Exhibit 10.1
CALIFORNIA REAL ESTATE INVESTMENT TRUST
1997 LONG-TERM INCENTIVE SHARE PLAN
CALIFORNIA REAL ESTATE INVESTMENT TRUST
1997 LONG-TERM INCENTIVE SHARE PLAN
ARTICLE 1. ESTABLISHMENT, PURPOSE AND DURATION
1.1 Establishment of the Plan. On May 23, 1997, the Board of Trustees
of California Real Estate Investment Trust (the "Company") adopted, subject to
the approval of shareholders, an incentive share compensation plan known as the
"1997 Long-Term Incentive Share Plan" (hereinafter referred to as the "Plan"),
which permits the grant of Incentive Share Options, Nonqualified Share Options,
Share Appreciation Rights, Restricted Shares, Performance Units, Performance
Shares and Share Units. The Plan is designed to comply with the
performance-based compensation exemption under the proposed regulations to
Internal Revenue Code Section 162(m) issued by the Department of Treasury.
1.2 Purpose of the Plan. The purpose of the Plan is to promote the
success of the Company and its Subsidiaries by providing incentives to Eligible
Individuals that will link their personal interests to the long-term financial
success of the Company and its Subsidiaries and to growth in shareholder value.
The Plan is designed to provide flexibility to the Company and its Subsidiaries
in their ability to motivate, attract, and retain the services of Eligible
Individuals upon whose judgment, interest, and special effort the successful
conduct of their operations is largely dependent.
1.3 Duration of the Plan. The Plan commences on the date on which
shareholders first approve the Plan, and shall remain in effect, subject to the
right of the Board of Trustees to terminate the Plan at any time pursuant to
Article 13 herein, until all Shares subject to it shall have been purchased or
acquired according to the provisions herein. However, in no event may an Award
be granted under the Plan on or after the tenth anniversary of the effective
date of the Plan.
ARTICLE 2. DEFINITIONS AND CONSTRUCTION
2.1 Definitions. Whenever used in the Plan, the following terms shall
have the meanings set forth below and, when the meaning is intended, the initial
letter of the word is capitalized:
(a) "Award" or "Awards" means, individually or collectively, a
grant under this Plan of Incentive Share Options, Nonqualified
Share Options, Share Appreciation Rights, Restricted Shares,
Performance Units, Performance Shares or Share Units.
(b) "Award Agreement" means the agreement required under Article 3
evidencing an Award under this Plan.
(c) "Beneficial Owner" shall have the meaning ascribed to such
term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.
(d) "Board" or "Board of Trustees" means the Board of Trustees of
the Company.
(e) "Cause" means the occurrence of any one of the following:
(i) The willful and continued failure by a Participant to
substantially perform his/her duties (other than any such
failure resulting from the Participant's disability),
after a written demand for substantial performance is
delivered to the Participant that specifically identifies
the manner in which the Company or any of its
Subsidiaries, as the case may be, believes that the
1
Participant has not substantially performed his/her
duties, and the Participant has failed to remedy the
situation within ten (10) business days of receiving such
notice; or
(ii) the Participant's conviction for committing a felony in
connection with the employment or service relationship;
or
(iii) the willful engaging by the Participant in gross
misconduct materially and demonstrably injurious to the
Company or any of its Subsidiaries. However, no act, or
failure to act, on the Participant's part shall be
considered "willful" unless done, or omitted to be done,
by the Participant not in good faith and without
reasonable belief, that his/her action or omission was in
the best interest of the Company or any of its
Subsidiaries.
(f) "Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs
shall have been satisfied:
(i) any Person (other than Veqtor Finance Company, LLC or its
affiliates as that term is defined under the rules and
regulations promulgated under the Exchange Act, a trustee
or other fiduciary holding securities under an employee
benefit plan of the Company or any of its Subsidiaries,
or a corporation owned directly or indirectly by the
shareholders of the Company in substantially the same
proportions as their ownership of Shares of the Company),
is or becomes the Beneficial Owner, directly or
indirectly, of 20% or more of the Voting Securities of
the Company;
(ii) the Board shall at any time consist of a majority of
individuals (the "New Majority") who where elected or
appointed Trustees of the Company without the approval of
a majority of the Trustees either (A) in office prior to
the election or appointment of the first of the Trustees
comprising the New Majority, or (B) appointed by or
elected with the approval of such Trustees; or
(iii)the shareholders of the Company approve (A) a plan of
complete liquidation of the Company; or (B) an agreement
for the sale or disposition of all or substantially all
the Company's assets; or (C) a merger or consolidation of
the Company with any other corporation, other than a
merger or consolidation which would result in the Voting
Securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities
of the surviving entity), at least 50% of the combined
voting power of the Voting Securities of the Company (or
such surviving entity) outstanding immediately after such
merger or consolidation.
However, in no event shall a Change in Control be deemed to
have occurred, with respect to a Participant, if the
Participant is part of a purchasing group which consummates
the Change in Control transaction. The Participant shall be
deemed "part of a purchasing group..." for purposes of the
preceding sentence if the Participant is an equity participant
or has agreed to become an equity participant in the
purchasing company or group (except for (i) passive ownership
of less than 5% of the combined voting power of the purchasing
company or (ii) ownership of equity participation in the
purchasing company or group which is otherwise not deemed to
be significant, as determined prior to the Change in Control
by a majority of the nonemployee continuing members of the
Board).
(g) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(h) "Committee" means the committee appointed by the Board to
administer the Plan pursuant to Article 3 herein.
2
(i) "Common Shares" means the class A common shares, per value
$1.00 per share, of beneficial interest in the Company.
(j) "Company" means California Real Estate Investment Trust, a
California trust, or any successor thereto.
