs through an
hourly charge based on usage. The Company reimburses the partnership for costs
on an hourly basis associated with use of the aircraft relating to the business
of the Company. During fiscal year 2002, the Company paid approximately $1.5
million as reimbursement for operating expenses pursuant to such arrangement.
The Bylaws provide that any contract or transaction between the Company or
the Operating Partnership and one or more directors or officers of the Company
or between the Company or the Operating Partnership and any other entity in
which one or more of its directors or officers are directors or officers, or
have a financial interest, must be approved by disinterested directors or
stockholders after the material facts as to the relationship or interest and as
to the contract or transaction are disclosed or are known to them.
CERTAIN LEASES
Certain officers and certain Company employees are partners in partnerships
that lease 40 spaces representing approximately 47,000 square feet in 26 of the
Company's malls as tenants. Such spaces are operated as food service and
entertainment establishments. Management believes that, at the time these leases
were entered into, they provided for rental payments at market rates and terms.
Shumacker Witt Gaither & Whitaker, P.C., local counsel to the Company and
CBL's Predecessor, leases 3,497 square feet of office space at the Company's
office building. Palmer & Cay of GA, Inc., the Company's insurance consultant,
leases 1,695 square feet of office space at the Company's office building. The
construction company also leases 20,637 square feet of office space at the
Company's office building. Management believes that, at the time these leases
were entered into, they provided for rental payments at market rates and terms.
OTHER
Charles B. Lebovitz, certain members of his family, certain of the
Associates, a partnership consisting of certain of the Associates, and Eric P.
Snyder have personally guaranteed an aggregate of $12.99 million of the debt of
the Operating Partnership. Such guarantee is payable only if, and to the extent
that, proceeds from a foreclosure sale of all assets of the Operating
Partnership are not in excess of the guarantee.
24
Charles B. Lebovitz is currently an advisory director of First Tennessee
Bank, N.A., Chattanooga, Tennessee ("First Tennessee"). The Company is currently
maintaining an $80 million line of credit from First Tennessee that matures in
2004. There was approximately $31 million outstanding on this line of credit as
of December 31, 2002. First Tennessee also provides certain cash management
services to the Company. In the future, the Company or the Operating Partnership
may, in the ordinary course of business, engage in other transactions with First
Tennessee on competitive terms.
John N. Foy is currently an advisory director of AmSouth Bank of Tennessee
("AmSouth"). The Company is currently maintaining a $5 million line of credit
from AmSouth that matures in 2004. There was approximately $1.14 million of
letters of credit drawn on this line of credit as of December 31, 2002. In
addition, AmSouth is a 25% participant in the First Tennessee line of credit
referred to in the immediately preceding paragraph and provides certain cash
management services to the Company and also serves as the administrator of the
Management Company's 401(k) Plan. In the future, the Company or the Operating
Partnership may, in the ordinary course of business, engage in other
transactions with AmSouth on competitive terms.
25
APPROVAL OF AMENDMENT TO THE
CBL & ASSOCIATES PROPERTIES, INC.
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
BACKGROUND
The Company's Certificate of Incorporation provides that the total number
of shares of all classes of equity stock that the Company shall have the
authority to issue is One Hundred Million (100,000,000) shares, consisting of
(i) Five Million (5,000,000) shares of preferred stock, par value $.01 per share
(the "Preferred Stock"), and (ii) Ninety-Five Million (95,000,000) shares of
common stock, par value $.01 per share (the "Common Stock"). As of March 10,
2003, there were 29,869,905 shares of Common Stock issued and outstanding and
there were 4,675,000 shares of Preferred Stock issued and outstanding
(consisting of 2,675,000 shares of Series A Preferred Stock and 2,000,000 shares
of Series B Preferred Stock), thus leaving a balance of 325,000 additional
shares of Preferred Stock that the Company is authorized to issue. On February
4, 2003, the Board of Directors passed a resolution recommending that the
stockholders approve an amendment to the Company's Certificate of Incorporation
in order to increase the number of shares of the Company's authorized Preferred
Stock from 5,000,000 to 15,000,000. The text of the proposed amendment to the
Company's Certificate of Incorporation is set forth on Exhibit A hereto.
PURPOSE AND EFFECT OF THE AMENDMENT
The increase in the authorized number of shares of Preferred Stock will not
have any immediate effect on the rights of existing stockholders. While the
Company has no immediate plans to issue additional shares of Preferred Stock,
the Board of Directors believes that the increased number of authorized shares
of Preferred Stock contemplated by the proposed amendment is advisable because
it will provide the Company with greater flexibility in connection with possible
future transactions or other corporate purposes. In adopting its resolution on
February 4, 2003 recommending that the stockholders approve the amendment to the
Company's Certificate of Incorporation as noted above, the Board of Directors
has stated that the authorization to increase the number of shares of Preferred
Stock is intended for capital formation purposes rather than anti-takeover
purposes. Nonetheless, the availability of such additional shares of authorized
Preferred Stock and the future issuance of Preferred Stock with voting or other
rights or preferences may have the effect of deterring, impeding or delaying
changes in control or management of the Company.
If the amendment is approved by the stockholders, the Board of Directors
does not intend to solicit further stockholder approval prior to the issuance of
additional shares of Preferred Stock, except as may be required by applicable
law. According to the Company's Certificate of Incorporation, the Board of
Directors is authorized to provide for the issuance of shares of Preferred Stock
in series and to establish from time to time the number of shares to be included
in each such series, to fix the designation, powers, preferences and rights of
the shares of each such series and the qualifications, limitations and
restrictions thereof. When issued, the additional shares of Preferred Stock may
be subject to dividends, conversion rates, voting rights, redemption prices,
maturity dates and similar matters, if any, as shall be determined by the Board
of Directors.
26
VOTES NECESSARY TO APPROVE THE PROPOSAL
Adoption of the amendment to the Company's Certificate of Incorporation
requires (i) the affirmative vote of the holders of a majority of the Company's
issued and outstanding shares of Common Stock, voting as a class, and (ii) the
affirmative vote of the holders of a majority of the total votes entitled to be
cast by the Company's issued and outstanding shares of Preferred Stock, voting
as a class. Each share of Common Stock is entitled to one vote with respect to
those matters upon which such share is to be voted. Each share of Preferred
Stock is entitled to one vote for each $25 of stated liquidation preference with
respect to those matters upon which such share is to be voted, so that each
share of Series A Preferred Stock is entitled to one vote per share and each
share of Series B Preferred Stock is entitled to two votes per share.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE PROPOSED AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
27
APPROVAL OF THE
CBL & ASSOCIATES PROPERTIES, INC.
AMDENDED AND RESTATED STOCK INCENTIVE PLAN
BACKGROUND
The Company has historically utilized stock options as a key part of its
overall compensation program for executive officers and other employees. As of
March 1, 2003, there were 1,109,461 shares available for awards under the Stock
Incentive Plan. As of that date, 424,279 shares had been issued as stock awards
under the Stock Incentive Plan of which 181 shares were returned (forfeited) as
Deferred Stock prior to the Vesting Period (see "Description of the Stock
Incentive Plan - Deferred Stock" below), 82,591 shares were held for issuance
under deferred compensation arrangements, 1,072,473 options for shares had been
exercised and 2,511,377 options for shares were outstanding, leaving a balance
of 1,109,461 additional shares that may be subject of future option grants or
other awards under the Stock Incentive Plan. The Board of Directors believes
that it is in the best interests of the Company to have stock and stock-based
awards available in order to retain, attract and motivate high quality personnel
for the Company. By vote of the stockholders on May 1, 1996, the stockholders
approved an amendment to the Stock Incentive Plan (the "First Amendment") to
increase the number of shares available under the Stock Incentive Plan from
1,300,000 to 2,800,000. The First Amendment also limited to 100,000 the number
of shares of Common Stock with respect to which stock options may be granted to
any Stock Incentive Plan participant in any calendar year. This limitation was
put in place as a result of federal tax legislation enacted in 1993. Section
162(m) of the Code generally disallows deductions in the case of publicly held
corporations (such as the Company) for compensation paid to any of the five
executive officers named in a corporation's proxy statement to the extent that
compensation exceeds $1 million per year per employee; "performance-based
compensation," however, does not count toward the $1 million limit. The First
Amendment conformed the Stock Incentive Plan to the requirements for
"performance-based compensation" exempt from deductibility limitations of
Section 162(m) of the Code. By vote of the stockholders on May 3, 2000, the
stockholders approved a second amendment to the Stock Incentive Plan (the
"Second Amendment") to increase the number of shares available under the Stock
Incentive Plan from 2,800,000 to 4,000,000. By vote of the stockholders on May
7, 2002, the stockholders approved a third amendment to the Stock Incentive Plan
(the "Third Amendment") to increase the number of shares available under the
Stock Incentive Plan from 4,000,000 to 5,200,000. On October 29, 2002, the Board
of Directors resolved to propose for stockholder approval the Amended and
Restated Plan to conform the plan to current tax laws, accounting pronouncements
and other regulations that have been promulgated since the plan's inception in
1993, to extend the termination date of the plan, to incorporate all previous
amendments into one document and to make certain other revisions to further
align the interests of the Company's officers, employees and directors with the
interests of the Company's stockholders.
DESCRIPTION OF THE AMENDED AND RESTATED PLAN
The Amended and Restated Plan provides for the grant of options to purchase
a specified number of shares of Common Stock ("Options"), rights to future
grants of Common Stock ("Deferred Stock") or shares issuable in the future
pursuant to deferred compensation arrangements, all subject to applicable share
ownership limits set forth in the Company's Certificate of Incorporation and
limits on stock awards set forth in the Amended and Restated Plan. See below
under "Description of the Amended and Restated Plan - Significant Revisions to
Stock Incentive Plan - Stock Award Limits". The Amended and Restated Plan is
administered by the Compensation Committee, which has the authority, among other
things, to interpret the Amended and Restated Plan and to adopt, alter and
repeal such rules and regulations for the administration of the Amended and
Restated Plan as it may deem advisable.
28
Under the Amended and Restated Plan, the total number of shares available
for grant is 5,200,000 shares. The Board of Directors or the Compensation
Committee may, under certain circumstances, make such adjustments in the
aggregate number and kind of shares reserved for issuance, the number and kind
of shares covered by outstanding awards and, subject to certain limitations, the
exercise prices specified therein. See below under "Description of the Amended
and Restated Plan - Significant Revisions to Stock Incentive Plan - Plan
Amendments".
Participants in the Amended and Restated Plan, who may be officers or
employees of the Company, its subsidiaries (including the Management Company) or
designated affiliates, will be selected by the Compensation Committee. Directors
of the Company are also eligible to participate, but, in the case of directors
who are not employees, only pursuant to automatic grants under a specified
formula set forth in the Amended and Restated Plan. As of March 1, 2003, the
approximate number of persons eligible to participate was 624.
OPTIONS. The Compensation Committee is authorized to determine whether
Options to be issued under the Amended and Restated Plan will be designated as
"Incentive Stock Options" or as "Non-Qualified Stock Options." Incentive Stock
Options are options that are intended to qualify as incentive stock options
under Section 422 of the Code. Non-Qualified Stock Options are options that are
not Incentive Stock Options. Incentive Stock Options may be granted only to
employees of the Company and its subsidiaries.
