SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check 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 to
Rule 14a-11(c) or Rule 14a-12
LIBERTY PROPERTY TRUST
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-
11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date
of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[LIBERTY PROPERTY TRUST LOGO]
Great Valley Corporate Center
65 Valley Stream Parkway
Suite 100
Malvern, Pennsylvania 19355
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held May 21, 1997
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The 1997 ANNUAL MEETING of the shareholders of Liberty Property Trust, a
Maryland real estate investment trust (the "Trust"), will be held at the
Wyndham Franklin Plaza, Horizons Ballroom, 17th and Race Streets,
Philadelphia, Pennsylvania 19103, on Wednesday, May 21, 1997, at 9:00
a.m., local time, for the following purposes:
1. To elect three Class III trustees to hold office until the Annual
Meeting of Shareholders to be held in 2000 and until their successors
are duly elect and qualified;
2. To consider and vote on amendments to the Declaration of Trust of
the Trust to (a) reduce the ownership limitation with respect to shares
of beneficial interest of the Trust from 7.5% to 5.0%; (b) permit the
Board of Trustees to grant certain exemptions from the ownership
limitation with respect to shares of beneficial interest of the Trust
without shareholder approval; and (c) revise the restrictive legend
appearing on certificates for shares of beneficial interest of the Trust
to reflect the reduction in the ownership limit;
3. To consider and vote on an amendment of the Liberty Property Trust
Amended and Restated Share Incentive Plan to increase the number of
shares available for awards thereunder from 2,100,000 to 5,100,000; and
4. To transact such other business as may properly come before the
meeting.
The Board of Trustees has fixed the close of business on March 25, 1997
as the record date for the meeting. Only shareholders of record as of
that date are entitled to notice of and to vote at the meeting and any
adjournment and postponement thereof.
The accompanying form of proxy is solicited by the Board of Trustees of
the Trust. Reference is made to the attached Proxy Statement for
further information with respect to the business to be transacted at the
meeting.
By Order of the Board of Trustees,
James J. Bowes
Secretary
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Malvern, Pennsylvania
March 31, 1997
PLEASE COMPLETE AND RETURN YOUR SIGNED PROXY CARD
Please complete and promptly return your proxy in the envelope provided.
is will not prevent you from voting in person at the meeting. It will,
however, help to assure a quorum and to avoid added proxy solicitation
costs.
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LIBERTY PROPERTY TRUST
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 21, 1997
GENERAL INFORMATION
This proxy statement is being furnished in connection with the
solicitation of proxies by the Board of Trustees of Liberty Property
Trust, a Maryland real estate investment trust (the "Trust"), for use at
the Trust's 1997 Annual Meeting of Shareholders (the "Meeting") to be
held at the Wyndham Franklin Plaza Hotel, Horizons Ballroom, 17th and
Race Streets, Philadelphia, Pennsylvania 19103, on Wednesday, May 21,
1997 at 9:00 a.m., local time, and any adjournment or postponement
thereof, for the purposes set forth in the foregoing notice and more
fully discussed herein. This proxy statement, the foregoing notice and
the enclosed proxy are first being mailed to shareholders of the Trust
on or about March 31, 1997. Only shareholders of record at the close of
business on March 25, 1997 shall be entitled to notice of and to vote at
the Meeting.
If the enclosed proxy is properly executed and received by the Trust
prior to voting at the Meeting, the common shares of beneficial
interest, $0.001 par value per share, of the Trust (the "common shares")
represented thereby will be voted in accordance with the instructions
marked thereon. In the absence of instructions, the common shares will
be voted FOR the nominees of the Board of Trustees in the election of
trustees, FOR the proposal relating to an amendments of the Declaration
of Trust of the Trust (the "Declaration of Trust") and FOR the proposal
relating to the Amendment of the Amended and Restated Share Incentive
Plan. Management does not intend to bring any matter before the Meeting
other than as indicated in the notice and does not know of anyone else
who intends to do so. If any other matters properly come before the
Meeting, however, the persons named in the enclosed proxy, or their duly
constituted substitutes acting at the Meeting, will be authorized to
vote or otherwise act thereon in accordance with their judgment on such
matters.
Any proxy may be revoked at any time prior to its exercise by notifying
the Secretary in writing prior to the time of the Meeting, by delivering
a duly executed proxy bearing a later date or by attending the Meeting
and voting in person.
On the record date, the Trust had [ ] common shares
outstanding and entitled to vote at the Meeting. There must be present
at the Meeting in person or by proxy shareholders entitled to cast a
majority of all the votes entitled to be cast to constitute a quorum for
the Meeting. Common shares represented at the meeting in person or by
proxy but not voted will be included in determining the presence of a
quorum. Each holder of common shares is entitled to one vote per share
held of record by such holder on the record date. Assuming a quorum is
present at the Meeting, a plurality of all the votes cast at the meeting
shall be sufficient to elect a trustee and to approve the proposal
relating to the Amended and Restated Share Incentive Plan, and a two-
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thirds vote of all the votes cast at the meeting shall be sufficient to
approve the proposal relating to an amendment of the Declaration of
Trust. There is no cumulative voting in the election of trustees. A
majority of all the votes cast at the Meeting shall be sufficient to
approve any other matter that may properly come before the Meeting,
unless more than a majority of the votes cast is required by statute or
by the Declaration of Trust.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as, of February 28,
1997 (except as indicated below), regarding the beneficial ownership, as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), of common shares by each trustee, each
nominee for election as trustee, each executive officer listed in the
Summary Compensation Table appearing on page 24, all trustees and
executive officers as a group, and each person who is known to the Trust
to be the beneficial owner of more than five percent of the outstanding
common shares. Each person named in the table below has sole voting and
investment power with respect to the common shares listed opposite such
person's name, except as otherwise noted.