(k) "Covered Employee" means any Participant designated prior to
the grant of Restricted Shares, Performance Units or
Performance Shares by the Committee who is or may be a
"covered employee" within the meaning of Section 162(m)(3) of
the Code in the year in which such Restricted Shares,
Performance Units or Performance Shares are taxable to such
Participant.
(l) "Eligible Individual" means an employee of the Company or any
of its Subsidiaries, including an employee who is an officer
or a Trustee of the Company or any of its Subsidiaries, or a
consultant or service provider to the Company or any of its
Subsidiaries who, in the opinion of the Committee, can
contribute significantly to the growth and profitability of
the Company and its Subsidiaries.
"Eligible Individual" also may include any other employee,
consultant or service provider, identified by the Committee,
in special situations involving extraordinary performance,
promotion, retention, or recruitment.
(m) "Election Form" means the form under which a Participant
elects to receive Shares granted under a Share Unit Award upon
the occurrence of certain events.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(o) "Fair Market Value" means the closing price of the Shares on a
securities exchange, or if the Shares were not traded on an
exchange, the average of the highest price and lowest price at
which the Shares were traded, as reported on the Nasdaq
National Market, on the relevant date, or on the most recent
date on which the Shares were traded prior to such date.
(p) "Incentive Share Option" or "ISO" means an option to purchase
Shares, granted to a Participant pursuant to Article 6 herein,
which is designated as an incentive share option and is
intended to meet the requirements of Section 422 of the Code.
(q) "Nonqualified Share Option" or "NQSO" means an option to
purchase Shares, granted to a Participant pursuant to Article
6 herein, which is not intended to be an Incentive Share
Option.
(r) "Option" or "Options" means an Incentive Share Option or a
Nonqualified Share Option.
(s) "Option Agreement" means an Award Agreement evidencing an
Option Award granted under Article 6 herein.
(t) "Outside Trustee" means any Trustee who qualifies as an
"outside director" as that term is defined in Code Section
162(m) and the regulations issued thereunder.
(u) "Participant" means an Eligible Individual who has been
granted an Award under the Plan.
(v) "Performance Share" means an Award, designated as a
performance share, granted to a Participant pursuant to
Article 9 herein.
(w) "Performance Unit" means an Award, designated as a performance
unit, granted to a Participant pursuant to Article 9 herein.
3
(x) "Period of Restriction" means the period during which the
transfer of Restricted Shares is restricted, during which the
Participant is subject to a substantial risk of forfeiture,
pursuant to Article 8 herein.
(y) "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d)
and 14(d) thereof, including a "group" as defined in Section
13(d) thereof.
(z) "Plan" means this Long-Term Incentive Share Plan of the
Company, as herein described and as hereafter from time to
time amended.
(aa) "Pooling Transaction" means an acquisition of the Company in a
transaction which is intended to be treated as a "pooling of
interests" under generally accepted accounting principles.
(bb) "Restricted Shares" means an Award granted to a Participant
pursuant to Article 8 herein.
(cc) "Restricted Share Agreement" means an Award Agreement
evidencing a Restricted Share Award granted under Article 8
herein.
(dd) "Subsidiary" means any corporation of which more than 50% (by
number of votes) of the combined voting power of outstanding
securities is owned, directly or indirectly, by the Company.
(ee) "Share" or "Shares" means the Common Shares.
(ff) "Share Unit" means a derivative interest in Shares granted to
a Participant pursuant to Article 9 herein which is credited
to a bookkeeping account and paid out on a one-for-one basis
in Shares.
(gg) "Share Appreciation Right" or "SAR" means an Award, designated
as a Share Appreciation Right, granted to a Participant
pursuant to Article 7 herein.
(hh) "Trustee" means a member of the Board.
(ii) "Voting Securities" means Shares or securities of any class or
classes of securities of the Company, the holders of which are
ordinarily, in the absence of contingencies, entitled to elect
a majority of the Trustees.
2.2 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine, the plural shall
include the singular, and the singular shall include the plural.
2.3 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
ARTICLE 3. ADMINISTRATION
3.1 The Committee. The Plan shall be administered by the Board or by a
committee (the "Committee") consisting of not less than two Trustees who shall
be appointed from time to time by, and shall serve at the discretion of, the
Board of Trustees. To the extent required to comply with Rule 16b-3 under the
Exchange Act, each member of the Committee shall qualify as a "Non-Employee
Director" as defined in Rule 16b-3 or any successor definition adopted by the
Securities and Exchange Commission or Awards made under the Plan will be made in
accordance with another available exception, including approval by the full
Board or Trustees or the shareholders. To the extent required to comply with
Code Section 162(m), each member of the Committee also shall be an Outside
Trustee.
4
3.2 Authority of the Committee. Subject to the provisions of the Plan,
the Committee shall have full power to construe and interpret the Plan; to
establish, amend or waive rules and regulations for its administration; to
accelerate the exercisability of any Award or the end of a performance period or
the termination of any Period of Restriction or any Award Agreement, or any
other instrument relating to an Award under the Plan; and (subject to the
provisions of Article 13 herein) to amend the terms and conditions of any
outstanding Option, Share Appreciation Right or other Award to the extent such
terms and conditions are within the discretion of the Committee as provided in
the Plan. Notwithstanding the foregoing, the Committee shall have no authority
to adjust upwards the amount payable to a Covered Employee with respect to a
particular Award, to take any of the foregoing actions or to take any other
action to the extent that such action or the Committee's ability to take such
action would cause any Award under the Plan to any Covered Employee to fail to
qualify as "performance-based compensation" within the meaning of Code Section
162(m)(4) and the regulations issued thereunder. Also notwithstanding the
foregoing, no action of the Committee (other than pursuant to Section 4.3 hereof
or Section 9.6 hereof) may, without the consent of the person or persons
entitled to exercise any outstanding Option or Share Appreciation Right or to
receive payment of any other outstanding Award, adversely affect the rights of
such person or persons.