The Amended and Restated Plan authorizes the Compensation Committee to
grant Options at an exercise price determined by the Compensation Committee.
Such price cannot be less than 100% of the fair market value of the shares of
Common Stock on the date on which the Option in respect thereof is granted. On
February 28, 2003 (the last trading day prior to March 1, 2003), the closing
price of the Common Stock as reported on the New York Stock Exchange was $39.85
per share. The exercise price is generally payable in cash or, in certain
circumstances, by the surrender, at the fair market value on the date on which
the Option is exercised, of shares of Common Stock held by the optionee. The
term of each Option is fixed by the Compensation Committee, but, in any event,
will expire 10 years after the date of grant (five years in the case of an
optionee who owns more than 10% of the voting power of all classes of stock of
the Company or any subsidiary). Additionally, the vesting provisions of the
Options will be determined by the Compensation Committee.
Options granted under the Amended and Restated Plan will become fully
exercisable upon a Change in Control (as defined in the Amended and Restated
Plan). In general, Change in Control means (i) any acquisition by a person or
group (other than an acquisition from the Company or by the Company or by the
Company's management, an acquisition through the exercise of the rights to
exchange limited partnership interests in the Operating Partnership for shares
of Common Stock or an acquisition by a Company-sponsored employee benefit plan)
of 20% or more of the outstanding shares of Common Stock, (ii) a change in the
majority of the Company's directors, (iii) approval by the Company's
stockholders of a reorganization, merger, consolidation, sale or disposition of
all or substantially all of the assets of the Company under certain
circumstances or (iv) approval by the Company's stockholders of a complete
liquidation or dissolution of the Company. See below "Description of the Amended
and Restated Plan - Significant Revisions to Stock Incentive Plan - Corporate
Events" for a description of the impact on outstanding options upon the
occurrence of a Corporate Event.
The right of any participant to exercise an Option may not be transferred
in any way other than (i) by will or the laws of descent and distribution, (ii)
pursuant to a qualified domestic relations order or (iii) by gift to a "family
member". A family member is defined as a participant's child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling,
niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
including adoptive relationships, any person sharing the participant's household
(other than a tenant or employee), a trust in which these persons (or the
participant) control the management of the assets and any other entity in which
these persons (or the participant) own more than fifty percent of the voting
interests.
If Options granted in connection with the Amended and Restated Plan are
exercised at any time or from time to time, the Partnership Agreement of the
Operating Partnership requires the Company to contribute to the Operating
Partnership as an additional contribution the exercise price received by the
Company in connection with the issuance of shares of Common Stock to such
29
exercising participant. Although the Company will contribute to the Operating
Partnership an amount equal to the exercise price received by the Company, the
Company will be considered to have contributed an amount equal to the fair
market value of the shares of Common Stock issued to the exercising party for
purposes of determining the increase in the Company's percentage interest in the
Operating Partnership (and the dilution of the interests of the other partners
of the Operating Partnership) in connection with additional capital
contributions of the Company.
DEFERRED STOCK. The Amended and Restated Plan also permits the Compensation
Committee to grant rights to receive shares of Deferred Stock, subject to the
terms and conditions imposed by the Compensation Committee. These terms will
include a vesting period (the "Vesting Period") during which the rights to
receive Deferred Stock will be subject to forfeiture upon certain terminations
of employment or failure to achieve certain performance goals, as determined by
the Compensation Committee, although the Vesting Period will be accelerated upon
a Change of Control. At the end of the Vesting Period set by the Compensation
Committee, the participant will be issued unrestricted shares of Common Stock,
and will have all the rights of a holder of Common Stock as to such shares,
including the right to vote the shares and the right to receive any cash
distributions. If so determined by the Compensation Committee in the applicable
Deferred Stock agreement, Deferred Stock awards may provide for the payment to
the awardee, during the Vesting Period, of cash amounts in respect of such
Deferred Stock equal to the amount of dividends that would have been paid on an
equivalent number of shares of Common Stock.
DEFERRED COMPENSATION ARRANGEMENTS. The Amended and Restated Plan also
permits the Compensation Committee to enter into deferred compensation
arrangements designed to provide deferral of taxable income to participants,
which may be funded or unfunded and may provide for future payments to
participants in the form of Common Stock or cash. As used by the Compensation
Committee, these deferred compensation arrangements typically allow the
executive/employee to elect to defer a portion of his/her salary or bonuses into
the arrangement on an unfunded and unsecured basis. For deferred compensation
arrangements payable in Common Stock, the amount of salary or bonus deferred is
then deemed to be converted to shares of the Company's Common Stock based on the
closing price of the Common Stock on the date of the deferral. Those deemed
shares are then further deemed to increase as dividends are paid on the Common
Stock as if such dividends had been utilized via the Company's Dividend
Reinvestment Plan to acquired additional shares of Common Stock at the 95% price
provided through the Company's Dividend Reinvestment Plan. The arrangements
generally provide that on the earlier of (i) a date certain specified in each
deferred compensation arrangement or (ii) the death, disability or termination
of employment of the executive/employee or (iii) the merger, consolidation or
sale of the Company, the executive/employee will then be entitled to receive the
stated amount of cash or, for deferred compensation arrangements payable in
Common Sotck, that number of shares of Common Stock deemed set aside on the date
of the deferral together with additional shares of Common Stock deemed acquired
through the Company's Dividend Reinvestment Plan through the date of the payout.
TERM, TERMINATION AND AMENDMENT. The term of the Amended and Restated Stock
Incentive Plan is 10 years and it will terminate on May 5, 2013. Awards
outstanding on that date are not affected or impaired by the termination of the
Amended and Restated Stock Incentive Plan.
See "Description of the Amended and Restated Plan - Significant Revisions
to Stock Incentive Plan - Plan Amendments" below for a description of the
provisions of the Amended and Restated Plan as to amendments.
Subject to the provisions set forth below (see "Description of the Amended
and Restated Plan - Significant Revisions to Stock Incentive Plan - Plan
Amendments"), the Compensation Committee may amend any award theretofore
granted, prospectively or retroactively. No such amendment may impair the rights
of any participant under any award without the consent of such participant
(except for any amendment made to cause the plan to qualify for an exemption
provided by Rule 16b-3).
SIGNIFICANT REVISIONS TO STOCK INCENTIVE PLAN. As stated above, the Board
of Directors resolved on October 29, 2002 to propose to the Company's
stockholders the adoption of the Amended and Restated Plan for purposes
30
including the purpose of further aligning the interests of the Company's
officers, employees and directors with the interests of the Company's
stockholders. The following are some significant revisions to the Stock
Incentive Plan that have been incorporated into the Amended and Restated Plan:
- PLAN AMENDMENTS. The Amended and Restated Plan provides that if any
proposed amendment to the plan would (i) materially increase the benefits
accruing to participants under the plan (such as the re-pricing of
Options), (ii) materially increase the aggregate number of securities that
may be issued under the plan or (iii) materially reduce the requirements as
to eligibility for participation in the plan, then to the extent required
by applicable law or deemed necessary or advisable by the Compensation
Committee of the board, such amendment shall be subject to stockholder
approval. Notwithstanding the foregoing, however, the requirement that any
such amendments to the plan be presented to the Corporation's stockholders
for approval shall not apply to such amendments as required by applicable
law or to cause the plan to comply with generally accepted accounting
principles or amendments to allow the plan to qualify for exemption under
Rule 16b-3.
- COMPENSATION COMMITTEE. The Amended and Restated Plan clarifies that it is
to be administered by the Company's Compensation Committee and that the
Compensation Committee must be composed of only Independent Directors.
- STOCK AWARD LIMITS. The Amended and Restated Plan provides an aggregate
limit on the number of shares of unrestricted Common Stock that may be
awarded to the Company's officers, employees and directors (other than
awards in lieu of cash compensation) of 5% of the total shares available
for grant under the plan (the "5% Authorization"). Stock awards falling
outside the 5% Authorization (other than awards in lieu of cash
compensation) may be granted from the plan (i) pursuant to a stock award
program or (ii) independently, provided, in either case, such awards are
subject to a Vesting Period of a minimum of 3 years or such awards are
subject to a Vesting Period of less than 3 years but at least 1 year if the
restrictions on the award are performance-based.
- USE OF SHARES OF COMMON STOCK IN LIEU OF CASH ON OPTION EXERCISE. The
Amended and Restated Plan allows a participant to utilize shares of the
Common Stock to pay the exercise price on the exercise of an Option but
requires that the shares so utilized must be "mature", i.e., held for 6
months or more or purchased on the open market.
- CORPORATE EVENTS. The Amended and Restated Plan provides that (i) in the
event the Company is merged or consolidated with another corporation or
entity, (ii) in the event all or substantially all of the Company's assets
or Common Stock is acquired by another person or entity, (iii) in the event
the Company is liquidated or reorganized or (iv) in the event the Company
shall enter into a written agreement to undergo any of the foregoing, then
in either of such events (a "Corporate Event"), the Company shall require
the successor or parent thereof to assume all outstanding Options, Deferred
Stock and all other outstanding awards under the plan (collectively, the
"Awards"), provided, however, the Company or the Compensation Committee
may, in lieu of requiring such assumption, provide that all outstanding
Awards shall terminate as of the consummation of such Corporate Event, and
then (x) accelerate the exercisability of, or cause all vesting
restrictions to lapse on, all outstanding Awards to a date at least ten
days prior to the date of such Corporate Event and/or (y) provide that
holders of Awards will receive a cash payment in respect of cancellation of
their Awards based on the amount, if any, by which the per share
consideration being paid for the Stock in connection with such Corporate
Event exceeds the applicable exercise price.
- COMPENSATION COMMITTEE RELIANCE ON REPORTS AND INDEMNITY. The Amended and
Restated Plan contains provisions providing that the members of the
Compensation Committee may justifiably rely on reports of the Company's
independent public accountant and upon other information supplied to the
Compensation Committee in carrying out its duties to administer the plan.
The Amended and Restated Plan also provides an indemnity to members of the
Compensation Committee except for acts or omissions due to a member's fraud
or willful bad faith.
31
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax consequences of participation in the Amended and
Restated Plan are complex and subject to change. The following discussion is
only a summary of the general rules applicable to options and participants in
the Amended and Restated Plan should consult their own tax advisers regarding
their particular situation.
No taxable income is realized by the optionee upon the grant or exercise of
an Incentive Stock Option. If Common Stock is issued to an optionee pursuant to
the exercise of an Incentive Stock Option, and if no disqualifying disposition
of such shares is made by such optionee within two years after the date of grant
or within one year after the transfer of such shares to such optionee, then (1)
upon sale of such shares, any amount realized in excess of the option price will
be taxed to such optionee as a long-term capital gain and any loss sustained
will be a long-term capital loss, and (2) no deduction will be allowed to the
optionee's employer for federal income tax purposes.
