DEF 14A of Seritage Growth Properties, Apr 23, 2024

DEF 14A of Seritage Growth Properties

Filed Apr 23, 2024 · FY20230001174947-24-000573

Open on EDGAR

  1. Compensation Committee

    | ● | Reviews and approves employment agreements, severance arrangements and change in control arrangements affecting the CEO and other senior executives; and |

  2. Mark Wilsmann

    | ● | for executive officers, shares held as restricted stock units that are scheduled to vest within 60 days of April 17, 2024. Unless otherwise indicated, the trustees and executive officers listed in the table have sole voting and investment power with respect to the shares listed next to their respective names. Information is provided for reporting purposes only and should not be construed as an admission of actual beneficial ownership. |

  3. Mark Wilsmann

    | Key Changes to the Executive Compensation Program in 2023 | 2023 Business Highlights | | Amendments to Employment Agreements. Each of our NEOs is party to an employment or letter agreement. On October 23, 2023, the Compensation Committee approved employment agreement amendments for Messrs. Fernand and Dinenberg, and, on December 28, 2023, the Compensation Committee approved an employment agreement amendment for Ms. Olshan, each of which included revisions to their compensation structures designed to retain our executives as the Company continues to execute on its Plan of Sale. | The Company, led by our management team, continued to make significant progress in the disposition of its assets pursuant to the Plan of Sale, despite challenging market conditions, generating $839.4 million of gross proceeds from the sale of 71 wholly-owned and joint venture assets last year (plus an additional $48.7 million of gross proceeds from the sale of five assets initiated during 2023 but completed subsequent to year-end through March 22, 2024). The Company also sustained its momentum on the Plan of Sale, with approximately $70 million of assets either under contract or with accepted offers through March 22, 2024. In 2023, we also prepaid $670 million of our $1.6 billion term loan facility and, in connection therewith, extended the loan’s maturity date from 2023 to 2025. Subsequent to year-end we made an additional prepayment of $30 million, which brought our total repayment to $1.27 billion through March 22, 2024. | | New Clawback Policy. On November 16, 2023, the Board of Trustees adopted the 2023 Clawback Policy, which provides for the recoupment of certain executive compensation in the event of an accounting restatement and is designed to comply with SEC and NYSE rules that became effective in 2023. The 2023 Clawback Policy supplements the Company’s existing clawback policy, which was adopted in March 2018. | |

  4. Mark Wilsmann

    The amended employment agreements with our NEOs set the parameters of the pay elements described above. The base salary and other compensation levels were set in consideration of the individual’s roles, responsibilities, experience, expected amount of impact or influence on overall Company performance, and industry standards. The chosen mix of elements is designed to provide appropriate levels of stability and motivation for the NEOs to execute on the Company’s strategic goals. These compensation elements and levels are reviewed annually by the Compensation Committee. Base Salary The annual base salaries for our NEOs at the beginning of 2023 were: $1,000,000, $425,000, and $400,000 for Ms. Olshan, Mr. Fernand and Mr. Dinenberg, respectively. While there were no salary increases for our NEOs in 2023, the employment agreement amendments approved by the Compensation Committee in 2023 provide that each NEO’s annual base salary will automatically increase by 5% each year during the NEO’s term of employment beginning on March 16, 2024. This annual increase was agreed upon to account for inflation, to provide enhanced compensation certainty over the short-term period during which they are being asked to continue executing on the Plan of Sale and in recognition of the fact that base salary levels have not been increased in the normal course during the last three years. Annual Bonus The 2023 annual bonus program follows the same approach adopted by the Compensation Committee in 2022, which provided that eligible employees who are actively employed on the payment date would receive a bonus in an amount equal to the employee’s target annual bonus and that there would be no performance metrics applicable to the annual bonus program. This approach was continued as a term in the employment agreement amendments approved by the Compensation Committee in 2023 in order to continue providing the NEOs with certainty regarding their compensation at market competitive levels and to allow them to remain dedicated and incentivized to continue in their roles in the near-term. The annual bonuses included in the following table were paid to the NEOs on March 15, 2024, in respect of service in 2023. The amounts of these bonuses reflect what was previously considered the executive’s “target” annual bonus amount. There were no annual bonus increases for our NEOs in 2023. The employment agreement amendments approved by the Compensation Committee in 2023 maintain the applicable percentages of base salary that are used to calculate the annual bonuses, but the annual bonus amount for each NEO will automatically increase by 5% each year during the NEO’s term of employment, beginning on March 16, 2024, in light of the corresponding annual base salary increases described above.