3.3 Selection of Participants. The Committee shall have the authority
to grant Awards under the Plan, from time to time, to such Eligible Individuals
(including officers and Trustees who are employees) as may be selected by it.
The Committee shall select Participants from among those who they have
identified as being Eligible Individuals.
3.4 Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders or
resolutions of the Board of Trustees shall be final, conclusive and binding on
all persons, including the Company and its Subsidiaries, its shareholders,
employees, and Participants and their estates and beneficiaries, and such
determinations and decisions shall not be reviewable.
3.5 Delegation of Certain Responsibilities. The Committee may, in its
sole discretion, delegate to an officer or officers of the Company the
administration of the Plan under this Article 3; provided, however, that no such
delegation by the Committee shall be made with respect to the administration of
the Plan as it affects officers of the Company or its Subsidiaries and provided
further that the Committee may not delegate its authority to correct errors,
omissions or inconsistencies in the Plan. The Board or the Committee may
delegate to the Chief Executive Officer of the Company its authority under this
Article 3 to grant Awards to Eligible Individuals who are not Covered Employees
or who are not officers or Trustees of the Company or its Subsidiaries subject
to the reporting requirements of Section 16(a) of the Exchange Act. All
authority delegated by the Board or the Committee under this Section 3.5 shall
be exercised in accordance with the provisions of the Plan and any guidelines
for the exercise of such authority that may from time to time be established by
the Board or the Committee.
3.6 Procedures of the Board or the Committee. All determinations of the
Board or the Committee shall be made by not less than a majority of its members
present at the meeting (in person or otherwise) at which a quorum is present. A
majority of the entire Board or the Committee shall constitute a quorum for the
transaction of business. Any action required or permitted to be taken at a
meeting of the Board or the Committee may be taken without a meeting if a
unanimous written consent, which sets forth the action, is signed by each member
of the Board or the Committee and filed with the minutes for proceedings of the
Board or the Committee. Service on the Board or the Committee shall constitute
service as a Trustee of the Company so that members of the Board or the
Committee shall be entitled to indemnification, limitation of liability and
reimbursement of expenses with respect to their services as members of the Board
or the Committee to the same extent that they are entitled under the Company's
Certificate of Incorporation and California law for their services as Trustees
of the Company.
3.7 Award Agreements. Each Award under the Plan shall be evidenced by
an Award Agreement which shall be signed by an authorized officer of the Company
and by the Participant, and shall contain such terms and conditions as may be
approved by the Board or the Committee. Such terms and conditions need not be
the same in all cases.
5
3.8 Rule 16b-3 Requirements. Notwithstanding any other provision of the
Plan, the Board or the Committee may impose such conditions on any Award
(including, without limitation, the right of the Board or the Committee to limit
the time of exercise to specified periods) as may be required to satisfy the
requirements of Rule 16b-3 (or any successor rule) under the Exchange Act ("Rule
16b-3").
ARTICLE 4. STOCK SUBJECT TO THE PLAN
4.1 Number of Shares. The maximum number of Shares that may be made the
subject of Awards granted under the Plan is two million (2,000,000) reduced by
the number of Shares made the subject of Awards under the Company's 1997
Non-Employee Trustee Share Plan; provided, however, that the maximum number of
Shares that may be the subject of Awards granted to any Eligible Individual
during the term of the Plan may not exceed 500,000 Shares and the maximum amount
payable in cash to any Eligible Individual with respect to any Performance
Period pursuant to any Performance Unit or Performance Share Award shall be
$1,000,000. Upon a change in capitalization or authorized shares (as described
in Section 4.3) the maximum number of Shares shall be adjusted in number and
kind pursuant to Section 4.3. The Company shall reserve for the purposes of the
Plan, out of its authorized but unissued Shares or out of Shares held in the
Company's treasury, or partly out of each, the number of Shares as shall be
determined by the Board. Upon the granting of an Award, the number of Shares
available under Section 4.1 for the granting of further Awards shall be reduced
as follows:
(a) In connection with the granting of an Award (other than
the granting of a Performance Unit denominated in dollars), the number of Shares
shall be reduced by the number of Shares in respect of which the Award is
granted or denominated.
(b) In connection with the granting or a Performance Unit
denominated in dollars, the number of Shares shall be reduced by an amount equal
to the quotient of (a) the dollar amount in which the Performance Unit is
denominated, divided by (b) the Fair Market value of a Share on the date the
Performance Unit is granted.
4.2 Lapsed Awards. If any Award (other than Restricted Shares) granted
under this Plan terminates, expires, or lapses for any reason, any Share subject
to such Award again shall be available for the grant of an Award under the Plan,
subject to Section 7.2 herein.
4.3 Adjustments in Authorized Shares. In the event of any merger,
reorganization, consolidation, recapitalization, separation, liquidation, share
dividend, split-up, share combination, or other change in affecting the
Company's Common Shares, such adjustment shall be made in the number and class
of Shares which may be delivered under the Plan, and in the number and class of
and/or price of Shares subject to outstanding Options, Share Appreciation
Rights, Restricted Share Awards, Performance Shares, Performance Units and Share
Units granted under the Plan, as may be determined to be appropriate and
equitable by the Board or the Committee, in its sole discretion, to prevent
dilution or enlargement of rights; and provided that the number of Shares
subject to any Award shall always be a whole number. Any adjustment of an
Incentive Share Option under this paragraph shall be made in such a manner so as
not to constitute a modification within the meaning of Section 425(h)(3) of the
Code.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 Eligibility. Persons eligible to participate in this Plan include
all employees of and consultants or service providers to the Company or any of
its Subsidiaries who, in the opinion of the Board or the Committee, are Eligible
Individuals. "Eligible Individuals" may include employees who are members of the
Board, but may not include Trustees who are not employees of the Company or any
of its Subsidiaries.