If the Common Stock acquired upon the exercise of an Incentive Stock Option
is disposed of prior to the expiration of either holding period described above,
generally (1) the optionee will realize ordinary income in the year of
disposition in an amount equal to the excess, if any, of the fair market value
of such shares at exercise (or, if less, the amount realized on the disposition
of such shares) over the option price paid for such shares, and (2) the
optionee's employer will be entitled to deduct such amount for federal income
tax purposes if the amount represents an ordinary and necessary business
expense. Any further gain (or loss) realized by the optionee will be taxed as
short-term or long-term capital gain (or loss), as the case may be, and will not
result in any deduction by the employer.
Subject to certain exceptions for disability or death, if an Incentive
Stock Option is exercised more than three months following termination of
employment, the exercise of the Option will generally be taxed as the exercise
of a Non-Qualified Stock Option.
In general, for purposes of the alternative minimum tax, the exercise of an
Incentive Stock Option will be treated essentially as if it were the exercise of
a Non-Qualified Stock Option. As a result, the rules of Section 83 of the Code
relating to transfers of property, including restricted property, will apply in
determining the optionee's alternative minimum taxable income. Consequently, an
optionee exercising an Incentive Stock Option with respect to unrestricted
Common Stock will have income, for purposes of determining the base for the
application of the alternative minimum tax, in an amount equal to the spread
between the option price for the shares and the fair market value of the shares
on the date of exercise. Each optionee is potentially subject to the alternative
minimum tax. In substance, a taxpayer is required to pay the higher of his/her
alternative minimum tax liability or his/her "regular" income tax liability. As
a result, a taxpayer has to determine his potential liability under the
alternative minimum tax.
With respect to Non-Qualified Stock Options, (1) no income is realized by
the optionee at the time the Option is granted; (2) generally, at exercise,
ordinary income is realized by the optionee in an amount equal to the difference
between the option price paid for the shares and the fair market value of the
shares, if unrestricted, on the date of exercise, and the optionee's employer is
generally entitled to a tax deduction in the same amount subject to applicable
tax withholding requirements; and (3) at sale, appreciation (or depreciation)
after the date of exercise is treated as either short-term or long-term capital
gain (or loss) depending on how long the shares have been held.
32
NEW PLAN BENEFITS UNDER THE AMENDED AND RESTATED PLAN
Name and Position Dollar Value ($) Number of Units
-------------------------------------------------------------------------------------------------
Charles B. Lebovitz, Chairman of the Board of (1) (1)
Directors and Chief Executive Officer
Stephen D. Lebovitz, Director, President and
Secretary (1) (1)
John N. Foy, Vice Chairman of the Board of
Directors, Chief Financial Officer and (1) (1)
Treasurer
Eric P. Snyder, Senior Vice President and
Director of Corporate Leasing (1) (1)
Augustus N. Stephas, Senior Vice President -
Accounting and Controller (1) (1)
Executive Group (1) (1)
Non-Executive Director Group (2) 3,000
Non-Executive Officer Employee Group (1) (1)
(1) Because the Amended and Restated Plan is a discretionary plan, it is
not possible to determine what awards the Compensation Committee will
grant under the Amended and Restated Stock Incentive Plan.
(2) Each of the Company's six non-employee directors receives an annual
option grant of 500 shares of Common Stock with an exercise price
equal to the fair market value of the Common Stock on the date of
grant. Because the dollar value of the options depends upon the market
value of the Common Stock which fluctuates, the dollar value of the
options cannot be determined at this time.
EQUITY COMPENSATION PLAN INFORMATION AS OF DECEMBER 31, 2002
The following table sets forth information as to the Company's equity
compensation plans as of the end of the Company's 2002 fiscal year:
(a) (b) (c)
Number of securities
remaining available for
Number of securities to be Weighted-average exercise future issuance under
issued upon exercise of price of outstanding equity compensation plans
the outstanding options, options, warrants and (excluding securities
Plan Category warrants and rights rights reflected in column (a))
------------------------------- ---------------------------- ---------------------------- ----------------------------
Equity Compensation Plans 2,533,417 $25.51(1) 1,133,053
approved by security holders
Equity Compensation Plans not None N/A N/A
approved by security holders
(1) The weighted-average calculation does not reflect 80,576 shares reserved
for issuance under deferred compensation arrangements. See above under
"Description of the Amended and Restated Plan - Deferred Compensation
Arrangements" for a description of the terms and provisions of deferred
compensation arrangements.
33
The Board of Directors believes that it is important to have stock and
stock-based awards available in order to retain, attract and motivate high
quality personnel who are likely to contribute to the long-term success of the
Company. Accordingly, the Board of Directors believes that the adoption of the
Amended and Restated Plan is in the best interests of the Company and its
stockholders. The Board of Directors recommends that the stockholders approve
the adoption of the Amended and Restated Plan.
VOTES NECESSARY TO APPROVE THE PROPOSAL
The adoption of the Amended and Restated Plan must be approved by a
majority of the shares of Common Stock present or represented at the Annual
Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" APPROVAL OF THE ADOPTION OF THE PROPOSED
AMENDED AND RESTATED STOCK INCENTIVE PLAN
34
RATIFICATION OF THE SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Deloitte & Touche LLP ("Deloitte & Touche") has served as the
auditors for the Company since May 7, 2002, and the Audit Committee has
recommended, subject to ratification by the stockholders, that Deloitte & Touche
serve as the Company's independent public accountants for the fiscal year ended
December 31, 2003.
On May 7, 2002, the Company's Board of Directors dismissed its independent
auditors, Arthur Andersen LLP ("Andersen") in view of then-recent developments
relating to Andersen, and engaged Deloitte & Touche to serve as the Company's
independent public accountants and to audit the Company's financial statements
for the fiscal year ending December 31, 2002. Additionally, the Company engaged
Deloitte & Touche to re-audit the Company's financial statements for the fiscal
years ending December 31, 2000 and 2001.
Andersen's reports on the Company's consolidated financial statements for
fiscal years ended December 31, 2000 and December 31, 2001 and Deloitte &
Touche's reports in connection with the re-audit of those same financial
statements did not contain any adverse opinion or disclaimer of opinion, nor
were they qualified or modified as to uncertainty, audit scope or accounting
principles. The Deloitte & Touche re-audit did not result in any change to the
Company's previously published consolidated financial statements other than
normal reclassifications and reclassifications required by new accounting
standards.
During the two fiscal years ended December 31, 2001 and December 31, 2000,
and the subsequent interim period through May 7, 2002, there were (i) no
disagreements with Andersen on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure which, if not
resolved to Andersen's satisfaction, would have caused them to make reference to
the subject matter in connection with their report on the Company's consolidated
financial statements for such years, and (ii) no reportable events, as listed in
Item 304(a)(1)(v) of SEC Regulation S-K promulgated under the Exchange Act.
The Company has provided Andersen and Deloitte & Touche with a copy of the
foregoing disclosures.
During the two fiscal years ended December 31, 2001 and December 31, 2000,
the Company did not consult Deloitte & Touche with respect to any of the matters
or events set forth in Item 304(a)(2)(i) and (ii) of Regulation S-K.
AUDIT FEES
Audit Fees billed by Deloitte & Touche for the fiscal period ended December
31, 2002 and for the reviews of the financial statements included in the
Company's quarterly reports on Form 10-Q during such year totaled $382,000.
Additionally, in the period ended December 31, 2002, the Company incurred
$325,000 in Audit Fees to Deloitte & Touche in connection with the re-audit of
the Company's consolidated financial statements for 2000 and 2001.
Audit Fees billed by Andersen for review of the financial statements
included in the Company's quarterly reports on Form 10-Q for the first quarter
of the Company's 2002 fiscal year totaled $62,500.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
The Company did not engage Deloitte & Touche or Andersen to provide advice
to the Company regarding financial information systems design and implementation
during the Company's 2002 fiscal year.
35
ALL OTHER FEES
The aggregate fees billed by Deloitte & Touche for other services rendered
to the Company during the Company's 2002 fiscal year totaled $374,460 and were
primarily for tax services.
The Board of Directors, in concurrence with the Audit Committee, proposes
and recommends that the stockholders ratify the selection of Deloitte & Touche
to serve as the independent public accountants for the Company's fiscal year
ending December 31, 2003. Unless otherwise directed by the stockholders, proxies
will be voted for approval of the selection of Deloitte & Touche to serve as the
Corporation's independent public accountants for the 2003 fiscal year.
VOTES NECESSARY TO APPROVE THE PROPOSAL
The ratification of the selection of Deloitte & Touche as the Corporation's
independent public accountants for the 2003 fiscal year must be approved by a
majority of the shares of Common Stock present or represented at the Annual
Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE RATIFICATION OF THE SELECTION OF
DELOITTE & TOUCHE LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR 2003
36
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
In accordance with the rules established by the SEC, stockholder proposals
to be included in the Company's proxy statement with respect to the 2004 Annual
Meeting of Stockholders must be received by the Company at its executive offices
located at 2030 Hamilton Place Blvd., Suite 500, CBL Center, Chattanooga,
Tennessee 37421-6000 no later than November 19, 2003.
In addition, the Company's Bylaws provide that any stockholder of record
desiring to nominate a director or have a stockholder proposal considered at an
annual meeting must provide written notice of such nomination or proposal and
appropriate supporting documentation, as set forth in the Bylaws, to the Company
at its principal executive offices not less than 60 days nor more than 90 days
prior to the anniversary date of the prior year's annual meeting (the
"Anniversary Date"); provided, however, that stockholders will have additional
time to deliver the required notice in the event the annual meeting is advanced
by more than 30 days or delayed by more than 60 days from the Anniversary Date.
37
OTHER BUSINESS OF THE MEETING
Management is not aware of any matters to come before the Annual Meeting
other than those stated in this Proxy Statement. However, inasmuch as matters of
which the management is not now aware may come before the meeting or any
adjournment, the proxies confer discretionary authority with respect to acting
thereon, and the persons named in such proxies intend to vote, act and consent
in accordance with their best judgment with respect thereto. Upon receipt of
such proxies (in the form enclosed and properly signed) in time for voting, the
shares represented thereby will be voted as indicated thereon and in this Proxy
Statement.
By Order of the Board of Directors
/s/ Stephen D. Lebovitz
STEPHEN D. LEBOVITZ
Secretary
Chattanooga, Tennessee
March 18, 2003
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 2002 MAY BE OBTAINED WITHOUT CHARGE BY ANY STOCKHOLDER TO WHOM THIS
PROXY STATEMENT IS SENT UPON WRITTEN REQUEST TO INVESTOR RELATIONS, CBL &
ASSOCIATES PROPERTIES, INC., 2030 HAMILTON PLACE BLVD., SUITE 500, CBL CENTER,
CHATTANOOGA, TENNESSEE 37421-6000.
38
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CBL & ASSOCIATES PROPERTIES, INC.
1. The name of the corporation (which is hereinafter referred to as the
"Corporation") is CBL & Associates Properties, Inc.
2. The Amended and Restated Certificate of Incorporation of the
Corporation, dated November 2, 1993, as amended by the Certificate of Amendment
to the Amended and Restated Certificate of Incorporation, dated May 2, 1996, as
amended by the Certificate of Amendment to the Amended and Restated Certificate
of Incorporation, dated January 31, 2001, as supplemented by the Certificate of
Designation, dated June 25, 1998, the Certificate of Designation, dated April
30, 1999, the Certificate of Designation, dated June 11, 2002, and the
Certificate of Decrease, dated June 25, 2002 (the "Amended and Restated
Certificate of Incorporation") shall be further amended as provided below.