No. of Shares Percent
Beneficial Owners Beneficially Owned of Class
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Willard G. Rouse III 584,766(1) 1.8%
Joseph P. Denny 330,750(2) 1.0%
George F. Congdon 387,632(3) 1.2%
Robert E. Fenza 230,643(4) *
George J. Alburger, Jr. 18,238(5) *
Frederick F. Buchholz 4,500(6) *
J. Anthony Hayden 53,500(6) *
M. Leanne Lachman 4,500(6) *
David L. Lingerfelt 35,674(7) *
John A. Miller, CLU 2,500(8) *
Stephen B. Siegel 2,000(8) *
FMR Corp.
82 Devonshire Street
Boston, MA 02109 4,071,850(9) 12.8%
All trustees and executive
officers as a group (13 persons) 1,956,705(10) 5.8%
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* Represents less than one percent of class.
(1) Includes 70,000 common shares subject to options exercisable
within 60 days of the record date for the Meeting, 4,000 common shares
issuable upon exchange of 8% Exchangeable Subordinated Debentures due
2001 (the "Debentures") of Liberty Property Limited Partnership, a
Pennsylvania limited partnership (the "Operating Partnership" and,
together with the Trust, the "Company") (which, as of February 28, 1997,
was 90.20% owned by the Trust), and 457,665 common shares issuable upon
exchange of units of limited partnership interest ("Units") of the
Operating Partnership, including 3,051 Units which become exchangeable
in July 1997.
(2) Includes 67,500 common shares subject to options exercisable
within 60 days of the record date for the Meeting and 260,250 common
shares issuable upon exchange of Units.
(3) Includes 35,200 common shares subject to options exercisable
within 60 days of the record date for the Meeting and 310,153 common
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shares issuable upon exchange of Units, including 61,611 Units which
become exchangeable in July 1997. Includes 2,800 common shares held by
Mr. Congdon or his spouse as custodian for children and other relatives,
as to which Mr. Congdon disclaims beneficial ownership.
(4) Includes 34,900 common shares subject to options exercisable
within 60 days of the record date for the Meeting and 195,043 common
shares issuable upon exchange of Units. Also includes 700 common
shares, held by Mr. Fenza as custodian for children, or owned directly
by such children, as to which Mr. Fenza disclaims beneficial ownership.
(5) Includes 15,260 common shares subject to options exercisable
within 60 days of the record date for the Meeting.
(6) Includes 3,500 common shares subject to options exercisable within
60 days of the record date for the Meeting.
(7) Includes 1,000 common shares subject to options exercisable within
60 days of the record date for the Meeting, and 30,674 common shares
issuable upon exchange of Units. Also includes 987 common shares held
by trusts for the benefit of Mr. Lingerfelt's children, as to which Mr.
Lingerfelt disclaims beneficial ownership.
(8) Includes 1,000 common shares subject to options exercisable within
60 days of the record date for the Meeting.
(9) Includes 1,639,350 common shares issuable upon exchange of
Debentures. As of December 31, 1996, FMR Corp. had sole dispositive
power over 4,071,850 common shares, including 389,650 common shares over
which FMR Corp. had sole voting power. The information relating to FMR
Corp. is based solely on a review of a Schedule 13G filed by FMR Corp.
with the Securities and Exchange Commission.
(10) Includes 266,360 common shares subject to options exercisable
within 60 days of the record date for the Meeting, 4,000 common shares
issuable upon exchange of Debentures, and 1,495,458 common shares
issuable upon exchange of Units, including 120,117 Units which become
exchangeable in June 1997.
ELECTION OF TRUSTEES AND CONTINUING TRUSTEES
In accordance with the Declaration of Trust and By-laws, the Board of
Trustees has fixed the total number of trustees at nine. The Board is
divided into three classes serving staggered three-year terms, the term
of one class of trustees to expire in each successive year. Three Class
III trustees will be elected at the Meeting to serve until the Annual
Meeting of Shareholders to be held in 2000 and until their successors
are duly elected and qualified. All of the present nominees for
election as trustees currently serve as trustees of the Trust. A proxy
signed in the enclosed form will be voted FOR the election of the
nominees named below, unless a contrary instruction is given.
Management believes that all of its nominees are willing and able to
serve the Trust as trustees. If any nominee at the time of election is
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unable or unwilling to serve or is otherwise unavailable for election,
and as a consequence thereof other nominees are designated, the persons
named in the proxy or their substitutes will have the discretion and
authority to vote or to refrain from voting for other nominees in
accordance with their judgment.
The following is a brief description of the nominees for election as
trustees and of the other trustees of Trust.
NOMINEES FOR ELECTION AS CLASS III TRUSTEES WITH TERMS TO EXPIRE IN 2000
Joseph P. Denny, age 50, has served as the President, Chief Operating
Officer and a trustee of the Trust since its inception. Mr. Denny
joined Rouse & Associates in 1979 and served as a Regional Managing
General Partner and, later, as President. In these capacities, he was
responsible for developing approximately one billion dollars of
projects, primarily large urban projects. Mr. Denny is a member of the
Board of Directors of Lawrence Holdings Co. Mr. Denny is a Vice
Chairman of the Industrial and Office Park Council of the Urban Land
Institute and serves on the Advisory Board of the Wharton Business
School's Real Estate Center and the NAREIT Legislative Advisory Council.
David L. Lingerfelt, age 44, has served as a trustee of the Trust since
May 1995. Mr. Lingerfelt is a partner with the law firm of Shewmake,
Baronian and Parkinson. Before joining Shewmake, Baronian and Parkinson
in August 1996, Mr. Lingerfelt was Director of Property Administration
and Counsel for Best Products Co., Inc. Previously, Mr. Lingerfelt had
been a partner in the Richmond, Virginia office of the law firm of
Coates & Davenport. Mr. Lingerfelt is a member of the American Bar
Association, Real Property Section and Business Law Section.
John A. Miller, CLU, age 69, has served as a trustee of the Trust since
May 1995. Mr. Miller recently retired as a Director and Chairman of the
Executive Committee of the Board of Directors of the Provident Mutual
Life Insurance Company of Philadelphia. Mr. Miller served Provident
Mutual in many capacities over his 25 years there, including as its
President, Chief Operating Officer, Chief Executive Officer and Chairman
of the Board. He has been a member of various Board of Directors,
presently including Guarantee Reassurance Corp. (of which he is
Chairman), Betz Laboratories, Inc., Bryn Mawr Hospital, CoreStates
Financial Corp., CoreStates Bank N.A., and Betz Dearborn.