  5. Mark Wilsmann

    | | Amount of Annual Bonus for 2023 | | | Name | As Percentage of Base Salary | As Dollar Amount | | Andrea L. Olshan | 140% | $1,400,000 | | Matthew Fernand | 75% | $318,750 | | Eric Dinenberg | 75% | $300,000 |

  6. Mark Wilsmann

    Retention Bonus Program The amended employment agreements with Messrs. Fernand and Dinenberg approved by the Compensation Committee in 2023 extended the retention bonus program previously established by the Compensation Committee in March 2022 and which were otherwise set to expire in March 2024. These retention bonus opportunities were granted to Messrs. Fernand and Dinenberg in recognition of the contributions they made, and the contributions the Compensation Committee expected them to continue making, to the success of the Company, including in the execution of its Plan of Sale, and provide for payment on regular time-based milestones, with larger payments being made the end of each 12-month compensation period (as defined below). When making its decision to extend the retention bonus program, the Compensation Committee considered the adverse incentives for Messrs. Fernand and Dinenberg if the program would have expired and acknowledged that the program’s continuation plays a key role in retaining their services and motivating their efforts on behalf of the Company. Under their employment agreement amendments, the retention bonus opportunities granted to Messrs. Fernand and Dinenberg equal $796,875 and $750,000, respectively, for the compensation period beginning March 16, 2023, and ending March 15, 2024. For each “compensation period” thereafter (each of which begins on March 16th of a particular calendar year and ends on March 15th of the following calendar year), Messrs. Fernand and Dinenberg will be eligible to earn an amount equal to 105% of the retention bonus amount for the immediately preceding compensation period. During each compensation period, Messrs. Fernand and Dinenberg will continue to receive 25% of his retention bonus amount on each July 15th and November 15th and 50% of his retention bonus amount on March 15th, subject in each case to his continued active employment in good standing through the payment date. Annual Long-Term Incentive Awards 2023 Long-Term Incentive Awards. In March 2022, the Compensation Committee determined that awards granted in 2023 and in subsequent years would be comprised of unvested cash awards, in lieu of any further equity awards. The amount of each unvested cash award will equal to the amount that was previously the executive’s annual target equity award value. The Compensation Committee believes this shift away from equity grants to be in the best interest of the Company’s shareholders because it limits the potential dilution of shareholder interests due to the executive compensation program while the Plan of Sale process is ongoing and provides compensation-related security to the executives during this critical time, which the Compensation Committee believes is essential to its retention goal. Accordingly, an unvested cash award grant to the NEOs was approved by the Compensation Committee on March 15, 2023, which provided for annual vesting in substantially equal amounts on the first three anniversaries of the grant date, subject to the NEO’s continued employment through the applicable vesting date. Under their employment agreement amendments approved by the Compensation Committee in 2023, the NEOs continue to be entitled to receive their annual long-term incentive awards in the form of unvested cash awards equal in value to what was their respective target equity award value, with each annual grant occurring on March 15th of the applicable year during their term of employment. The target long-term incentive award values in 2023 were $2,000,000, $378,750, and $300,000, for Ms. Olshan, Mr. Fernand, and Mr. Dinenberg, respectively. Under their employment agreement amendments, for each compensation period beginning March 16, 2024, and thereafter, Mr. Fernand’s and Mr. Dinenberg’s target long-term incentive award value will equal 105% of the target long-term incentive award value for the immediately preceding compensation period. Beginning with the long-term incentive award on March 15, 2024, one-third of the awards will vest on the grant date, one-third will vest on the first anniversary of the grant date, and one-third will vest on the second anniversary of the grant date, subject to the continued employment of the executive through each vesting date. Under her employment agreement amendment, the vesting schedule applicable to Ms. Olshan’s unvested cash award granted on March 15, 2023, was modified to provide for vesting as to one-third of the award on March 15, 2024, one-third of the award on December 31, 2024, and one-third of the award on December 31, 2025, subject to her continued employment through each vesting date. Ms. Olshan’s employment agreement amendment also provides that all future unvested cash awards granted to her will vest as to one-third of the award on the grant date, one-third of the award on December 31st of the calendar year in which the grant date occurs, and one-third of the award on December 31st of the calendar year immediately following the calendar year in which the grant date occurs, subject to her continued employment through each vesting date. 2020 Performance-Vested Awards. The performance goals for the 2020 performance-based vesting restricted stock unit (“RSU”) awards, the performance period for which began in 2021 and ended December 31, 2023 (including annual performance-based RSUs granted to Messrs. Fernand and Dinenberg and the performance-based RSUs granted to Ms. Olshan in connection with the commencement of her employment in 2021), were not achieved. Therefore, the underlying RSUs were forfeited by the NEOs. Employee Benefit Programs In 2023, our NEOs were eligible to participate in the tax-qualified 401(k) retirement plan sponsored by the Company, as well as other employee benefit plans, in the same manner as all other Company employees. Pursuant to the 401(k) plan, employees are eligible to contribute to an individual account on a tax-deferred basis. If an employee participates in the 401(k) plan, the Company makes a matching contribution to the employee’s 401(k) account in an amount of up to 100% of the first 3% of the employee’s eligible compensation and up to 50% of the next 2% of the employee’s eligible compensation (subject to applicable statutory limitations). Each of the eligible NEOs contributed to the 401(k) plan and received a related matching contribution. Participants are fully vested in both their own contribution and the matching contributions at all times. We did not provide our NEOs with any benefits or perquisites that are not provided to our employees generally. Change in Control and Termination Arrangements The amended employment agreements include terms that provide the NEOs with certain severance benefits in the event of a termination initiated by the Company without Cause or initiated by the NEO for Good Reason (as such terms are defined in the applicable amended employment agreement). More detailed descriptions of the employment termination and change in control provisions of the employment agreements and outstanding equity awards are set forth below under the heading “Potential Payments Upon Termination or Change in Control.” Clawback Policies