3. This Certificate of Amendment has been duly proposed by resolutions
adopted and declared advisable by the Board of Directors of the Corporation,
duly adopted by the stockholders of the Corporation and duly executed and
acknowledged by the officers of the Corporation in accordance with the
provisions of Sections 103 and 242 of the General Corporation Law of the state
of Delaware.
4. The text of Article IV of the Amended and Restated Certificate of
Incorporation is hereby amended as follows:
ARTICLE IV
Section A of Article IV is hereby deleted in its entirety and in its place
is inserted the following as Section A of Article IV:
A. Classes and Number of Shares.
The total number of shares of all classes of Equity Stock that the
Corporation shall have authority to issue is One Hundred and Ten Million
(110,000,000) shares, consisting of (i) Fifteen Million (15,000,000)
shares of preferred stock, par value $.01 per share (the "Preferred
Stock"), and (ii) Ninety-Five Million (95,000,000) shares of common
stock, par value $.01 per share (the "Common Stock").
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by its Chairman of the Board and Chief Executive Officer
and attested to by its Secretary this ____ day of ___________, 2003. CBL &
ASSOCIATES PROPERTIES, INC.
BY: _________________________________
Charles B. Lebovitz
Chairman of the Board
and Chief Executive Officer
Attest: _________________________
Stephen D. Lebovitz
Secretary
39
[WHITE CARD STOCK]
CBL & ASSOCIATES PROPERTIES, INC. PROXY
ANNUAL MEETING OF STOCKHOLDERS OF
CBL & ASSOCIATES PROPERTIES, INC.
ON MAY 5, 2003
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints CHARLES B. LEBOVITZ and STEPHEN D. LEBOVITZ and
each or any of them proxies, with power of substitution, to vote all shares of
the undersigned at the Annual Meeting of Stockholders to be held on May 5, 2003,
at 4:00 p.m., local time, at The Chattanoogan, 1201 South Broad Street,
Chattanooga, Tennessee or at any adjournment thereof, upon the matters set forth
in the Proxy Statement for such meeting, and in their discretion, on such other
business as may properly come before the meeting.
1. TO RE-ELECT THREE DIRECTORS TO SERVE FOR THREE YEARS AND UNTIL THEIR
RESPECTIVE SUCCESSORS HAVE BEEN DULY ELECTED AND QUALIFIED.
__ __
|__| FOR THE NOMINEES LISTED BELOW |__| WITHHOLD AUTHORITY
to vote for the nominees listed below
(INSTRUCTION: To withhold authority to vote for the nominee strike a line
through the nominee's name below:)
John N. Foy Martin J. Cleary William J. Poorvu
2. TO APPROVE AN AMENDMENT TO THE CBL & ASSOCIATES PROPERTIES, INC.
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF THE COMPANY'S PREFERRED STOCK FROM
5,000,000 TO 15,000,000.
__ __ __
|__| FOR |__| AGAINST |__| ABSTAIN
3. TO APPROVE AN ADOPTION OF AN AMENDED AND RESTATED STOCK INCENTIVE PLAN FOR
THE COMPANY.
__ __ __
|__| FOR |__| AGAINST |__| ABSTAIN
4. TO RATIFY THE SELECTION OF DELOITTE & TOUCHE, LLP AS THE INDEPENDENT
PUBLIC ACCOUNTANTS FOR THE COMPANY'S FISCAL YEAR ENDING DECEMBER 31,
2003.
__ __ __
|__| FOR |__| AGAINST |__| ABSTAIN
Dated: ___________________, 2003 ----------------------------------------
Signature
----------------------------------------
Signature if held jointly
NOTE: When shares are held by joint tenants, both should
sign. Persons signing as Executor, Administrator, Trustee,
etc. should so indicate. Please sign exactly as the name
appears on the proxy.
IF NO CONTRARY SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1,
2, 3 AND 4.
PLEASE MARK, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
[YELLOW CARD STOCK]
CBL & ASSOCIATES PROPERTIES, INC. PROXY-PREFERRED B
ANNUAL MEETING OF STOCKHOLDERS OF
CBL & ASSOCIATES PROPERTIES, INC.
ON MAY 5, 2003
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints CHARLES B. LEBOVITZ and STEPHEN D. LEBOVITZ and
each or any of them proxies, with power of substitution, to vote all shares of
the undersigned at the Annual Meeting of Stockholders to be held on May 5, 2003,
at 4:00 p.m., local time, at The Chattanoogan, 1201 South Broad Street,
Chattanooga, Tennessee or at any adjournment thereof, upon the matters set forth
in the Proxy Statement for such meeting, and in their discretion, on such other
business as may properly come before the meeting.
1. TO APPROVE AN AMENDMENT TO THE CBL & ASSOCIATES PROPERTIES, INC.
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF THE COMPANY'S PREFERRED STOCK FROM
5,000,000 TO 15,000,000.
__ __ __
|__| FOR |__| AGAINST |__| ABSTAIN
Dated: ___________________, 2003 ----------------------------------------
Signature
----------------------------------------
Signature if held jointly
NOTE: When shares are held by joint tenants, both should
sign. Persons signing as Executor, Administrator, Trustee,
etc. should so indicate. Please sign exactly as the name
appears on the proxy.
IF NO CONTRARY SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSAL 1.
PLEASE MARK, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
[GREEN CARD STOCK]
CBL & ASSOCIATES PROPERTIES, INC. PROXY-PREFERRED A
ANNUAL MEETING OF STOCKHOLDERS OF
CBL & ASSOCIATES PROPERTIES, INC.
ON MAY 5, 2003
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints CHARLES B. LEBOVITZ and STEPHEN D. LEBOVITZ and
each or any of them proxies, with power of substitution, to vote all shares of
the undersigned at the Annual Meeting of Stockholders to be held on May 5, 2003,
at 4:00 p.m., local time, at The Chattanoogan, 1201 South Broad Street,
Chattanooga, Tennessee or at any adjournment thereof, upon the matters set forth
in the Proxy Statement for such meeting, and in their discretion, on such other
business as may properly come before the meeting.
1. TO APPROVE AN AMENDMENT TO THE CBL & ASSOCIATES PROPERTIES, INC.
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF THE COMPANY'S PREFERRED STOCK FROM
5,000,000 TO 15,000,000.
__ __ __
|__| FOR |__| AGAINST |__| ABSTAIN
Dated: ___________________, 2003 ----------------------------------------
Signature
----------------------------------------
Signature if held jointly
NOTE: When shares are held by joint tenants, both should
sign. Persons signing as Executor, Administrator, Trustee,
etc. should so indicate. Please sign exactly as the name
appears on the proxy.
IF NO CONTRARY SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSAL 1.
PLEASE MARK, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
APPENDIX
AMENDED AND RESTATED
CBL & ASSOCIATES PROPERTIES, INC.
STOCK INCENTIVE PLAN
AMENDED AND RESTATED
CBL & ASSOCIATES PROPERTIES, INC.
STOCK INCENTIVE PLAN
WHEREAS, the CBL & Associates Properties, Inc. 1993 Stock Incentive Plan
was adopted by the Company on October 27, 1993 (the "Initial Plan");
------------
WHEREAS, the Initial Plan has been amended by Amendment No. 1 on May 1,
1996, Amendment No. 2 on May 3, 2000 and by Amendment No. 3 on May 7, 2002;
WHEREAS, the Initial Plan, as amended, is scheduled to terminate on October
27, 2003;
WHEREAS, the Awards granted under the Initial Plan, as amended, and the
status of the Initial Plan, as amended, were, as follows as of March 10, 2003
(the record date for stockholders voting on the adoption of the Plan, as defined
below):
Stock Awards (fully vested on grant or
fully vested as of March 10, 2003) [301,336]
Deferred Stock Awards (subject to vesting/issuance
following March 10, 2003) [205,534]
Outstanding Employee Stock Options (vested and
non-vested unexercised stock options granted
to employees prior to March 10, 2003) [2,510,377]
Non-Employee Directors Shares [3,000]
Outstanding Non-Employee Directors Stock Options [20,000]
Shares Available For Awards [1,109,461]
WHEREAS, the Board of Directors of the Company has recommended to the
Company's stockholders that the Initial Plan, as amended, be amended and
restated on the terms set forth herein as the Amended and Restated CBL &
Associates Properties, Inc. Stock Incentive Plan (herein, the "Plan"), and has
submitted such recommendation to the Company's stockholders for vote of the
stockholders on May 5, 2003.
Pursuant to the recommendation of the Board of Directors of the Company and
subject to the approval of the Company's stockholders on May 5, 2003, the
Initial Plan, as amended, is hereby amended and restated in its entirety on the
terms and provisions set forth below. Notwithstanding the preceding sentence,
the terms and provisions of Pre-Amendment Awards, as defined below, shall
continue in force as such terms and provisions existed on the date such
Pre-Amendment Awards were made.
Effective Date - provided the Company's stockholders have approved this
Plan, the effective date of this Plan shall be May 5, 2003, the date the Plan
was submitted to the Company's stockholders for vote.
1
Expiration Date - the expiration date of this Plan, after which no Awards
may be granted hereunder, shall be May 5, 2013; provided, however, that the
administration of the Plan shall continue in effect until all matters relating
to the payment of Awards previously granted have been settled.
SECTION 1. Purpose; Definitions.
Purpose. The purpose of the Plan is to give the Company a significant
advantage in attracting, retaining and motivating officers, employees and
directors of the Company and to provide the Company and is Subsidiaries with the
ability to provide incentives more directly linked to the long term
profitability of the Company's businesses and increases in stockholder value
thereby strengthening the commitment of the Company's officers, employees and
directors to the welfare of the Company and promoting an identity of interest
between stockholders and the Company's officers, employees and directors.
Definitions. For purposes of the Plan, the following terms are defined as set
forth below:
"Affiliate" means CBL & Associates Management, Inc., and any
other corporation or other entity in which the Company has a substantial direct
or indirect ownership interest, and designated by the Compensation Committee as
such.
"Award" means awards/grants of Stock Option(s), unrestricted
Stock, Restricted Stock, Non-Employee Director Share(s), Non-Employee Director
Stock Option(s) and/or any other stock based awards described in Section 7 below
that is made pursuant to the terms of this Plan.
"Board" means the Board of Directors of the Company.
"Cause" has the meaning set forth in Section 5(a)(ix) below.