CONTINUING CLASS I TRUSTEES WITH TERMS TO EXPIRE IN 1998
Willard G. Rouse III, age 54, has served as Chairman of the Board of
Trustees and Chief Executive Officer of the Trust since its inception.
He had been a General Partner of Rouse & Associates since its founding
in 1972. He serves as a trustee of the Urban Land Institute. Mr. Rouse
has served as Chairman of each of the Pennsylvania Convention Center
Authority, the Foundation for Architecture, We the People 200 and the
Philadelphia Children's Network and as President of the Fellowship
Commission.
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M. Leanne Lachman, age 54, has served as a trustee of the Trust since
June 1994. Ms. Lachman is Managing Director of Schroder Real Estate
Associates ("Schroder"). which specializes in real estate management for
institutional investors, managing approximately $1.0 billion invested in
shopping centers and office buildings across the country. Prior to
joining Schroder, Ms. Lachman was affiliated for 26 years with Real
Estate Research Corporation, the last eight serving as its President and
Chief Executive Officer. Ms. Lachman is a director of Lincoln National
Corporation and Chicago Title & Trust Company, and is an Executive
Committee Member and Trustee of the Urban Land Institute and Urban Land
Foundation.
J. Anthony Hayden, age 52, has served as a trustee of the Trust since
June 1994. Mr. Hayden is the President of Hayden Real Estate, Inc.
From 1990 through February 1996, he served as Executive Director and a
member of the Board of Directors for Cushman & Wakefield, for whom he
had worked since 1975. From 1981 to 1990 he served as its Mid-
Atlantic/Midwest Regional Director, and was responsible for the
operations and management of the Boston, Chicago, Detroit, Philadelphia,
Pittsburgh, St. Louis, and Washington, DC offices. Mr. Hayden is also a
member of the Society of Industrial & Office Realtors, serving in 1982
as President of the Philadelphia Chapter. He is also a member of the
Philadelphia Board of Realtors and was President in 1985. Other
memberships include the National Association of Real Estate Boards and
the Urban Land Institute.
CONTINUING CLASS II TRUSTEES WITH TERMS TO EXPIRE IN 1999
George F. Congdon, age 54, has served as a trustee of the Trust since
its inception and as an Executive Vice President of the Trust since
April 19, 1995. Until April 19, 1995, Mr. Congdon served as Treasurer
and Chief Financial Officer of the Trust. Mr. Congdon had been a
General Partner of Rouse & Associates, the Trust's predecessor, since
its founding in 1972. He is a member of the Board of Directors of the
People's Light and Theater Company and Historic Yellow Springs, Inc.
Frederick F. Buchholz, age 51, has served as a trustee of the Trust
since June 1994. Mr. Buchholz has been affiliated with Equitable Real
Estate or its predecessor ("Equitable") since 1968. He was appointed
Senior Vice President in December 1990 and Executive Vice President in
1992, and is the officer in charge of Equitable's New York and
Philadelphia regions, supervising new business, asset management and
restructuring/workout activities on behalf of a total mortgage and
equity portfolio which exceeds $5.0 billion. Mr. Buchholz is a member
of the Appraisal Institute, the Philadelphia Board of Realtors and the
Philadelphia Chamber of Commerce.
Stephen B. Siegel, age 52, has served as a trustee of the Trust since
May 1995. Mr. Siegel has been president of Insignia/Edward S. Gordon
Co., Inc. and its predecessor ("ESG"), the fourth largest commercial
real estate company in the United States, since March 1992. Prior to
joining ESG, Mr. Siegel spent more than 27 years at Cushman & Wakefield,
ascending to Chief Executive Officer. Mr. Siegel left Cushman &
Wakefield in late 1988 and entered a joint venture with the Chubb
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Corporation where he worked for several years to develop and acquire
investment-grade office buildings throughout the United States.
Mr. Siegel is the general chairman of the Association for the Help of
Retarded Children (AHRC) and a trustee of the National Jewish Center for
Immunology and Respiratory Medicine. In addition, he serves on the
advisory board of the Wharton Business School's Real Estate Center and
New York University's Real Estate Council and is active in the Urban
Land Institute, the Real Estate Board of New York and the Young
Men's/Women's Real Estate Association.
COMMITTEES OF THE BOARD OF TRUSTEES
The Board's Audit Committee makes recommendations concerning the
engagement of independent public accountants for the Trust, reviews with
such accountants the plans and results of the audit engagement, approves
professional services provided by the independent public accountants and
fees therefor and reviews the adequacy of the Trust's internal
accounting controls. The Audit Committee consists of at least two
independent trustees, with the independent trustees constituting a
majority of the Committee members. The Audit Committee currently
includes no officers or employees of the Trust or the Operating
Partnership. Members of the Audit Committee are Messrs. Buchholz
(Chair), Hayden and Siegel. The Committee met twice during the last
fiscal year.
The Board's Compensation Committee is empowered to determine
compensation for the Trust's executive officers and to administer the
Trust's 1994 Share Incentive Plan. Members of the Compensation
Committee are Messrs. Miller (Chair), Buchholz and Lingerfelt. See
"Report of the Compensation Committee on Executive Compensation." The
Compensation Committee met three times during the last fiscal year.
The Board's Corporate Governance and Nominating Committee consists of
Ms. Lachman (Chair) and Messrs. Rouse, Hayden and Miller. The Corporate
Governance and Nominating and Committee makes recommendations to the
Board regarding nominees for positions on the Board. The Corporate
Governance and Nominating Committee will consider candidates proposed by
shareholders in accordance with the following procedure. Such
nominations should be sent to the attention of the Trust's Secretary at
its principal executive office, describe the candidate's qualifications
and be accompanied by the candidate's written statement of willingness
and affirmative desire to serve representing the interest of all
shareholders. Shareholders may also make nominations directly by
following the procedure specified in the Trust's Bylaws. The Corporate
Governance and Nomination Committee met once during the last fiscal
year.