5.2 Actual Participation. Subject to the provisions of the Plan, the
Board or the Committee may from time to time select those Eligible Individuals
to whom Awards shall be granted and determine the nature and amount of each
Award. No individual shall have any right to be granted an Award under this Plan
even if previously granted an Award.
ARTICLE 6. STOCK OPTIONS
6
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Eligible Individuals at any time and from time to time
as shall be determined by the Board or the Committee. The Board or the Committee
shall have the sole discretion, subject to the requirements of the Plan, to
determine the actual number of Shares subject to Options granted to any
Participant. The Board or the Committee may grant any type of Option that is
permitted by law at the time of grant including, but no limited to, ISOs and
NQSOs; provided, however, ISOs may only be granted to Eligible Individuals who
are employees or the Company or a Subsidiary at the time of grant. Unless
otherwise expressly provided at the time of grant, Options granted under the
Plan will be NQSOs.
6.2 Limitation on Exercisability. The aggregate Fair Market Value
(determined as of the date of grant) of the Shares issuable pursuant to an ISO
under this Plan and under any other plan of the Company, any parent corporation
or any Subsidiary of the Company, which are exercisable for the first time by
any employee during any calendar year, shall not exceed $100,000. Options for
Shares which are exercisable for the first time by any employee during any
calendar year in excess of $100,000 shall be treated as NQSOs, in accordance
with Section 422(d)(i) of the Code.
6.3 Option Agreement. Each Option grant shall be evidenced by an
Option Agreement that shall specify the type of Option granted, the Option
price, the duration of the Option, the number of Shares to which the Option
pertains, and such other provisions as the Board or the Committee shall
determine. The Option Agreement shall specify whether the Option is intended to
be an Incentive Share Option within the meaning of Section 422 of the Code, or a
Nonqualified Share Option whose grant is not intended to be subject to the
provisions of Code Section 422.
6.4 Option Price. The purchase price per share of an Option shall be
determined by the Board or the Committee but shall not be less than the Fair
Market Value of the Shares on the date the Option is granted.
An Incentive Share Option granted to an employee, who at the time of
grant, owns (within the meaning of Section 425(d) of the Code) Shares possessing
more than 10% of the total combined voting power of all classes of Shares of the
Company, shall have an exercise price which is at least 110% of the Fair Market
Value of the Shares subject to the Option.
6.5 Duration of Options. Each Option shall expire at such time as the
Board or the Committee shall determine at the time of grant, provided, however,
that no ISO shall be exercisable later than the tenth (10th) anniversary date of
its grant, and no ISO granted to any individual who owns more than 10% of the
Voting Securities of the Company shall be exercisable later than the fifth (5th)
anniversary date of its grant.
6.6 Exercise of Options. Subject to Section 3.8 herein, Options
granted under the Plan shall be exercisable at such times and be subject to such
restrictions and conditions as the Board or the Committee shall in each instance
approve, which need not be the same for all Participants.
6.7 Payment. Options shall be exercised by the delivery of a written
notice to the Company setting forth the number of Shares with respect to which
the Option is to be exercised, accompanied by full payment for the Shares. The
purchase price upon exercise of any Option shall be payable to the Company in
full either (a) in cash or its equivalent, (b) by tendering previously acquired
Shares having a Fair Market Value at the time of exercise equal to the total
purchase price, (c) by foregoing compensation under rules established by the
Board or the Committee, or (d) by a combination of (a), (b), or (c). The
proceeds from such a payment shall be added to the general funds of the Company
and shall be used for general purposes. As soon as practicable, after receipt of
written notification and payment, the Company shall deliver to the Participant
Share certificates in an appropriate amount based upon the number of Options
exercised, issued in the Participant's name.
6.8 Restrictions on Share Transferability. The Board or the Committee
shall impose such restrictions on any Shares acquired pursuant to the exercise
of an Option under the Plan as it may deem advisable, including,
7
without limitation, restrictions under applicable Federal securities law, under
the requirements of any securities exchange upon which such Shares are then
listed and under any applicable blue sky or state securities laws.
6.9 Termination of Employment or Service Due to Death, Disability, or
Retirement. In the event the employment or service of a Participant is
terminated by reason of death, the Participant's outstanding Options may be
exercised at any time prior to the expiration date of the Options or within one
year after such date of termination of employment or service, whichever period
is shorter, but only to the extent that the Participant was entitled to exercise
the Options at the date of his termination, by such person or persons as shall
have acquired the Participant's rights under the Option pursuant to Article 10
hereof or by will or by the laws of descent and distribution. In the event the
employment of a Participant is terminated by reason of disability (as defined
under the then established rules of the Company or any of its Subsidiaries, as
the case may be), the Participant's outstanding Options may be exercised at any
time prior to the expiration date of the Options or within one year after such
date of termination of employment or service, whichever period is shorter but
only to the extent that the Participant was entitled to exercise the Options on
the date of his termination. In the event the employment or service of a
Participant who is an employee is terminated by reason of retirement, the
Participant's outstanding Options may be exercised (subject to Section 3.8
herein) at any time prior to the expiration date of the Options or within 90
days after such date of termination of employment or service, whichever period
is shorter, but only to the extent that the Participant was entitled to exercise
the Options on the date of his termination. In the case of Incentive Share
Options, the favorable tax treatment prescribed under Section 422 of the
Internal Revenue Code of 1986, as amended, may not be available if the Options
are not exercised within the Code Section 422 prescribed time period after
termination of employment for death, disability, or retirement.
6.10 Termination of Employment or Service for Other Reasons. If the
employment or service of a Participant shall terminate for any reason other than
death, disability, retirement (in the case of an employee) or for Cause, the
Participant shall have the right to exercise outstanding Options at any time
prior to the expiration date of the Options or within the 90 days after the date
of his termination, whichever period is shorter, but only to the extent that the
Participant was entitled to exercise the Options at the date of his termination
of employment or service. In its sole discretion, the Company may extend the 90
days to up to one year, but in no event beyond the expiration date of the
Option.