"Change in Control" shall mean the happening of any of the
following events:
(i) An acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of either (A) the then outstanding shares of common Stock of the
Company (the "Outstanding Common Stock") or (B) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Voting Securities"); excluding,
however, the following: (I) any acquisition directly from the Company, other
than an acquisition by virtue of the exercise of a conversion privilege unless
the security being so converted was itself acquired directly from the Company,
(II) any acquisition by the Company, or members of the Company's management, or
any combination thereof, (III) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the Company or (IV) any acquisition by any Person pursuant to a
2
transaction which complies with clauses (A), (B) and (C) of subsection (iii) of
this definition; or
(ii) A change in the composition of the Board such that the individuals
who, as of the effective date of the Plan, constitute the Board (such Board
shall be hereinafter referred to as the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided, however,
for the purposes of this definition, that any individual who becomes a
member of the Board subsequent to such effective date, whose election, or
nomination for election by the Company's stockholders, was approved by a
vote of at least a majority of those individuals who are members of the
Board and who were also members of the Incumbent Board (or deemed to be
such pursuant to this provision) shall be considered as though such
individual were a member of the Incumbent Board; but, provided further,
that any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act) or other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board shall not be so considered as
a member of the Incumbent Board; or
(iii) The approval by the stockholders of the Company of a Corporate Event
as defined in Section 8(a) below; excluding, however, such a Corporate
Event pursuant to which
(A) all or substantially all of the
individuals and entities who are the beneficial owners, respectively, of
the Outstanding Common Stock and Outstanding Voting Securities immediately
prior to such Corporate Event will beneficially own, directly or
indirectly, more than 60% of, respectively, the outstanding shares of
common stock, and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Corporate Event
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more Subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Corporate Event, of the Outstanding Common Stock and Outstanding
Voting Securities, as the case may be;
(B) no Person (other than the Company, any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or such corporation
resulting from such Corporate Event) will beneficially own, directly or
indirectly, 20% or more of, respectively, the outstanding shares of common
stock of the corporation resulting from such Corporate Event or the
combined voting power of the outstanding voting securities of such
corporation entitled to vote generally in the election of directors except
to the extent that such ownership existed with respect to the Company prior
to the Corporate Event; and
(C) individuals who were members of the
Incumbent Board will constitute at least a majority of the members of the
board of directors of the corporation resulting from such Corporate Event;
or
3
(iv) The approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor thereto.
"Commission" means the Securities and Exchange Commission
or any successor agency.
"Common Stock" means common stock, par value $0.01 per
Share, of the Company.
"Company" means CBL & Associates Properties, Inc., Delaware
corporation.
"Compensation Committee" means the Compensation Committee
referred to in Section 2 below.
"Corporate Event" shall have the meaning ascribed to that
term in Section 8(a) below.
"Date of Grant" means the date on which the granting
of an Award is authorized or such other date as may be set forth in such
authorization.
"Disability" means permanent and total disability as
determined under procedures established by the Compensation Committee for
purposes of the Plan.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor thereto.
"Fair Market Value" means, as of any given date, the mean
between the highest and lowest reported sales prices of the Common Stock on the
New York Stock Exchange or, if not listed on such exchange, on any other
national securities exchange on which the Common Stock is listed or on NASDAQ.
If there is no regular public trading market for such Common Stock the Fair
Market Value of the Common Stock shall be determined by the Compensation
Committee in good faith.
"Incentive Stock Option" means any Stock Option intended to be
and designated as an "incentive stock option" within the meaning of Section 422
of the Code.
"Mature Stock" shall have the meaning ascribed to that term in
Section 5(a)(iv) below.
"Non-Employee Director Share" means a share of Common Stock
granted to Non-Employee Directors as set forth in Section 13 below.
4
"Non-Employee Director Stock Option" means a Stock Option
granted to Non-Employee Directors as set forth in Section 13 below.
"Non-Qualified Stock Option" means any Stock Option that is
not an Incentive Stock Option.
"Participant" shall mean any recipient of an Award under this
Plan.
"Plan" means the Amended and Restated CBL & Associates
Properties, Inc. Stock Incentive Plan, as set forth herein and as hereinafter
amended from time to time.
"Pre-Amendment Awards" means collectively the Deferred Stock
Awards set forth in the 4th Whereas clause above, the Outstanding Employee Stock
Options set forth in the 4th Whereas clause above, the Non-Employee Director
Shares set forth in the 4th Whereas clause above and the Outstanding
Non-Employee Director Stock Options set forth in the 4th Whereas clause above.
"Restricted Stock" means an Award granted under Section 6
below.
"Retirement" means retirement from active employment under a
pension plan of the Company, any Subsidiary or Affiliate, or under an employment
contract with any of them, or termination of employment at or after age 65 under
circumstances which the Compensation Committee, in its sole discretion, deems
equivalent to retirement.
"Rule 16b-3" means Rule 16b-3, as promulgated by the
Commission under Section 16(b) of the Exchange Act, as amended from time to
time.
"Stock Award(s)" means any award of Common Stock of the
Company, whether such award is in the form of Restricted Stock or Stock that is
unrestricted.
"Stock Option" or "Option" means an option granted under
Section 5(a) below.
"Subsidiary" means a "subsidiary corporation" within the
meaning of Section 424(f) of the Code.
"Termination of Employment" means the termination of the
Participant's employment with the Company or any Subsidiary or Affiliate. A
Participant employed by a Subsidiary or an Affiliate shall also be deemed to
5
incur a Termination of Employment if the Subsidiary or Affiliate ceases to be
such a Subsidiary or Affiliate, as the case may be, and the Participant does not
immediately thereafter become an employee of the Company or another Subsidiary
or Affiliate.
In addition, certain other terms used herein have definitions
given to them in the first place in which they are used.
SECTION 2. Administration.
The Plan shall be administered by the Compensation Committee
of the Board as such is presently situated on the Effective Date and as it shall
be constituted after the Effective Date throughout the term of this Plan (the
"Compensation Committee"). The Compensation Committee is required to be
comprised of Independent Directors, as defined by the Board and/or applicable
law. If at any time no Compensation Committee shall be in office, the functions
of the Compensation Committee specified in the Plan shall be exercised by the
Board or by such other committee of the Board; provided any such other committee
that shall be charged with the responsibility of exercising the functions of the
Compensation Committee hereunder in the absence of the Compensation Committee
shall be comprised of not less than two Persons who shall meet the definition of
"Independent Director" as set forth above.
Subject to Section 14 hereof, the Compensation Committee shall
have primary authority to grant Awards pursuant to the terms of the Plan to
officers, employees and directors of the Company and its Subsidiaries and
Affiliates.
Among other things, the Compensation Committee shall have the
authority, subject to the terms of the Plan:
(a) to select the officers, employees and directors to whom
Awards may from time to time be granted; provided that awards to non-employee
directors shall be made only in accordance with Section 13 below;
(b) to determine whether and to what extent Incentive Stock
Options, Non-Qualified Stock Options and Restricted Stock or any combination
thereof are to be granted hereunder;
(c) to determine the number of shares of Common Stock to be
covered by each Award granted hereunder;
(d) to determine the terms and conditions of any Award granted
hereunder (including, but not limited to, subject to Section 5(a) below, the
option price, any vesting restriction or limitation and any vesting acceleration
or forfeiture waiver regarding any Award and the shares of Common Stock relating
thereto, based on such factors as the Compensation Committee shall determine);
(e) to modify, amend or adjust the terms and conditions of any
Award, at any time or from time to time, including, but not limited to, with
respect to performance goals and measurements applicable to performance-based
Awards pursuant to the terms of the Plan;
(f) to determine to what extent and under what circumstances
Common Stock and other amounts payable with respect to an Award shall be
deferred; and
6
(g) to determine under what circumstances a Stock Option may
be settled in cash or Common Stock under Section 5(a)(iv) below.
The Compensation Committee shall have the authority to adopt,
alter and repeal such administrative rules, guidelines and practices governing
the Plan as it shall, from time to time, deem advisable, to interpret the terms
and provisions of the Plan and any Award issued under the Plan (and any
agreement relating thereto) and to otherwise supervise the administration of the
Plan.
The Compensation Committee may act with respect to the Plan
only by a majority of its members then in office, except that the members
thereof may authorize any one or more of their number or any officer of the
Company to execute and deliver documents on behalf of the Compensation
Committee.
Any determination made by the Compensation Committee or
pursuant to delegated authority pursuant to the provisions of the Plan with
respect to any Award shall be made in the sole discretion of the Compensation
Committee or such delegate at the time of the grant of the Award or, unless in
contravention of any express term of the Plan, at any time thereafter. All
decisions made by the Compensation Committee or any appropriately delegated
officer pursuant to the provisions of the Plan shall be final and binding on all
persons, including the Company and Plan Participants subject to Plan provisions,
including but not limited to Section 14 below.
SECTION 3. Common Stock Subject to Plan.
(a) Number of Shares of Common Stock Available. Subject to
adjustment as provided herein, the total number of shares of Common Stock
available for distribution pursuant to Awards under the Plan shall be 5,200,000
shares of Common Stock, and the maximum number of shares of Common Stock with
respect to which Options may be granted to any Plan Participant during any
calendar year shall not exceed 100,000. Shares subject to an Award under the
Plan may be authorized and unissued shares or may be treasury shares.
(b) Adjustments. Awards granted under the Plan and any
agreements evidencing such Awards, the maximum number of shares of Stock subject
to all Awards under the Plan, the number of shares of Stock subject to
outstanding Awards and the maximum number of shares of Stock with respect to
which any one person may be granted Options or stock appreciation rights during
any year may be subject to adjustment or substitution, as determined by the
Company or the Compensation Committee, as to the number, price or kind of a
share of Stock or other consideration subject to such Awards or as otherwise
determined by the Company or the Compensation Committee to be equitable:
(i) in the event of changes in the outstanding Stock or in the
capital structure of the Company by reason of stock dividends, stock splits,
7
reverse stock splits, recapitalizations, reorganizations, mergers,
consolidations, combinations, exchanges, or other relevant changes in
capitalization occurring after the Date of Grant of any such Award; or
(ii) in the event of any change in applicable laws or any
change in circumstances which results in or would result in any substantial
dilution or enlargement of the rights granted to, or available for, Participants
in the Plan; or
(iii) for any other reason which the Company or the
Compensation Committee determines otherwise warrants equitable adjustment
because it interferes with the intended operation of the Plan.
Any adjustment to Incentive Stock Options under this Section
3(b) shall take into account that adjustments which constitute a "modification"
within the meaning of Section 424(h)(3) of the Code may have an adverse tax
impact on such Incentive Stock Options and the Compensation Committee may, in
its sole discretion, provide for a different adjustment or no adjustment in
order to preserve the tax effects of Incentive Stock Options. Unless otherwise
determined by the Company or the Compensation Committee, any adjustments or
substitutions under this Section 3(b) shall be made in a manner which does not
adversely affect the exemption provided pursuant to Rule 16b-3 under the
Exchange Act and any such adjustments or substitutions shall be subject to the
provisions of this Plan including, but not limited to Section 9 and Section 14
below. Further, with respect to Awards intended to qualify as "performance-based
compensation" under Section 162(m) of the Code, such adjustments or
substitutions shall, unless otherwise determined by the Company or the
Compensation Committee, be made only to the extent that the Company or the
Compensation Committee determines that such adjustments or substitutions may be
made without a loss of deductibility for such Awards under Section 162(m) of the
Code. The Company shall give each Participant notice of an adjustment hereunder
and, upon notice, such adjustment shall be conclusive and binding for all
purposes.
SECTION 4. Eligibility.
Officers, employees and directors of the Company, its
Subsidiaries and Affiliates who are responsible for or contribute to the
management, growth and profitability of the business of the Company, its
Subsidiaries and Affiliates are eligible to be granted Awards under the Plan.