TRUSTEES' ATTENDANCE AT MEETINGS
The Board of Trustees held seven meetings during the last fiscal year,
and acted on two other occasions by unanimous written consent. Each
incumbent trustee of the Trust attended at least 75% of the meetings of
the Board of Trustees and meetings held by all committees on which such
trustee served.
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TRUSTEES' COMPENSATION
Each trustee who is not also an officer and full-time employee of the
Trust or the Operating Partnership receives an annual trustee fee in the
amount of $18,000 plus a fee of $1,000 for each meeting attended.
Trustees who are officers and full-time employees of the Trust or the
Operating Partnership receive no separate compensation for service as a
trustee or committee member. Additionally, all trustees are reimbursed
for travel and lodging expenses associated with attending Board and
committee meetings. On June 23 of each year, each non-employee trustee
is entitled to receive a 10-year option to purchase 5,000 common shares,
exercisable at a price equal to the fair market value on the date of the
grant. Such options are exercisable with respect to 20% of the covered
shares after the first anniversary of the grant date, exercisable with
respect to 50% of the covered shares after the second anniversary of the
grant date and fully exercisable after the third anniversary of the
grant date.
PROPOSAL TO AMEND THE DECLARATION OF TRUST
NATURE OF PROPOSED AMENDMENTS
At a meeting held on February 26, 1997, the Board of Trustees
unanimously adopted, and recommend for approval by the shareholders at
the Meeting, certain amendments to the Declaration of Trust. Upon
adoption, these amendments will (a) reduce the ownership limitation from
7.5% to 5.0%; (b) conform the legend required to appear on certificates
for shares of beneficial interest (which include the common shares and
any preferred shares of beneficial interest that may be issued in the
future) of the Trust to reflect the reduction in the ownership
limitation; and (c) allow the Board of Trustees flexibility to grant
exemptions from the ownership limitation.
If adopted, the proposed amendments will amend (a) Section 7.12 of the
Declaration of Trust to afford the Board of Trustees authority to grant
exemptions from the "Ownership Limit" in the Declaration of Trust,
without also obtaining the affirmative vote of not less than two-thirds
of the shares of beneficial interest then outstanding and entitled to
vote, under circumstances in which the aggregate ownership limitations
in the Declaration of Trust designed to protect the tax status of the
Trust as a real estate investment trust (the "REIT Status") would not
otherwise be breached; (b) Section 7.1 of the Declaration of Trust to
reduce the percentage of shares of beneficial interest of the Trust
referred to in the definition of the term "Ownership Limit" from 7.5% to
5.0%; and (c) Section 7.13 of the Declaration of Trust to conform the
legend required to appear on certificates for shares of beneficial
interest of the Trust to reflect the aforementioned reduction in the
ownership limitation.
REASONS FOR AND EFFECTS OF PROPOSED AMENDMENTS
In order for the Trust to maintain its REIT Status, among other
requirements, no five or fewer beneficial owners of the shares of
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beneficial interest may, at any one time, beneficially own in the
aggregate more than 50% in number or value of the outstanding shares.
In this regard, Article VII of the Declaration of Trust contains various
provisions designed to ensure that such aggregate ownership limit is not
breached. Among such limitations is an ownership limit, which presently
mandates that no shareholder may, unless pursuant to an exemption
obtained in accordance with Section 7.12 of the Declaration of Trust,
beneficially own more than that number of shares that equals the lesser
of (a) 7.5% of the number of outstanding shares and (b) 7.5% of the
value of outstanding shares.
BOARD AUTHORITY TO GRANT EXEMPTIONS
As the Declaration of Trust is presently constituted, these percentages
may be adjusted by the Board of Trustees only upon the affirmative vote
of not less than two-thirds of the shares then outstanding and entitled
to vote. Accordingly, even under circumstances where the Board of
Trustees determines to grant an exemption to the ownership limit in
order to facilitate a transaction, the exemption will not be effective
until the holders of two-thirds of the outstanding shares affirm such
exemption. Given the period of time required to seek shareholder
approval of such an action, the usefulness of the Board's ability to
grant exemptions is limited. The Board of Trustees believes that
adoption of the proposed amendments would enhance its ability to grant
exemptions in appropriate cases, thereby facilitating certain equity
investments in the Company.
REDUCTION IN OWNERSHIP LIMIT TO FIVE PERCENT
Section 7.11 of the Declaration of Trust also includes a provision to
the effect that an exemption from the ownership limit cannot be granted
if, after giving effect to such exemption, the aggregate ownership by
any five beneficial owners could exceed 49.0%. Consistent with Section
7.11, in considering the grant of an exemption to the ownership limit,
it must be assumed that if the exemption were granted, (i) the
shareholder to which the exemption is proposed to be granted would
beneficially own the maximum number of shares permitted to be
beneficially owned under such exemption and (ii) each of four other
shareholders would beneficially own 7.5%, or such higher percentage as
might previously have been achieved by waiver, of the outstanding
shares, the maximum number of shares permitted to be beneficially owned
without an exemption, or 30.0% of the outstanding shares in the
aggregate. Accordingly, under these circumstances, if no other
exemptions were granted, an exemption could be granted permitting one
shareholder to beneficially own not more than 19.0% of the outstanding
shares.
Prior to the Trust's initial public offering, an exemption to the
ownership limit was granted to permit the beneficial ownership by an
investor of up to 13.0% of the outstanding shares (the "13.0%
Shareholder"). Accordingly, if the 7.5% ownership limit is retained,
additional exemptions from the ownership limit will be limited to an
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aggregate of 6.0% of the outstanding shares. If the entire availability
for additional exemptions were concentrated on one shareholder (other
than the 13.0% Shareholder), based on a 7.5% ownership limit, such
shareholder could be permitted to beneficially own 13.5% of the
outstanding shares. The Board of Trustees believes that this construct
results in a limitation upon the Company's ability to facilitate large
equity investments in the Company.