If the employment or service of the Participant shall terminate for
Cause, all of the Participant's outstanding Options shall be immediately
forfeited back to the Company.
6.11 Nontransferability of Options. No Option granted under the Plan
may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, otherwise than by will or by the laws of descent and distribution.
Further, all Options granted to a Participant under the Plan shall be
exercisable during his lifetime only by such Participant.
ARTICLE 7. SHARE APPRECIATION RIGHTS
7.1 Grant of Share Appreciation Rights. Subject to the terms and
conditions of the Plan, Share Appreciation Rights may be granted to
Participants, at the discretion of the Board or the Committee, in any of the
following forms:
(a) In lieu of Options;
(b) In addition to Options;
(c) Independent of Options; or
(d) In any combination of (a), (b), or (c).
8
The Board or the Committee shall have the sole discretion, subject to the
requirements of the Plan, to determine the actual number of Shares subject to
SARs granted to any Participant.
7.2 Exercise of SARs in Lieu of Options. SARs granted in lieu of
Options may be exercised for all or part of the Shares subject to the related
Option upon the surrender of the related Options representing the right to
purchase an equivalent number of Shares. SARs may be exercised only with respect
to the Shares for which its related Option is then exercisable. Option Shares
with respect to which SARs shall have been exercised may not be subject again to
an Award under the Plan.
Notwithstanding any other provision of the Plan to the contrary, with
respect to an SAR granted in lieu of an Incentive Share Option, (i) the SAR will
expire no later than the expiration of the underlying Incentive Share Option;
(ii) the SAR amount may be for no more than one hundred percent (100%) of the
difference between the exercise price of the underlying Incentive Share Option
and the Fair Market Value of the Shares subject to the underlying Incentive
Share Option at the time the SAR is exercised; and (iii) the SAR may be
exercised only when the Fair Market Value of the Shares subject to the Incentive
Share Option exceeds the exercise price of the Incentive Share Option.
7.3 Exercise of SARs in Addition to Options. SARs granted in addition
to Options shall be deemed to be exercised upon the exercise of the related
Options. The deemed exercise of SARs granted in addition to Options shall not
necessitate a reduction in the number of related Options.
7.4 Exercise of SARs Independent of Options. Subject to Section 3.8
herein and Section 7.5 herein, SARs granted independently of Options may be
exercised upon whatever terms and conditions the Board or the Committee, in its
sole discretion, imposes upon the SARs, including, but not limited to, a
corresponding proportional reduction in previously granted Options.
7.5 Payment of SAR Amount. Upon exercise of the SAR, the holder shall
be entitled to receive payment of an amount determined by multiplying:
(a) The difference between the Fair Market Value of a Share on the
date of exercise over the price fixed by the Board or the
Committee at the date of grant (which price shall not be less
than 100% of the market price of a Share on the date of grant)
(the "Exercise Price"); by
(b) The number of Shares with respect to which the SAR is exercised.
7.6 Form and Timing of Payment. Payment to a Participant, upon SAR
exercise, will be made in cash or Shares, at the discretion of the Board or the
Committee, within ten calendar days of the exercise.
7.7 Term of SAR. The term of an SAR granted under the Plan shall not
exceed ten years.
7.8 Termination of Employment or Service. In the event the employment
or service of a Participant is terminated by reason of death, disability,
retirement (in the case of an employee), for Cause, or any other reason, the
exercisability of any outstanding SAR granted in lieu of or in addition to an
Option shall terminate in the same manner as its related Option as specified
under Sections 6.8 and 6.9 herein. The exercisability of any outstanding SARs
granted independent of Options also shall terminate in the manner provided under
Sections 6.8 and 6.9 hereof.
7.9 Nontransferability of SARs. No SAR granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
otherwise than by will or by the laws of descent and distribution. Further, all
SARs granted to a Participant under the Plan shall be exercisable during his
lifetime only by such Participant.
9
ARTICLE 8. RESTRICTED SHARES
8.1 Grant of Restricted Shares. Subject to the terms and provisions of
the Plan, the Board or the Committee, at any time and from time to time, may
grant Restricted Shares under the Plan to such Participants and in such amounts
as it shall determine. In the case of Covered Employees, the Board or the
Committee may condition the vesting or lapse of the Period of Restriction
established pursuant to Section 8.3 upon the attainment of one or more of the
Performance Goals utilized for purposes of Performance Units and Performance
Shares pursuant to Article 9 hereof.
8.2 Restricted Share Agreement. Each Restricted Share grant shall be
evidenced by a Restricted Share Agreement that shall specify the Period of
Restriction, or periods, the number of Restricted Shares granted, and such other
provisions as the Board or the Committee shall determine.
8.3 Transferability. Except as provided in this Article 8 or in
Section 3.8 herein, the Restricted Shares granted hereunder may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated until the
termination of the applicable Period of Restriction or for such period of time
as shall be established by the Board or the Committee and as shall be specified
in the Restricted Share Agreement, or upon earlier satisfaction of other
conditions (including any Performance Goals as defined below) as specified by
the Board or the Committee in its sole discretion and set forth in the
Restricted Share Agreement. All rights with respect to the Restricted Shares
granted to a Participant under the Plan shall be exercisable during his lifetime
only by such Participant.
8.4 Other Restrictions. The Board or the Committee shall impose such
other restrictions on any Restricted Shares granted pursuant to the Plan as it
may deem advisable including, without limitation, restrictions under applicable
Federal or state securities laws, and the Board or the Committee may legend
certificates representing Restricted Shares to give appropriate notice of such
restrictions.