Except as expressly authorized by Section 13 of the Plan, however, no grant
shall be made to a director who is not an officer or a salaried employee of the
Company, its Subsidiaries and/or Affiliates.
SECTION 5. Stock Options; Stock Awards.
(a) Stock Options. Stock Options may be granted alone or in
addition to other Awards granted under the Plan and may be of two types:
Incentive Stock Options and Non-Qualified Stock Options. Any Stock Option
granted under the Plan shall be in such form as the Compensation Committee may
8
from time to time approve.
The Compensation Committee shall have the authority to grant
any optionee Incentive Stock Options, Non-Qualified Stock Options or both types
of Stock Options. Incentive Stock Options may be granted only to employees of
the Company and its Subsidiaries and Affiliates. To the extent that any Stock
Option is not designated as an Incentive Stock Option or even if so designated
does not qualify as an Incentive Stock Option, it shall constitute a
Non-Qualified Stock Option.
Stock Options shall be evidenced by option agreements, the
terms and provisions of which may differ. An option agreement shall indicate on
its face whether it is intended to be an agreement for an Incentive Stock Option
or a Non-Qualified Stock Option. The grant of a Stock Option shall occur on the
date the Compensation Committee by resolution selects an individual to be a
Participant in any grant of a Stock Option, determines the number of shares of
Stock to be subject to such Stock Option to be granted to such individual and
specifies the terms and provisions of the Stock Option. The Company shall notify
a Participant of any grant of a Stock Option, and a written option agreement or
agreements shall be duly executed and delivered by the Company to the
Participant. Such agreement or agreements shall become effective upon execution
by the Participant.
Anything in the Plan to the contrary notwithstanding, no term
of the Plan relating to Incentive Stock Options shall be interpreted, amended or
altered nor shall any discretion or authority granted under the Plan be
exercised so as to disqualify the Plan under Section 422 of the Code or, without
the consent of the optionee affected, to disqualify any Incentive Stock Option
under such Section 422 of the Code.
Stock Options granted under the Plan shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions as the Compensation Committee shall deem desirable:
(i) Option Price. The option price per share of Common Stock
purchasable under a Stock Option (A) shall be determined by the Compensation
Committee and set forth in the option agreement, (B) shall not be less than the
Fair Market Value of the Common Stock subject to the Stock Option on the Date of
Grant and (C) in the case of an Incentive Stock Option granted to an optionee
who owns stock representing more than 10% of the voting power of all classes of
stock of the Company or any subsidiary of the Company, shall not be less than
110% of the Fair Market Value of the Common Stock subject to the Incentive Stock
Option on the Date of Grant.
(ii) Option Term. The term of each Stock Option shall be fixed
by the Compensation Committee, but (A) no Stock Option shall be exercisable more
than 10 years after the date the Stock Option is granted and (B) no Incentive
Stock Option granted to an optionee who owns stock representing more than 10% of
the voting power of all classes of stock of the Company or any Subsidiary shall
be exercisable more than five years after the date the Stock Option is granted.
(iii) Exercisability. Except as otherwise provided herein,
Stock Options shall be exercisable at such time or times and subject to such
terms and conditions as shall be determined by the Compensation Committee. If
9
the Compensation Committee provides that any Stock Option is exercisable only in
installments, the Compensation Committee may at any time waive such installment
exercise provisions, in whole or in part, based on such factors as the
Compensation Committee may determine. In addition, the Compensation Committee
may at any time, in whole or in part, accelerate the exercisability of any Stock
Option.
Notwithstanding any other provision hereof, the aggregate Fair Market
Value, determined on the date of award, of Common Stock with respect to which
Incentive Stock Options are exercisable by an optionee for the first time during
any calendar year under all stock option plans of the Company and any Subsidiary
of the Company shall not exceed $100,000.
(iv) Method of Exercise. Subject to the provisions of this
Section 5(a), Stock Options may be exercised, in whole or in part, at any time
during the option term by giving written notice of exercise to the Company
specifying the number of shares of Common Stock subject to the Stock Option to
be purchased.
The option price of Common Stock to be purchased upon exercise
of any Option shall be paid in full in cash (by certified or bank check, or such
other instrument as the Company may accept) or, if and to the extent set forth
in the option agreement, may also be paid by one or more of the following: (A)
in the case of the exercise of a Non-Qualified Stock Option, in the form of
unrestricted Common Stock already owned by the optionee that meets the
definition of "Mature Stock", as defined below, based in any such instance on
the Fair Market Value of the Common Stock on the date the Stock Option is
exercised; provided, however, that, in the case of an Incentive Stock Option,
the right to make a payment in the form of already owned shares of Common Stock
may be authorized only at the time the Stock Option is granted; (B) by
requesting the Company to withhold from the number of shares of Common Stock
otherwise issuable upon exercise of the Stock Option that number of shares
having an aggregate Fair Market Value on the date of exercise equal to the
exercise price for all of the shares of Common Stock subject to such exercise;
or (C) by a combination thereof, in each case in the manner provided in the
option agreement.
As noted above, the option price may be paid in shares of
Common Stock owned by the optionee upon the exercise of a Stock Option provided
the shares of Common Stock so utilized meet the definition of "Mature Stock".
For purposes hereof, the term "Mature Stock" shall mean (I) shares of
unrestricted Common Stock that have been owned by the optionee for at least six
(6) consecutive months prior to the date of the exercise of the Stock Option
wherein such shares at to be utilized to pay all or a portion of the Option
Price; or (II) shares of unrestricted Common Stock that were purchased by the
optionee in an open-market transaction prior to the exercise of the Stock
Options wherein such shares are to be utilized to pay all or a portion of the
Option Price.
In the discretion of the Compensation Committee and to the
extent allowed under applicable law, payment for any shares subject to a Stock
Option may also be made by delivering a properly executed exercise notice to the
Company, together with a copy of irrevocable instructions to a broker to deliver
promptly to the Company the amount of funds to pay the purchase price.
10
(v) Transferability of Stock Options. No Stock Option shall be
transferable by the optionee other than (A) by will or by the laws of descent
and distribution or (B) pursuant to a qualified domestic relations order (as
defined in the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder) or (C) by a gift to a "family
member", as herein defined. All Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee or by the guardian or legal
representative of the optionee or by an alternate payee pursuant to such
qualified domestic relations order or by the "family member" who is the donee of
a gift, it being understood that the terms "holder" and "optionee" include the
guardian, legal representative or family member donee of the optionee named in
the option agreement and any person to whom an option is transferred by will or
the laws of descent and distribution, pursuant to a qualified domestic relations
order or pursuant to a gift to a "family member". For purposes of this Plan, the
term "family member" as relates to the optionee means any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling,
niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
including adoptive relationships, any person sharing the optionee's household
(other than a tenant or employee), a trust in which these persons (or the
optionee) control the management of the assets and any other entity in which
these persons (or the optionee) own more than fifty percent of the voting
interests. No Stock Option may be transferred for value except for (I) transfers
under a qualified domestic relations order in settlement of marital property
rights; and (II) a transfer to an entity in which more than fifty percent of the
voting interests are owned by "family members" (or the optionee) in exchange for
an interest in that entity. Notwithstanding the above definition of "family
member" and prohibitions on transfers and exceptions thereto, the definition of
"family member" and the prohibitions and exceptions to transfers shall be
subject to the definitions thereof and restrictions set forth on Form S-8
Registration Statement Under the Securities Act of 1933 as such definitions and
restrictions shall be revised, amended or replaced from time to time.
(vi) Termination by Death. If an optionee's employment
terminates by reason of death, any Stock Option held by such optionee may
thereafter be exercised, to the extent then exercisable, or on such accelerated
basis as the Compensation Committee may determine, for a period of one year (or
such other period as the Compensation Committee may specify in the option
agreement) from the date of such death or until the expiration of the stated
term of such Stock Option, whichever period is the shorter. In the event of
termination of employment due to death, if an Incentive Stock option is
exercised after the expiration of the exercise periods that apply for purposes
of Section 422 of the Code, such Stock Option will thereafter be treated as a
Non-Qualified Stock Option.
(vii) Termination by Reason of Disability. If an optionee's
employment terminates by reason of Disability, any Stock Option held by such
optionee may thereafter be exercised by the optionee, to the extent it was
exercisable at the time of termination, or on such accelerated basis as the
Compensation Committee may determine, for a period of three years (or such
11
shorter period as the Compensation Committee may specify in the option
agreement) from the date of such termination of employment or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter; provided, however, that if the optionee dies within such three-year
period (or such shorter period), any unexercised Stock Option held by such
optionee shall, notwithstanding the expiration of such three-year (or such
shorter) period, continue to be exercisable to the extent to which it was
exercisable at the time of death for a period of one year from the date of such
death or until the expiration of the stated term of such Stock Option, whichever
period is the shorter. In the event of termination of employment by reason of
Disability, if an Incentive Stock Option is exercised after the expiration of
the exercise periods that apply for purposes of Section 422 of the Code, such
Stock Option will thereafter be treated as a Non-Qualified Stock Option.
(viii) Termination by Reason of Retirement. If an optionee's
employment terminates by reason of Retirement, any Non-Qualified Stock Option
held by such optionee may thereafter be exercised by the optionee, to the extent
it was exercisable at the time of such Retirement or on such accelerated basis
as the Compensation Committee may determine, for a period of three years (or
such shorter period as the Compensation Committee may specify in the option
agreement) from the date of such termination of employment or until the
expiration of the stated term of such Non-Qualified Stock Option, whichever
period is the shorter; provided, however, that if the optionee dies within such
three-year (or such shorter) period, any unexercised Non-Qualified Stock Option
held by such optionee shall, notwithstanding the expiration of such three-year
(or such shorter) period, continue to be exercisable to the extent to which it
was exercisable at the time of death for a period of one year-from the date of
such death or until the expiration of the stated term of such Non-Qualified
Stock Option, whichever period is the shorter. In the event of termination of
employment by reason of Retirement, an Incentive Stock Option may be exercised
by the optionee to the extent it was exercisable at the time of such Retirement
or on such accelerated basis as the Compensation Committee may determine, only
within a period of three months thereafter or prior to the expiration of the
stated term of such Incentive Stock Option, whichever period is the shorter;
provided, however, that if the optionee dies within such three-month period, any
unexercised Incentive Stock Option held by such optionee shall, notwithstanding
the expiration of such three-month period, continue to be exercisable to the
extent to which it was exercisable at the time of death for a period of one year
from the date of such death or until the expiration of the stated term of such
Incentive Stock Option, whichever period is the shorter.