If the ownership limit provided in the Declaration of Trust is reduced
to 5.0% of the outstanding shares, as is proposed, then after taking
into account the exemption previously granted to the 13.0% Shareholder,
the percentage of the outstanding shares with respect to which the Board
of Trustees could grant to shareholders additional exemptions from the
ownership limit would increase from an aggregate of 6.0% to an aggregate
of 16.0% of the outstanding shares. If the entire availability for
additional exemptions were concentrated on one shareholder (other than
the 13.0% shareholder), based on a 5.0% ownership limit, such
shareholder could be permitted to beneficially own 21.0% of the
outstanding shares. The Board of Trustees believes that adoption of the
amendments will enhance its ability to use such exemptions so as to
facilitate large equity investments in the Company.
As a result of the reduction in the ownership limit, the restrictions in
the Declaration of Trust on share ownership will be imposed on
beneficial owners of more than 5.0% of the outstanding shares.
Presently, such restrictions are not imposed unless beneficial ownership
exceeds 7.5% of the outstanding shares. However, based on Schedules 13G
filed with the Securities and Exchange Commission, since the Trust's
initial public offering, management believes that only one shareholder,
other than the 13.0% Shareholder, had, at any time, beneficially owned
in excess of 5.0% of the outstanding common shares. Moreover, on the
same basis, management believes that no shareholder, other than the
13.0% Shareholder, has beneficially owned more than 5.0% of the
outstanding common shares since [ ], 199[ ]. Accordingly,
management does not believe that the reduction of the ownership limit
will unduly restrict share ownership in the Trust. Moreover, management
believes that the reduction in the ownership limit, coupled with the
ability of the Board of Trustees to grant exemptions from the ownership
limit without further shareholder approval, will facilitate the Trust's
formation of capital.
Shareholders should carefully consider the proposed amendment to the
Declaration of Trust. Management believes that the effect of the
proposed amendment would be to grant the Board of Trustees greater
flexibility in attracting equity capital to the Trust from institutional
investors.
TEXT OF PROPOSED AMENDMENTS
The text of the definition of "Ownership Limit," set forth in Section
7.1 of the Declaration of Trust, as proposed to be amended, is set forth
below. The proposed amendments to the definition have been marked by
underlining the text to be added and striking through the text to be
deleted. The affirmative vote of not less than two-thirds of the
outstanding shares of the Trust is required for the approval of the
proposed amendments to the Declaration of Trust. The Trustees have
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unanimously approved the proposed amendments and recommend approval of
the amendments as being in the best interests of shareholders.
"Ownership Limit" shall, [deleted text, "initially"] mean that number of
Shares which equals the lesser of (a) [added text "5.0%", deleted text
"7.5%"] of the number of outstanding Equity Shares and (b) [added text
"5.0%", deleted text "7.5%"] of the value of outstanding Equity Shares, and
after any adjustment as set forth in Section 7.10, shall mean such
greater percentage of the outstanding Equity Shares as so adjusted. The
number and value of outstanding Equity Shares shall be determined by the
Board of Trustees in good faith, which determination shall be conclusive
for all purposes hereof.
The text of Section 7.12 of the Declaration of Trust, as proposed to be
amended, is set forth below. The proposed amendments to the Section
have been marked by underlining the text to be added. The affirmative
vote of not less than two-thirds of the outstanding shares of the Trust
is required for the approval of the proposed amendments to the
Declaration of Trust. The Trustees have unanimously approved the
proposed amendments and recommend approval of the amendments as being in
the best interests of shareholders.
SECTION 7.12 Exemptions by Board. The Board of Trustees, upon receipt
of a ruling from the Internal Revenue Service or an opinion of counsel
or other evidence satisfactory to the Board of Trustees, and upon at
least 15 days written notice from a Transferee prior to the proposed
Transfer which, if consummated, would result in the intended Transferee
owning Shares in excess of the Ownership Limit or Existing Holder Limit,
as the case may be, and upon such other conditions as the Board of
Trustees may direct, may exempt a Person from the Ownership Limit or the
Existing Holder Limit, as the case may be; provided, however, that no
exemption from the Ownership Limit or the Existing Holder Limit shall be
effective without the prior affirmative vote of not less than two-thirds
of the Shares then outstanding and entitled to vote [added text, "if,
after giving effect to such exemption, five Beneficial Owners of Common
Shares (assuming each such Beneficial Owner Beneficially Owns the
greater of (i) the Ownership Limit or (ii) the greatest number or
percentage of Shares such Beneficial Owner is permitted to own pursuant
to this Section 7.12 or any other provision hereof) would Beneficially
Own, in the aggregate, more than 49% in number or value (determined as
provided in the definition of "Ownership Limit" in Section 7.1) of the
outstanding Equity Shares."]
The text of the legend required to be borne by all certificates for
shares of beneficial interest in the Trust, set forth in Section 7.13 of
the Declaration of Trust, as proposed to be amended, is set forth below.
The proposed amendments to the legend have been marked by underlining
the text to be added and striking through the text to be deleted. The
affirmative vote of not less than two-thirds of the outstanding shares
of the Trust is required for the approval of the proposed amendments to
the Declaration of Trust. The Trustees have unanimously approved the
proposed amendments and recommend approval of the amendments as being in
the best interests of shareholders.
- -17-
The securities represented by this certificate are subject to
restrictions on transfer for the purpose of the Trust's maintenance of
its status as a real estate investment trust under the Internal Revenue
Code of 1986, as amended. Except as otherwise provided pursuant to the
Declaration of Trust, no Person (unless such Person is an Existing
Holder) may Beneficially Own Shares in excess of that number of Shares
which equals the lesser of [added text "5.0%", deleted 7.5%] (or such
greater percentage as may be determined by the Board of Trustees) of (a)
the number of outstanding Equity Shares of the Trust and (b) the value
of outstanding Equity Shares of the Trust. Any Person who attempts or
proposes to beneficially own Shares in excess of the above limitations
must notify the Trust in writing at least 15 days prior to such proposed
or attempted Transfer. All capitalized terms in this legend have the
meanings defined in the Declaration of Trust of the Trust, a copy of
which will be sent without charge to each Shareholder who so requests.