8.5 Certificate Legend. In addition to any legends placed on
certificates pursuant to Section 8.4 herein, each certificate representing
Restricted Shares granted pursuant to the Plan shall bear the following legend:
"The sale or other transfer of the shares represented by this
certificate, whether voluntary, involuntary, or by operation of law, is
subject to certain restrictions on transfer set forth in the Long-Term
Incentive Share Plan of California Real Estate Investment Trust, in the
rules and administrative procedures adopted pursuant to such Plan, and
in a Restricted Share Agreement dated . A copy of the Plan, such rules
and procedures and such Restricted Share Agreement may be obtained from
the Secretary of California Real Estate Investment Trust."
8.6 Removal of Restrictions. Except as otherwise provided in this
Article and subject to applicable securities laws and restrictions imposed
pursuant thereto, Restricted Shares shall become transferable by the Participant
after the last day of the Period of Restriction. Once the Shares are released
from the restrictions, the Participant shall be entitled to have the legend
required by Section 8.5 removed from his Share certificate.
8.7 Voting Rights. During the Period of Restriction, Participants
holding Restricted Shares granted hereunder may exercise full voting rights with
respect to those Shares.
8.8 Dividends and Other Distributions. During the Period of
Restriction, Participants holding Restricted Shares granted hereunder shall be
entitled to receive all dividends and other distributions paid with respect to
those Shares while they are so held. If any such dividends or distributions are
paid in Shares, the Shares shall be subject to the same restrictions on
transferability as the Restricted Shares with respect to which they were paid.
8.9 Termination of Employment or Service. In the event that a
Participant terminates his employment or service with the Company or any of its
Subsidiaries for any reason or is terminated for Cause during the Period of
Restriction, then any Restricted Shares still subject to restrictions as of the
date of such termination shall
10
automatically be forfeited and returned to the Company; provided, however, that
in the event of an involuntary termination of the employment or service of a
Participant by the Company or any of its Subsidiaries other than for Cause, the
Board or the Committee, in its sole discretion (subject to Section 3.8 herein),
may waive the automatic forfeiture of any or all such Shares and may add such
new restrictions to such Restricted Shares as it deems appropriate.
ARTICLE 9. PERFORMANCE UNITS, PERFORMANCE SHARES AND SHARE UNITS
9.1 Grant of Performance Units, Performance Shares or Share Units.
Subject to the terms and provisions of the Plan, Performance Units, Performance
Shares or Share Units may be granted to Participants at any time and from time
to time as shall be determined by the Board or the Committee. The Board or the
Committee shall have complete discretion in determining the number of
Performance Units, Performance Shares or Share Units granted to each
Participant.
9.2 Value of Performance Units and Performance Shares. The Board or
the Committee shall set certain periods to be determined in advance by the Board
or the Committee (the "Performance Periods"). Prior to each grant of Performance
Units or Performance Shares, the Board or the Committee shall establish an
initial value for each Performance Unit and an initial number of Shares for each
Performance Share granted to each Participant for that Performance Period. Prior
to each grant of Performance Units or Performance Shares, the Board or the
Committee also shall set the performance goals (the "Performance Goals") that
will be used to determine the extent to which the Participant receives a payment
of the value of the Performance Units or number of Shares for the Performance
Shares awarded for such Performance Period. These goals will be based on the
attainment, by the Company or its Subsidiaries, of certain objective or
subjective performance measures, which shall include one or more of the
following: total shareholder return, return on equity, return on capital,
earnings per share, market price, share price, revenues, costs, net income, cash
flow and retained earnings. Such Performance Goals also may be based upon the
attainment of specified levels of performance of the Company or one or more
Subsidiaries under one or more measures described above relative to the
performance of other corporations. With respect to each such performance measure
utilized during a Performance Period, the Board or the Committee shall assign
percentages to various levels of performance which shall be applied to determine
the extent to which the Participant shall receive a payout of the values of
Performance Units and number of Performance Shares awarded. With respect to
Covered Employees, all Performance Goals shall be objective performance goals
satisfying the requirements for "performance-based compensation" within the
meaning of Section 162(m)(4) of the Code, and shall be set by the Board or the
Committee within the time period prescribed by Section 162(m) of the Code and
related regulations.
9.3 Payment of Performance Units and Performance Shares. After a
Performance Period has ended, the holder of a Performance Unit or Performance
Share shall be entitled to receive the value thereof as determined by the Board
or the Committee. The Board or the Committee shall make this determination by
first determining the extent to which the Performance Goals set pursuant to
Section 9.2 have been met. It will then determine the applicable percentage
(which may exceed 100%) to be applied to, and will apply such percentage to, the
value of Performance Units or number of Performance Shares to determine the
payout to be received by the Participant. In addition, with respect to
Performance Units and Performance Shares granted to any Covered Employee, no
payout shall be made hereunder except upon written certification by the Board or
the Committee that the Applicable Performance Goal or Goals have been satisfied
to a particular extent.
9.4 Value of Share Units. Subject to the terms and provisions of the
Plan, Share Units may be granted to Participants at any time and from time to
time on such terms as shall be determined by the Board or the Committee. The
Board or the Committee shall have complete discretion in determining the number
of Share Units granted to each Participant. Share Units shall be payable in
Shares upon the occurrence of certain trigger events set forth on the
Participant's Election Form in his or her complete discretion (the "Trigger
Events"). The terms and conditions of the Trigger Events may vary by Share Unit
Award, by Participant, or both. The Election Form shall be filed with the
Secretary of the Company prior to the date on which any Share Unit Award is
made. Such election will be irrevocable as to any Share Unit Award made after
delivery of the Election Form to the Company, and it
11
shall continue in effect until revoked, increased or decreased prospectively by
Participant prior to the grant of any future Share Unit Award for which the
change is effective.