(ix) Other Termination. Unless otherwise determined by the
Compensation Committee, if there occurs a Termination of Employment for any
reason other than death, Disability, Retirement or Cause, any Stock Option held
by such optionee shall thereupon terminate, except that such Stock Option, to
the extent then exercisable, or on such accelerated basis as the Compensation
Committee may determine, may, if such Termination of Employment is without
Cause, be exercised for the lesser of (A) in the case of a Non-Qualified Stock
Option, one year from the date of such Termination of Employment or the balance
12
of such Stock Option's term and (B) in the case of an Incentive Stock Option,
three months from the date of such Termination of Employment or the balance of
such Stock Option's term; provided, however, that if the optionee dies within
such one-year or three-month period, any unexercised Stock Option held by such
optionee shall notwithstanding the expiration of such one-year or three-month
period, continue to be exercisable to the extent to which it was exercisable at
the time of death for a period of one year from the date of such death or until
the expiration of the stated term of such Stock Option, whichever period is the
shorter. In the event of Termination of Employment for Cause, any unexercised
Stock Option held by such optionee shall expire immediately upon the giving to
the optionee of notice of such Termination of Employment. Unless otherwise
determined by the Compensation Committee, for the purposes of the Plan, "Cause"
shall mean (I) the conviction of the optionee for a felony under Federal law or
the law of the state in action occurred, (II) dishonesty in the course of the
optionee's employment duties or (III) willful and failure on the part of the
optionee to perform his duties in any material respect.
(x) Cashing Out of Stock Option. On receipt of written notice
of exercise and subject to confirmation of applicable accounting implications,
the Compensation Committee may elect to cash out all or any part of the shares
of Common Stock for which a Stock Option is being exercised by paying the
optionee an amount, in cash or Common Stock, equal to the excess of the Fair
Market Value of the Common Stock over the option price times the number of
shares of Common Stock for which the Stock Option is being exercised on the
effective date of such cash out.
(xi) Corporate Event Cash Out. The provisions of Section 8
below shall be applicable in the event of a Corporate Event as defined therein.
(b) Stock Awards. Subject to the terms of this Plan, the Compensation
Committee may grant Awards to individuals in the form of shares of Common Stock
of the Company and may place restrictions on such Awards as set forth in Section
6 below or may grant such shares of Common Stock without restrictions.
SECTION 6. Restricted Stock.
(a) Administration. Restricted Stock may be awarded either
alone, in addition to or in tandem with other Awards granted under the Plan. The
Compensation Committee shall determine the eligible persons to whom and the time
or times at which Restricted Stock shall be awarded, the number of shares of
Restricted Stock to be awarded, the number of shares of Restricted Stock to be
awarded to any person, the duration of the period (the "Restrictions Period")
during which, and the conditions under which receipt of the Common Stock will be
Restricted, and the other terms and conditions of the Award in addition to those
set forth in Section 6(b).
The Compensation Committee may condition the grant of
Restricted Stock upon the attainment of specified performance goals or such
other factors or criteria as the Compensation Committee shall determine, in its
sole discretion.
The provisions of Restricted Stock awards need not be the same
with respect to each recipient.
(b) Terms and Conditions. The shares of Restricted Stock
awarded pursuant to this Section 6 may, in the sole discretion of the
Compensation Committee, be subject to any of the following terms and conditions:
13
(i) Subject to the provisions of this Plan and the
Award agreement referred to in
Section 6(b)(v) below, Restricted Stock Awards may not be sold, assigned,
transferred, pledged or otherwise encumbered during the Restrictions Period and
a legend evidencing such restrictions shall, at the request of the Company or
the Compensation Committee and upon such language as the Company or the
Compensation Committee shall require, be inserted on any stock certificate
evidencing shares received under a Restricted Stock Award. At the expiration of
the Restrictions Period if such Participant has previously received stock
certificates with the above-referenced legend thereon with respect to the
referenced Restricted Stock Award, certificates for shares of Common Stock
without such legend shall, within a reasonable time following the request of the
Participant or his or her legal representative, be delivered to the Participant
or his or her legal representative, by the Company's transfer agent in a number
equal to the shares represented by the stock certificates previously received by
such Participant with respect to the referenced Restricted Stock Award. If the
Participant has not received certificates representing his or her Restricted
Stock Award by the end of the Restrictions Period, the Company shall, within a
reasonable time following the request of the Participant or his or her legal
representative, cause the Company's transfer agent to deliver to the Participant
or his or her legal representative stock certificates, without the
above-referenced legend appearing thereon, in a number equal to the number of
shares with respect to the referenced Restricted Stock Award.
(ii) Unless otherwise determined by the Compensation
Committee at grant, amounts equal to any dividends declared during the
Restrictions Period with respect to the number of shares covered by a Restricted
Stock Award will be paid to the Participant currently, or deferred and deemed to
be reinvested in additional Restricted Stock, or otherwise reinvested, all as
determined at or after the time of the Award by the Compensation Committee or,
if the Compensation Committee determines to allow the Participant to make the
election, at the election of the Participant.
(iii) Subject to the provisions of the Award
agreement and this Section 6, upon termination of a Participant's
employment with the Company and any Subsidiary or Affiliate for any reason
during the Restrictions Period for a given Award, the Restricted Stock in
question will vest, or be forfeited, in accordance with the terms and conditions
established by the Compensation Committee at grant.
(iv) The Compensation Committee may, at or after
grant, accelerate the vesting of all or any part of any Restricted Stock Award
and/or waive the deferral limitations for all or any part of such Award.
(v) Each Restricted Stock Award shall be confirmed
by, and subject to the terms of, a Restricted Stock agreement executed by the
Company and the Participant.
14
(c) Limitations and Additional Restrictions Applicable to
Restricted Stock Awards. Notwithstanding the provisions of this Section 6, any
awards of Restricted Stock under this Plan shall be subject to the provisions of
Section 14 below.
SECTION 7. Other Stock-Based Awards
Subject to all other applicable provisions of this Plan, including but
not limited to the provisions of Section 9 and Section 14 below, the
Compensation Committee may grant any other cash, stock or stock-related Awards
to any eligible individual under this Plan that the Compensation Committee deems
appropriate, including, but not limited to, stock appreciation rights, limited
stock appreciation rights, phantom stock Awards, the bargain purchase of Stock
and Stock bonuses. Any such benefits and any related agreements shall contain
such terms and conditions as the Compensation Committee deems appropriate
including, but not limited to the right to settle any stock appreciation right
by use of Common Stock. Such Awards and agreements need not be identical. The
Compensation Committee may provide a stock option deferral program or similar
types of plans designed to provide further deferral of taxable income to
Participants including the use of unfunded deferred compensation arrangements
that may provide for future payments to Participants in the form of Common Stock
or cash provided such programs or plans do not include re-pricing of Stock
Options, and such programs or plans shall be subject to the provisions of this
Plan, including but not limited to the provisions of Section 9 and Section 14
below. With respect to any benefit under which shares of Stock are or may in the
future be issued for consideration other than prior services, the amount of such
consideration shall not be less than the amount (such as the par value of such
shares) required to be received by the Company in order to comply with
applicable state law.
SECTION 8. Changes in Company's Capital Structure.
(a) Corporate Events. Notwithstanding the above, in the event of any of
the following:
(i) The Company is merged or consolidated with another
corporation or entity;
(ii) All or substantially all of the assets of the Company or
the Common Stock are acquired by another person or entity;
(iii) The reorganization or liquidation of the Company; or
(iv) The Company shall enter into a written agreement to
undergo an event described in clauses (i), (ii) or (iii) above,
(each (i), (ii), (iii) and (iv) above, a "Corporate Event") then, the Company
shall require the successor corporation or parent thereof to assume such
outstanding Awards; provided, however, the Company or the Compensation Committee
may, in lieu of requiring such assumption, provide that all outstanding Awards
15
shall terminate as of the consummation of such Corporate Event, and (x)
accelerate the exercisability of, or cause all vesting restrictions to lapse on,
all outstanding Awards to a date at least ten days prior to the date of such
Corporate Event and/or (y) provide that holders of Awards will receive a cash
payment in respect of cancellation of their Awards based on the amount (if any)
by which the per share consideration being paid for the Stock in connection with
such Corporate Event exceeds the applicable exercise price.
For purposes of this Section 8, an Award shall be considered assumed,
without limitation, if, at the time of issuance of the stock or other
consideration upon a Corporate Event, each holder of an Award would be entitled
to receive upon exercise of the award the same number and kind of shares of
stock or the same amount of property, cash or securities as such holder would
have been entitled to receive upon the occurrence of the transaction if the
holder had been, immediately prior to such transaction, the holder of the number
of shares of Stock covered by the Award at such time; provided, that if such
consideration received in the transaction is not solely equity securities of the
successor entity, the Company or the Compensation Committee may, with the
consent of the successor entity, provide for the consideration to be received
upon exercise of the Award to be solely equity securities of the successor
entity equal to the Fair Market Value of the per share consideration received by
holders of Stock in the Corporate Event.
(b) Effect of Change in Control. Except to the extent reflected in a
particular Award agreement or as determined by the Company or the Compensation
Committee, in the event of a Change in Control, notwithstanding any vesting
schedule with respect to an Award of Options or Restricted Stock, such Option
shall become immediately exercisable with respect to 100% of the shares subject
to such Option, and the Restrictions Period shall expire immediately with
respect to 100% of such shares of Restricted Stock. In the event of a Change in
Control, all other Awards shall become fully vested and or payable to the
fullest extent of any Award or portion thereof that has not then expired and any
restrictions with respect thereto shall expire. The Company and the Compensation
Committee shall have full authority and discretion to interpret this Section
8(b) and to implement any course of action with respect to any Award so as to
satisfy the intent of this provision. The obligations of the Company under the
Plan shall be binding upon any successor corporation or organization resulting
from the merger, consolidation or other reorganization of the Company, or upon
any successor corporation or organization succeeding to substantially all of the
assets and business of the Company.
SECTION 9. Term, Amendment and Termination.
The Plan will terminate on May 5, 2013. Under the Plan, Awards
outstanding as of May 5, 2013 shall not be affected or impaired by the
termination of the Plan.
The Board may not amend, alter or discontinue the Plan or an
Award in such manner so as to impair the rights of an optionee under a Stock
Option or a recipient of a Restricted Stock Award theretofore granted without
the optionee's or recipient's consent except such an amendment made to cause the
16
Award to qualify for the exemption provided by Rule 16b-3. If any proposed
amendment to the Plan would (i) materially increase the benefits accruing to
Participants under the Plan, (ii) materially increase the aggregate number of
securities that may be issued under the Plan or (iii) materially reduce the
requirements as to eligibility for participation in the Plan, then to the extent
required by applicable law or deemed necessary or advisable by the Compensation
Committee, such amendment shall be presented to the Company's stockholders for
approval. Notwithstanding the foregoing, however, the requirement that any such
amendments to the Plan be presented to the Company's stockholders for approval
shall not apply to such amendments as required by applicable law or to cause the
Plan to comply with generally accepted accounting principles.
Subject to the above provisions, the Board shall have
authority to amend the Plan to take into account changes in law and tax and
accounting rules, as well as other developments and to grant Awards which
qualify for beneficial treatment under such rules without stockholder approval.
Notwithstanding the above provisions, any changes or adjustments as described in
Section 3(b) above may be made without stockholder approval.
SECTION 10. Unfunded Status of Plan.