If the restrictions on transfer are violated, the securities represented
hereby will be designated and treated as Excess Shares which will be
held in the Charitable Trust by the Trust.
RECOMMENDATION AND REQUIRED VOTE
The Board of Trustees recommends a vote FOR approval of the above
proposal. Approval of the above proposal requires the affirmative vote
of the holders of not less than two-thirds of the common shares
represented at the Meeting.
PROPOSAL TO AMEND THE LIBERTY PROPERTY TRUST
AMENDED AND RESTATED SHARE INCENTIVE PLAN
SUMMARY OF THE PLAN
The Trust's Board of Trustees adopted the Liberty Property Trust Amended
and Restated Share Incentive Plan (the "Plan") effective upon
completion of the initial public offering of the Common shares. At a
meeting held on February 26, 1997, the Board of Trustees unanimously
adopted, and recommend for approval by the shareholders at the Meeting,
an amendment to the Plan. Upon adoption, this amendment will increase
the number of common shares available for awards under the Plan from
2,100,000 to 5,100,000. The following is a brief summary of the Plan, as
modified by the proposed amendment, which is qualified in all respects
by the text of the Plan, attached hereto as Exhibit A.
Under the Plan the Trust may grant options to purchase shares or may
make grants of restricted shares to certain participants. Options
granted under the Plan may be either non-qualified share options
("Non-Qualified Options") or options intended to qualify as incentive
share options under Section 422 of the Code ("Incentive Options" and,
together with the Non-Qualified Options, the "Options").
PURPOSE OF THE PLAN
The purpose of the Plan is to advance the interests of the Trust, its
shareholders and its subsidiaries by encouraging and enabling selected
trustees, employees, consultants and advisors, upon whose judgment,
- -18-
initiative and effort the Trust is largely dependent for the successful
conduct of its business, to acquire and retain a proprietary interest in
the Trust by ownership of its shares through the exercise of Options and
to acquire equity participation in the Trust through the grant of
restricted shares.
AMOUNT OF COMMON SHARES SUBJECT TO OPTIONS AND GRANTS OF RESTRICTED
SHARES UNDER THE PLAN
The Plan provides for the grant of Options and restricted shares
covering an aggregate of 2,100,000 shares. If the proposed amendment to
the Plan is approved by the shareholders, the maximum aggregate number
of shares available for the grant of Options and restricted shares would
increase by 3,000,000 to 5,100,000. The number of shares subject to
Options and grants of restricted shares is subject to adjustment to
reflect changes in the Trust's capitalization. Any option that is not
exercised prior to expiration or that otherwise terminates will
thereafter be available for further grant under the Plan. As of [
] 1997, grants of Options and restricted shares covering [ ]
shares had been made under the Plan.
ADMINISTRATION OF THE PLAN
The Plan is administered by a committee or committees designated by the
Board of Trustees (the "Share Option Committee"). Options and grants of
restricted shares may be granted under the Plan to members of the Share
Option Committee only pursuant to automatic grants under a specified
formula stated in the Plan. Subject to the conditions set forth in the
Plan, the Share Option Committee has full and final authority to
determine the number of Options or restricted shares granted, the
individuals to whom and the time or times at which such Options or
restricted shares shall be granted and be exercisable, the exercise
prices (including vesting) and the terms and provisions of the
respective agreements to be entered into at the time of grant, which may
vary. The Plan is intended to be flexible, and a significant amount of
discretion is vested in the Share Option Committee with respect to all
aspects of the Options and restricted shares to be granted under the
Plan.
PARTICIPANTS
Options and restricted shares may be granted under the Plan to any
person who is or who agrees to become a trustee, employee, consultant or
advisor of the Trust, its subsidiaries and designated affiliates. As of
[ ], 1997, the Trust, its subsidiaries and designated
affiliates had nine trustees, approximately [ ] employees and
approximately [ ] consultants and advisors.
EXERCISE PRICE
The exercise price of each Non-Qualified Option granted under the Plan
shall be determined by the Share Option Committee. The exercise price
of each Incentive Option granted under the Plan shall be determined by
the Share Option Committee and shall be 100% of the fair market value of
- -19-
a share on the date the Option is granted (or at least 110% if the
recipient owns, directly or by attribution under the Code, shares having
10% of the total combined voting power of all classes of shares of the
Trust ("10% Shareholder") or any subsidiary of the Trust). The payment
of the exercise price of an Option may be made in cash or shares, as
more fully described under "Exercise of Options."
Fair market value shall be determined by the Share Option Committee in
accordance with the Plan and such determination shall be binding upon
the Trust and upon the holder. The closing sale price of the common
shares on the New York Stock Exchange on [ ], 1997 was [
] per share.
TERM OF OPTIONS
Incentive Options may be granted for a term of up to 10 years (five
years in the case of a grant to a 10% Shareholder), which may extend
beyond the term of the Plan.
EXERCISE OF OPTIONS
The terms governing exercise of Options granted under the Plan shall be
determined by the Share Option Committee, which may limit the number of
Options exercisable in any period.
Payment of the exercise price upon exercise of an Option may be made in
any combination of cash and shares, including the automatic application
of shares received upon exercise of an Option to satisfy the exercise
price of additional Options (unless the Share Option Committee provides
otherwise). Where payment is made in shares, such shares shall be
valued for such purpose at the fair market value of such shares on the
date of delivery. In no event shall an Option granted under the Plan be
exercisable prior to the date of shareholder approval of the Plan.
NON-TRANSFERABILITY
Options granted under the Plan are not transferable other than by will
or the laws of descent and distribution or pursuant to a qualified
domestic relations order.