9.5 Accounting for Share Units. The Participant's Share Unit Award
shall be credited by the Company to a bookkeeping account to reflect the
Company's liability to that Participant (the "Share Unit Account"). Each Share
Unit is credited as a Share equivalent on the date so credited. Additional Share
equivalents may be added to the Share Unit Account equal to the amount of Share
that could be purchased with dividends equal to that paid on one Share,
multiplied by the number of Share equivalents then existing in the Share Unit
Account, based on the Fair Market Value of the Share on the date a dividend is
paid. Because the Trigger Events of each Share Unit Award may differ, the
Company shall establish a separate Share Unit Account for each separate Share
Unit Award. Upon the occurrence of particular Trigger Events, the holder of a
Share Unit Award shall be entitled to receive a number of Shares which
corresponds to the number of Share Units granted as part of the initial Share
Unit Award, as such amount may have been increased to reflect dividends paid
with respect thereto. Because the payout of Share Unit Awards is not based on
objective performance goals, such award will not constitute "performance-based"
compensation within the meaning of Section 162(m)(4)(C) of the Code and, as
such, will count toward the annual $1,000,000 deduction limit.
9.6 Board or Committee Discretion to Adjust Awards. Subject to Section
3.2 regarding Awards to Covered Employees, the Board or the Committee shall have
the authority to modify, amend or adjust the terms and conditions of any
Performance Unit Award, Performance Share Award or Share Unit Award, at any time
or from time to time, including but not limited to the Performance Goals.
9.7 Form of Payment. The value of a Performance Unit or a Performance
Share may be paid in cash, Shares, or a combination thereof as determined by the
Board or the Committee. In the case of Share Units, payment shall be made in
Shares. Payment may be made in a lump sum or installments as prescribed by the
Board or the Committee. If any payment is to be made on a deferred basis, the
Board or the Committee may provide for the payment of dividend equivalents or
interest during the deferral period.
9.8 Termination of Employment or Service Due to Death, Disability, or
Retirement. In the case of death, disability, or retirement (in the case of a
Participant who is an employee) (each of disability and retirement as defined
under the established rules of the Company or any of its Subsidiaries, as the
case may be), the holder of a Performance Unit or Performance Share shall
receive a prorated payment based on the Participant's number of full months of
service during the Performance Period, further adjusted based on the achievement
of the Performance Goals during the entire Performance Period, as computed by
the Board or the Committee. Payment shall be made at the time payments are made
to Participants who did not terminate service during the Performance Period. In
the case of Share Units, all such Share Units held, to the extent vested at the
date of such Participant's termination of employment or service, will be paid as
set forth in the Participant's Election Form.
9.9 Termination of Employment or Service for Other Reasons. In the
event that a Participant terminates employment or service with the Company or
any of its Subsidiaries for any reason other than death, disability, or
retirement, all Performance Units and Performance Shares shall be forfeited;
provided, however, that in the event of an involuntary termination of the
employment or service of the Participant by the Company or any of its
Subsidiaries other than for Cause, the Board or the Committee in its sole
discretion may waive the automatic forfeiture provisions and pay out on a pro
rata basis. In the case of termination other than for Cause, all Share Units
held, to the extent vested at the date of such Participant's termination of
employment or service, will be paid as set forth in the Participant's Election
Form. However, in the event of termination for Cause, all Share Units held will
be forfeited.
9.10 Nontransferability. No Performance Units, Performance Shares or
Share Units granted under the Plan may be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated, otherwise than by will or by the laws of
descent and distribution until the termination of the applicable Performance
Period or, in the case of Share Units, vesting and payment. All rights with
respect to Performance Units, Performance Shares and Share Units granted to a
Participant under the Plan shall be exercisable during his lifetime only by such
Participant.
12
ARTICLE 10. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively and
who may include a trustee under a will or living trust) to whom any benefit
under the Plan is to be paid in case of his death before he receives any or all
of such benefit. Each designation will revoke all prior designations by the same
Participant, shall be in a form prescribed by the Board or the Committee, and
will be effective only when filed by the Participant in writing with the Board
or the Committee during his lifetime. In the absence of any such designation or
if all designated beneficiaries predecease the Participant, benefits remaining
unpaid at the Participant's death shall be paid to the Participant's estate.
ARTICLE 11. RIGHTS OF EMPLOYEES
11.1 Employment or Service. Nothing in the Plan shall interfere with
or limit in any way the right of the Company or any of its Subsidiaries to
terminate any Participant's employment or service at any time, nor confer upon
any Participant any right to continue in the employ or service of the Company or
any of its Subsidiaries.
11.2 Participation. No individual shall have the right to be selected
as a Participant, or, having been so selected, to be selected again as a
Participant.
11.3 No Implied Rights; Rights on Termination of Service. Neither the
establishment of the Plan nor any amendment thereof shall be construed as giving
any Participant, beneficiary, or any other person any legal or equitable right
unless such right shall be specifically provided for in the Plan or conferred by
specific action of the Board or the Committee in accordance with the terms and
provisions of the Plan. Except as expressly provided in this Plan, neither the
Company nor any of its Subsidiaries shall be required or be liable to make any
payment under the Plan.
11.4 No Right to Company Assets. Neither the Participant nor any other
person shall acquire, by reason of the Plan, any right in or title to any
assets, funds or property of the Company or any of its Subsidiaries whatsoever
including, without limiting the generality of the foregoing, any specific funds,
assets, or other property which the Company or any of its Subsidiaries, in its
sole discretion, may set aside in anticipation of a liability hereunder. Any
benefits which become payable hereunder shall be paid from the general assets of
the Company or the applicable subsidiary. The Participant shall have only a
contractual right to the amounts, if any, payable hereunder unsecured by any
asset of the Company or any of its Subsidiaries. Nothing contained in the Plan
constitutes a guarantee by the Company or any of its Subsidiaries that the
assets of the Company or the applicable Subsidiary shall be sufficient to pay
any benefit to any person.