  7. Mark Wilsmann

    In November 2023, the Board of Trustees adopted a clawback policy (our “2023 Clawback Policy”) to comply with the finalized and effective SEC and NYSE rules (Section 10D of the Exchange Act, Rule 10D-1 of the Dodd Frank Wall Street Reform and Consumer Protection Act promulgated thereunder and Section 303A.14 of the NYSE Listed Company Manual). Pursuant to our 2023 Clawback Policy, in the event of an “accounting restatement” (as defined in the 2023 Clawback Policy), our “covered executives” (as defined in the Clawback Policy), including our NEOs, must reimburse us for any “erroneously awarded compensation” (as defined in the 2023 Clawback Policy). Erroneously awarded compensation includes the amount of incentive compensation received by a covered executive during the three fiscal years preceding the required accounting restatement based on our achievement of “financial reporting measures” (as defined in the 2023 Clawback Policy) in excess of the amount that the covered executive would have received based on the restated financial reporting measures. The Compensation Committee has the authority to interpret and make all determinations under the 2023 Clawback Policy. In addition, the Company continues to maintain its existing incentive compensation clawback policy adopted in March 2018 (our “2018 Clawback Policy”). Our 2018 Clawback Policy allows the Company to recoup certain compensation paid to a current or former NEO or other persons covered by the policy, if the Company is required to undertake a material restatement (occurring after the effective date of our 2018 Clawback Policy) of its financial statements that have been filed with the SEC. Compensation that may be recoverable includes incentive-based cash compensation, equity compensation, and equity-based compensation (including stock options, restricted stock, RSUs, or other forms of incentive awards) received by that employee during the three-year period preceding the publication of the restated financial statements that the Compensation Committee or Board determines was in excess of the amount that such employee would have received if such compensation had been determined based on the financial results reported in the restated financial statements. In making its determination to recoup compensation from a covered employee, the Compensation Committee, or the Board, may take into account all factors it considers relevant under the circumstances, including, for an officer, whether or not the officer engaged in embezzlement, fraud, willful misconduct, breach of fiduciary duty, or other willful action or willful inaction that materially contributed to or resulted in the events that led to the restatement.

  8. COMPENSATION OF EXECUTIVE OFFICERS AND TRUSTEES

    | Name and Principal Position | Year | Salary | Bonus | Stock Awards | Non-Equity Incentive Plan Compensation | All other compensation | Total | | | | ($) | ($)(1)(2) | ($) | ($) | ($)(3) | ($) | | Andrea L. Olshan | 2023 | 1,000,000 | 1,400,000 | - | - | 4,615 | 2,404,615 | | Chief Executive Officer and | 2022 | 1,000,000 | 1,400,000 | 1,999,993 | - | 11,269 | 4,411,262 | | President | 2021 | 784,615 | 1,000,000 | 3,737,493 | - | 13,500 | 5,535,608 | | John Garilli(4) | 2023 | - | - | - | - | - | - | | Interim Chief Financial Officer | 2022 | - | - | - | - | - | - | | Matthew E. Fernand | 2023 | 425,000 | 1,115,625 | - | - | 13,200 | 1,553,825 | | Chief Legal Officer and | 2022 | 425,000 | 717,188 | 424,566 | - | 12,200 | 1,578,954 | | Corporate Secretary | 2021 | 425,000 | 215,000 | 122,674 | 424,575 | 13,500 | 1,200,749 | | Eric Dinenberg | 2023 | 400,000 | 1,050,000 | - | - | 13,200 | 1,463,200 | | Chief Operating Officer | 2022 | 400,000 | 675,000 | 399,594 | - | 12,200 | 1,486,794 | | | 2021 | 364,230 | 110,000 | 429,933 | 399,600 | 13,500 | 1,317,263 |

  9. Employment Agreements

    | (3) The dollar amounts reported in column (e) represent the average amount of “compensation actually paid” to Mr. Schall, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual average amount of compensation earned by or paid to the Mr. Schall during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made Mr. Schall’s total compensation for each year to determine the compensation actually paid, using the same methodology described above in footnote 2: |