TERMINATION OF RELATIONSHIP
Except as the Share Option Committee may expressly determine otherwise,
if the holder of an Option ceases to be employed by or to have another
qualifying relationship (such as that of trustee, employee, consultant
or advisor) with the Trust, any of its subsidiaries or a designated
affiliate other than by reason of the holder's death or permanent
disability (as defined in the Plan), all Options granted to such holder
under the Plan shall terminate immediately, except for Options that were
exercisable on the date of such termination of relationship, which
Options shall terminate three months after the date of such termination
of relationship unless such Options expire or terminate earlier.
However, if a new qualifying relationship is established before the end
of such three-month period, such exercisable Options shall continue
- -20-
until their expiration or earlier termination. In the event of the
death or permanent disability of the holder of an Option, except as the
Share Option Committee may expressly determine otherwise, Options may be
exercised to the extent that the holder might have exercised the Options
on the date of death or permanent disability for a period of one year
following the date of death or permanent disability, unless by their
terms the Options expire before the end of such one-year period.
AMENDMENT AND TERMINATION OF THE PLAN
The Board of Trustees may at any time and from time to time amend,
suspend or terminate the Plan, but may not, without the approval of the
shareholders of the Trust representing a majority of the voting power,
increase the maximum number of shares subject to Options that may be
granted under the Plan, change the provisions concerning the exercise
price of Options granted, increase the term during which Options may be
exercised, change the class of eligible participants, materially
increase the benefits to participants under the Plan or extend the term
of the Plan. No amendment, suspension or termination of the Plan by the
Board of Trustees may alter or impair any of the rights under any Option
granted under the Plan without the holder's consent.
The Plan makes it clear that the Share Option Committee may amend any
award under the Plan (provided that any such amendment that would impair
the rights or interests of a participant must have the written consent
of the participant, except if such amendment is to enable the Plan to
qualify for an exemption under Rule 16b-3 of the Securities Exchange Act
of 1934, as amended) to include any provision that, at the time of such
amendment, is authorized under the Plan.
CHANGE IN CONTROL
In the event of a change in control, as defined in the Plan, Options to
the extent not then vested will be fully exercisable.
EFFECTIVE DATE AND TERM OF THE PLAN
Options may be granted after the date that is the tenth anniversary of
the earlier of the date on which the Plan is adopted or is approved by
the Shareholders.
TERMS OF RESTRICTED SHARES
The Committee will determine the terms and conditions applicable to
awards of Restricted Shares, including a period during which the
restricted shares may not be sold, assigned, transferred, pledged or
otherwise encumbered. Unless otherwise determined by the Committee, a
recipient of a restricted share award will have the same rights as an
owner of shares, including the right to receive cash distributions and
to vote the shares. Unless otherwise specified in an award, upon
termination of employment a participant will forfeit all restricted
shares as to which the restrictions had not lapsed at time of the
termination of employment.
- -21-
REGISTRATION OF SHARES SUBJECT TO PLAN
The 2,100,000 shares available under the Plan as currently constituted
were registered under a Form S-8 Registration Statement under the
Securities Act of 1933, as amended, which was filed with the Securities
and Exchange Commission on [ ], 199[ ] and became effective on
[ ], 199[ ].
If the proposed amendment is adopted, the 3,000,000 additional shares
that will be available under the Plan will be registered under a Form S-
8 Registration Statement under the Securities Act of 1933, as amended,
to be filed with the Securities and Exchange Commission within 12 months
after the effective date of the Registration Statement relating to the
shares offered hereby.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Incentive Options. The Trust believes that with respect to Incentive
Options granted under the Plan, no income generally will be recognized
by an optionee for federal income tax purposes at the time such an
Option is granted or at the time it is exercised. If the optionee makes
no disposition of the shares so received within two years from the date
the Incentive Option was granted and one year from the receipt of the
shares pursuant to the exercise of the Incentive Option, he will
generally recognize long-term capital gain or loss upon disposition of
the shares.
If the optionee disposes of shares acquired by exercise of an Incentive
Option before the expiration of the applicable holding period, any
amount realized from such a disqualifying disposition will be taxable as
ordinary income in the year of disposition generally to the extent that
the lesser of the fair market value of the shares on the date the Option
was exercised or the fair market value at the time of such disposition
exceeds the exercise price. Any amount realized upon such a disposition
in excess of the fair market value of the shares on the date of exercise
generally will be treated as long-term or short-term capital gain,
depending on the holding period of the shares. A disqualifying
disposition will include the use of shares acquired upon exercise of an
Incentive Option in satisfaction of the exercise price of another option
prior to the satisfaction of the applicable holding period.
The Trust will not be allowed a deduction for federal income tax
purposes at the time of the grant or exercise of an Incentive Option.
At the time of a disqualifying disposition by an optionee, the Trust
generally will be entitled to a deduction for federal income tax
purposes equal to the amount taxable to the optionee as ordinary income
in connection with such disqualifying disposition (assuming that such
amount constitutes reasonable compensation).
Non-qualified Options. The Trust believes that the grant of a
Non-Qualified Option under the Plan will not be subject to federal
income tax. Upon exercise, the optionee generally will recognize
ordinary income in an amount equal to the excess of the fair market
value of the shares on the date of exercise over the exercise price.
- -22-
Gain or loss on the subsequent sale of shares received on exercise of a
Non-Qualified Option generally will be long-term or short-term capital
gain or loss, depending on the holding period of the shares.
Upon exercise of a Non-Qualified Option, the Trust generally will be
entitled to a compensation deduction for federal income tax purposes in
the year and in the same amount as the optionee or grantee is considered
to have recognized ordinary income (assuming that such compensation is
reasonable and that provision is made for withholding of federal income
taxes, where applicable). In general, no deduction is allowed for
remuneration in excess of $1,000,000 paid by the Trust during any
taxable year to any of the Chief Executive Officer or the four highest
compensated executive officers (other than the Chief Executive Officer).
Remuneration for this purpose excludes certain performance-based
compensation. The Plan is intended to qualify for the performance-based
compensation exception to the deduction limitation.