ARTICLE 12. CHANGE IN CONTROL
12.1 Share Based Awards. Notwithstanding any other provisions of the
Plan, in the event of a Change in Control, all Share based Awards granted under
this Plan shall immediately vest 100% in each Participant (subject to Section
3.8 herein), including Incentive Share Options, Nonqualified Share Options,
Share Appreciation Rights, Restricted Shares and Share Units.
12.2 Performance Based Awards. Notwithstanding any other provisions of
the Plan, in the event of a Change in Control, all performance based Awards
granted under this Plan shall be immediately paid out in cash, including
Performance Units and Performance Shares. The amount of the payout shall be
based on the higher of: (i) the extent, as determined by the Board or the
Committee, to which Performance Goals, established for the Performance Period
then in progress have been met up through and including the effective date of
the Change in Control or (ii) 100% of the value on the date of grant of the
Performance Units or number of Performance Shares.
12.3 Pooling Transactions. Notwithstanding anything contained in the
Plan or any agreement to the contrary, in the event of a Change in Control which
is also intended to constitute a Pooling Transaction, the Board
13
or the Committee shall take such actions, if any, which are specifically
recommended by an independent accounting firm retained by the Company to the
extent reasonably necessary in order to assure that the Pooling Transaction will
qualify as such, including but not limited to (a) deferring the vesting,
exercise, payment or settlement with respect to any Award, (b) providing that
the payment or settlement in respect of any Award be made in the form of cash,
Shares or securities of a successor or acquired of the Company, or a combination
of the foregoing and (c) providing for the extension of the term of any Award to
the extent necessary to accommodate the foregoing, but not beyond the maximum
term permitted for any Award.
ARTICLE 13. AMENDMENT, MODIFICATION AND TERMINATION
13.1 Amendment, Modification and Termination. At any time and from time
to time, the Board may terminate, amend, or modify the Plan, subject to the
approval of the shareholders of the Company if required by the Code, by the
insider trading rules of Section 16 of the Exchange Act, by any securities
exchange or system on which the Shares are then listed or reported or by any
regulatory body having jurisdiction with respect hereto.
13.2 Awards Previously Granted. No termination, amendment or
modification of the Plan other than pursuant to Section 4.3 hereof shall in any
manner adversely affect any Award theretofore granted under the Plan, without
the written consent of the Participant.
ARTICLE 14. WITHHOLDING
14.1 Tax Withholding. The Company and any of its Subsidiaries shall
have the power and the right to deduct or withhold, or require a Participant to
remit to the Company or any of its Subsidiaries, an amount sufficient to satisfy
Federal, state and local taxes (including the Participant's FICA obligation)
required by law to be withheld with respect to any grant, exercise, or payment
made under or as a result of this Plan.
14.2 Share Delivery or Withholding. With respect to withholding
required upon the exercise of Nonqualified Share Options, or upon the lapse of
restrictions on Restricted Shares, Participants may elect, subject to the
approval of the Board or the Committee, to satisfy the withholding requirement,
in whole or in part, by tendering to the Company previously acquired Shares or
by having the Company withhold Shares, in each such case in an amount having a
Fair Market Value equal to the amount required to be withheld to satisfy the tax
withholding obligations described in Section 14.1. The value of the Shares to be
tendered or withheld is to be based on the Fair Market Value of the Shares on
the date that the amount of tax to be withheld is to be determined. All Share
withholding elections shall be irrevocable and made in writing, signed by the
Participant on forms approved by the Board or the Committee in advance of the
day that the transaction becomes taxable.
Share withholding elections made by Participants who are subject to the
short-swing profit restrictions of Section 16 of the Exchange Act must comply
with the additional restrictions of Section 16 and Rule 16b-3 in making their
elections.
ARTICLE 15. EFFECT OF CERTAIN TRANSACTIONS
Effect of Certain Transactions. Subject to Section 12, or as
otherwise provided in an agreement, in the event of (a) the liquidation or
dissolution of the Company or (b) a merger, consolidation or combination of the
Company (a "Transaction"), the Plan and the Awards issued hereunder shall
continue in effect in accordance with their respective terms except that
following a Transaction each Participant shall be entitled to receive in respect
of each Share subject to any outstanding Options or Awards, as the case may be,
upon exercise of any Option or payment or transfer in respect of any Award, the
same number and kind of Shares, securities, cash, property, or other
consideration that each holder of a Share was entitled to receive in the
Transaction in respect of a Share; provided, however, that such Shares,
securities, cash, property, or other consideration shall remain subject to all
of the conditions, restrictions and performance criteria which were applicable
to the Options or Awards prior to such Transaction.
14
ARTICLE 16. REQUIREMENTS OF LAW
16.1 Requirements of Law. The granting of Awards and the issuance of
Shares under this Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or securities
exchanges as may be required.
16.2 Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of New York.
15
AMENDMENT NUMBER 1
TO
CALIFORNIA REAL ESTATE INVESTMENT TRUST
1997 LONG-TERM INCENTIVE SHARE PLAN
WHEREAS, an amended and restated declaration of trust of
Capital Trust, formerly California Real Estate Investment Trust (the "Company"),
was approved by the shareholders and executed by the trustees of the Company on
July 15, 1997, thereby effecting the change in trust name to "Capital Trust";
WHEREAS, the Company maintains the California Real Estate
Investment Trust 1997 Long-term Incentive Share Plan ("Plan"); and
WHEREAS, the Company desires to amend the Plan to reflect
therein the change in trust name;
NOW THEREFORE, the Plan is amended effective as of July 15,
1997 by the addition of the following provision:
All references to "California Real Estate Investment Trust" in
the Plan shall be to "Capital Trust."
IN WITNESS WHEREOF, the Company has caused this amendment to
be executed by its duly authorized officer this 15th day of July 1997.
CAPITAL TRUST
(formerly California Real Estate Investment)
By:/s/ John R. Klopp
John R. Klopp
Chief Executive Officer
612402.1