It is presently intended that the Plan constitute an
"unfunded" plan for incentive and deferred compensation. The Compensation
Committee may authorize the creation of trusts or other arrangements to meet the
obligations created under the Plan to deliver Common Stock or make payments;
provided, however, that, unless the Compensation Committee otherwise determines,
the existence of such trusts or other arrangements is consistent with the
"unfunded" status of the Plan. No provision of the Plan shall require the
Company, for the purpose of satisfying any obligations under the Plan, to
purchase assets or place any assets in a trust or other entity to which
contributions are made or otherwise to segregate any assets, nor shall the
Company maintain separate bank accounts, books, records or other evidence of the
existence of a segregated or separately maintained or administered fund for such
purposes. Holders shall have no rights under the Plan other than as unsecured
general creditors of the Company, except that insofar as they may have become
entitled to payment of additional compensation by performance of services, they
shall have the same rights as other employees under general law.
SECTION 11. General Provisions.
(a) Additional Provisions of an Award. The Compensation
Committee may require each person purchasing or receiving shares pursuant to an
Award to represent to and agree with the Company in writing that such person is
acquiring the shares without a view to the distribution thereof. The
certificates for such shares may include any legend which the Compensation
Committee deems appropriate to reflect any restrictions on transfer. All
certificates for shares of Common Stock or other securities delivered under the
Plan shall be subject to such stock transfer orders and other restrictions as
the Compensation Committee may deem advisable under the rules, regulations and
other requirements of the Commission, any stock exchange upon which the Common
Stock is then listed and any applicable Federal or state securities law, and the
Compensation Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(b) Privileges of Stock Ownership. Except as otherwise
provided in this Plan, no person shall be entitled to the privileges of stock
ownership in respect of shares of Common Stock which are subject to Awards
17
hereunder until such shares shall have been issued to such person.
(c) Government and Other Regulations. The obligation of the
Company to make payment of Awards in Stock or otherwise shall be subject to all
applicable laws, rules and regulations, and to such approvals by governmental
agencies as may be required. Notwithstanding any terms or conditions of any
Award to the contrary, the Company shall be under no obligation to offer to sell
or to sell and shall be prohibited from offering to sell or selling any shares
of Stock pursuant to an Award unless such shares have been properly registered
for sale pursuant to the Securities Act with the Securities and Exchange
Commission or unless the Company has received an opinion of counsel,
satisfactory to the Company, that such shares may be offered or sold without
such registration pursuant to an available exemption therefrom and the terms and
conditions of such exemption have been fully complied with. The Company shall be
under no obligation to register for sale under the Securities Act any of the
shares of Stock to be offered or sold under the Plan. If the shares of Stock
offered for sale or sold under the Plan are offered or sold pursuant to an
exemption from registration under the Securities Act, the Company may restrict
the transfer of such shares and may legend the Stock certificates representing
such shares in such manner as it deems advisable to ensure the availability of
any such exemption.
(d) No Restriction on Other Compensation Arrangements. Nothing
contained in the Plan shall prevent the Company or any Subsidiary or Affiliate
from adopting other or additional compensation arrangements for its employees.
(e) No Employment Right or Claim. The adoption of the Plan
shall not confer upon any employee any right to continued employment nor shall
it interfere in any way with the right of the Company or any Subsidiary or
Affiliate to terminate the employment of any employee at any time. No individual
shall have any claim or right to be granted an Award under the Plan, or, having
been selected for the grant of an Award, to be selected for the grant of any
other Award.
(f) Tax Withholding. No later than the date as of which an
amount first becomes subject to being included in the gross income of the
Participant for Federal income tax purposes with respect to any Award under the
Plan, the Participant shall pay to the Company, or make arrangements
satisfactory to the Company regarding the payment of, any Federal, state, local
18
or foreign taxes of any kind required by law to be withheld with respect to such
amount. If so determined by the Compensation Committee, withholding obligations
may be settled with Common Stock, including Common Stock that is part of the
Award that gives rise to the withholding requirement. The obligations of the
Company under the Plan shall be conditional on such payment or arrangements, and
the Company, its Subsidiaries and its Affiliates shall, to the extent permitted
by law, have the right to deduct any such taxes from any payment otherwise due
to the Participant. The Compensation Committee may establish such procedures as
it deems appropriate, including the making of irrevocable elections, for the
settlement of withholding obligations with Common Stock.
(g) Payments to Persons Other Than Participants. If any person
to whom any amount is payable under the Plan is unable to care for his affairs
because of illness or accident, or is a minor, or has died, then any payment due
to such person or his estate (unless a prior claim therefor has been made by a
duly appointed legal representative) may, if the Compensation Committee so
directs the Company, be paid to his spouse, child, relative, an institution
maintaining or having custody of such person, or any other person deemed by the
Compensation Committee to be a proper recipient on behalf of such person
otherwise entitled to payment. Any such payment shall be a complete discharge of
the liability of the Company therefor.
(h) No Liability of Compensation Committee Members. No member
of the Compensation Committee shall be personally liable by reason of any
contract or other instrument executed by such member or on his behalf in his
capacity as a member of the Compensation Committee nor for any mistake of
judgment made in good faith, and the Company shall indemnify and hold harmless
each member of the Compensation Committee and each other employee, officer or
director of the Company to whom any duty or power relating to the administration
or interpretation of the Plan may be allocated or delegated, against any cost or
expense (including counsel fees) or liability (including any sum paid in
settlement of a claim) arising out of any act or omission to act in connection
with the Plan unless arising out of such person's own fraud or willful bad
faith; provided, however, that approval of the Board shall be required for the
payment of any amount in settlement of a claim against any such person. The
foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company's
Certificate of Incorporation or By-Laws, as a matter of law, or otherwise, or
any power that the Company may have to indemnify them or hold them harmless.
(i) Reliance on Reports. Each member of the Compensation
Committee and each member of the Board shall be fully justified in relying,
acting or failing to act, and shall not be liable for having so relied, acted or
failed to act in good faith, upon any report made by the independent public
accountant of the Company and its Subsidiaries and upon any other information
furnished in connection with the Plan by any person or persons other than
himself.
(j) Relationship to Other Benefits. No payment under the Plan
shall be taken into account in determining any benefits under any pension,
retirement, profit sharing, group insurance or other benefit plan of the Company
or any Subsidiary except as otherwise specifically provided in such other plan.
(k) Expenses. The expenses of administering the Plan shall be
borne by the Company and its Subsidiaries.
(l) Pronouns. Masculine pronouns and other words of masculine
gender shall refer to both men and women.
(m) Titles and Headings. The titles and headings of the
sections in the Plan are for convenience of reference only, and in the event of
any conflict, the text of the Plan, rather than such titles or headings, shall
19
control.
(n) Termination of Employment. For all purposes herein, a
person who transfers from employment or service with the Company to employment
or service with a Subsidiary or vice versa shall not be deemed to have
terminated employment or service with the Company or a Subsidiary.
(o) Other Procedures.The Compensation Committee shall
establish such procedures as it deems appropriate for a Participant to designate
a beneficiary to whom any amounts payable in the event of the Participant's
death are to be paid.
(p) Governing Law. The Plan and all Awards made and actions
taken thereunder shall be governed by and construed in accordance with the laws
of the State of Delaware.
SECTION 12. Effective Date of Plan.
Provided the Plan is approved by the Company's stockholders,
the Plan shall be effective on May 5, 2003, the date the Plan was submitted to
the Company's stockholders for vote.
SECTION 13. Non-Employee Director Stock Options and Non-Employee Director
Shares.
(a) Each director of the Company who is not otherwise an
employee of the Company or any Subsidiary or Affiliate from and after the
effective date of the Plan (a "Non-Employee Director") shall, on each December
31 during such Non-Employee Director's term, automatically be granted
Non-Qualified Stock Options to purchase 500 shares of Common Stock having an
exercise price per share equal to 100% of the Fair Market value of the Common
Stock at the Date of Grant of such Non-Qualified Stock Option. Each such
Non-Employee Director, upon joining the Board, shall also be awarded 500 shares
of Common Stock ("Non-Employee Director Shares"). Non-Employee Director Shares
shall be fully vested upon grant, but may not be sold, pledged, or otherwise
transferred in any manner during a Non-Employee Director's term and for one year
thereafter. The Compensation Committee may require that such shares- bear an
appropriate legend evidencing such transfer restrictions.
(b) An automatic Non-Employee Director Stock Option shall be
granted hereunder only if as of each Date of Grant (or, in the case of any
initial grant, from and after the effective date of the Plan) the Non-Employee
Director (i) is not otherwise an employee of the Company or any Subsidiary or
Affiliate, (ii) has not been an employee of the Company or any Subsidiary or
Affiliate for any part of the preceding fiscal year and (iii) has served on the
Board continuously since the commencement of his term.
(c) Each holder of a Stock Option granted pursuant to this
Section 13 shall also have the rights specified in Section 5(a).
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(d) In the event that the number of shares of Common Stock
available for future grant under the Plan is insufficient to make all automatic
grants required to be made on such date, then all Non-Employee Directors
entitled to a grant on such date shall share ratably in the number of options on
shares available for grant under the Plan.
(e) Except as expressly provided in this Section 13, any Stock
Option granted hereunder shall be subject to the terms and conditions of the
Plan as if the grant were made pursuant to Section 5(a) hereof.
(f) Awards granted under this Section 13 shall be subject to
any applicable restrictions set forth in Section 14(a) below.
SECTION 14. Award Limitations.
(a) General Restriction. Any provision of this Plan to the
contrary notwithstanding, in no event shall any Awards or Award of Non-Employee
Director Shares be made, and in no event shall any option be granted or
exercised, if the grant or exercise of such Award or Option, would result in a
violation of the Common Stock ownership limits or any other requirements
necessary for qualification of the Company as a "real estate investment trust"
for federal income tax purposes. For purposes of the Plan, in determining
whether such limits would be violated, Participants shall be deemed to own
beneficially any shares of Common Stock subject to unexercised Options, whether
or not vested. Any such Award or grant or exercise of Options, if made, shall be
null and void and shall have no legal effect. In addition, the Plan and any
Awards or Options granted hereunder shall be subject in all events to, and shall
in no event violate (i) the "Ownership Limit" as set forth in the Company's
Amended and Restated Certificate of Incorporation, (ii) the provisions of any
applicable rule or regulation of the Securities and Exchange Commission, the New
York Stock Exchange and/or such other exchange upon which the Company's stock
may be traded or (iii) any provision of any federal or state law, rule or
regulation.
(b) Restrictions on Stock Awards. Stock Awards
granted from the Plan must be
subject to the following guidelines:
(i) Stock Awards may be granted from the Plan in lieu of cash
compensation; and
(ii) Except for Stock Awards falling within the 5% Authorization
(defined below), Stock Awards that are granted from the Plan other
than in lieu of cash compensation (A) pursuant to a stock award
program or (B) independently, must provide for a vesting period of
a minimum of three (3) years or may provide for a vesting period
of less than three (3) years but at least one (1) year if the
restrictions period placed upon the Stock Award is performance
based.
Up to a maximum of Stock Awards equivalent to 5% of the total shares available
for grant under the Plan as set forth in the first sentence of Section 3(a)
21
above (the "5% Authorization"), Stock Awards may be granted to officers and
employees of the Company other than in lieu of cash compensation and without the
necessity of compliance with the vesting or performance based criteria set forth
directly above.