ACCOUNTING CONSEQUENCES
The accounting treatment of options provides that no amount is accrued
as compensation and thus charged against earnings unless the options
were granted at below the market price. In the latter circumstance, the
excess of such market price over the exercise price is fixed at the date
of grant and is amortized, through a charge against earnings, over the
period to which the compensation represented by the options is deemed
attributable. This is typically the vesting period of the options.
RECOMMENDATION AND REQUIRED VOTE
The Board of Trustees recommends a vote FOR approval of the above
proposal. Approval of the above proposal requires the affirmative vote
of the holders of a majority of the common shares represented at the
Meeting.
- -23-
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows, for the years ended December 31, 1996, 1995
and 1994, the compensation paid or accrued by the Trust and its
subsidiaries, including the Operating Partnership, to the Trust's Chief
Executive Officer and to the four other most highly compensated
executive officers, determined as of December 31, 1996 (collectively,
the "Named Executive Officers").
Summary Compensation Table
Annual Compensation Long-Term Compensation
-------------------------- -----------------------------------------------
Awards Payouts
---------------------- ----------
Other Restricted Securities All
Annual Stock Underlying Other
Name and Principal Compensa- Awards Options LTIP Compen-
Positions Year(1) Salary($) Bonus($) tion($)(2) ($) (3) /SARs(#) Payouts($) sation ($)
- --------------------------- ------- --------- -------- ---------- ---------- ---------- ---------- ----------
Willard G. Rouse III 1996 $220,470 $104,850 -- $ 60,000 -- -- --
Chairman and Chief 1995 $210,000 $220,500 -- -- 100,000 -- --
Executive Officer 1994 $113,750 $ 500 -- -- 100,000 -- --
Joseph P. Denny 1996 $183,750 $129,215 -- -- -- -- --
President and 1995 $175,000 $175,500 -- -- 87,500 -- --
Chief Operating Officer 1994 $ 94,791 $ 500 -- -- 100,000 -- --
George F. Congdon 1996 $178,500 $ 500 -- $ 89,964 -- -- --
Executive Vice President 1995 $170,000 $ 51,500 -- 61,200 51,000 -- --
1994 $ 92,083 $ 500 -- -- 50,000 -- --
Robert E. Fenza 1996 $173,250 $ 73,265 -- -- -- -- --
Executive Vice President 1995 $165,000 $ 99,500 -- -- 49,500 -- --
1994 $ 89,375 $ 500 -- -- 50,000 -- --
George J. Alburger, Jr. 1996 $168,000 $ 500 -- $100,800 -- -- --
Chief Financial Officer 1995 $104,849 $ 375 -- $ 63,135 76,300 -- --
1994 $ -- $ -- -- -- -- -- --
(1) Amounts for 1994 represent amounts paid from June 16, 1994 (the
effective date of the Trust's initial public offering) through December
31, 1994. Annual salary rates during such period were: Mr. Rouse -
$210,000; Mr. Denny - $175,000; Mr. Congdon - $170,000; and Mr. Fenza -
$165,000. For the period January 1 through June 15, 1994, Messrs. Rouse,
Denny, Congdon, and Fenza received aggregate salaries of $25,208,
$102,500, $25,208 and $75,625, and aggregate bonuses of $4,038, $3,365,
$3,269 and $3,173, respectively, from the Trust's predecessors. Messrs.
Rouse and Congdon also received distributions as partners of various
predecessor partnerships during this period.
(2) Did not exceed the lesser of $50,000 or 10% of the total annual
salary and bonus for any Named Executive Officer.
(3) Consistent with a policy adopted by the Trust's compensation
committee with respect to employee bonus compensation, Messrs. Rouse,
Congdon and Alburger elected to receive common shares in lieu of cash
for all or part of their bonus compensation for 1996, at the rate of
shares equal to 120% of the cash value of such bonus or portion thereof
(the "Bonus Value"). See "Report of the Compensation Committee on
Executive Compensation." Pursuant to such elections, in March 1997,
- -24-
Messrs. Rouse, Congdon and Alburger were awarded [ ] shares, [
]shares and [ ] shares, respectively. Each executive received
the number of shares able to be purchased with the dollar amount of the
Bonus Value, less applicable withholding, based on the closing price per
share of the common shares on December [ ], 1996. The dollar amounts
of Bonus Values are not reflected under the Bonus column. Dividends
will be paid on the shares issued pursuant to such awards, and such
awards will vest on January [ ], 1998. At December 31, 1996, neither
Messrs. Rouse, Congdon nor Alburger held any common shares awarded by
the Trust and subject to restrictions until vesting.
SHARE OPTION GRANTS, EXERCISES AND HOLDINGS
No options to purchase shares were granted to the Named Executive
Officers during the fiscal year ended December 31, 1996. Additionally,
no options were exercised by the Named Executive Officers during such
period. The Trust does not have any outstanding stock appreciation
rights.
AGGREGATED OPTION/SAR EXERCISES
AND FISCAL YEAR-END OPTION/SAR VALUE TABLES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at Fiscal at Fiscal
Shares Year-End (#) Year-End ($)(1)
Acquired On Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- ------------------------- ------------ ------------ -------------- -----------------
Willard G. Rouse III - - 70,000/130,000 $387,500/$687,500
Joseph P. Denny - - 67,500/120,000 $375,000/$637,500
George F. Congdon - - 35,200/65,800 $194,750/$347,750
Robert E. Fenza - - 34,900/64,600 $193,250/$341,750
George J. Alburger, Jr. - - 15,260/61,040 $ 80,050/$320,200
- -----------------
(1) Value is reported net of option exercise price, but before taxes
associated with exercise.
EMPLOYMENT AGREEMENTS
Messrs. Rouse, Denny and Congdon have entered into employment agreements
with the Trust and the Operating Partnership, each dated June 23, 1994.
Each agreement has a three-year term, subject to certain termination
provisions and subject to extension if the executive and the Trust so
agree. The initial base salary for each executive is specified in the
agreements; for the base salaries paid in 1996, 1995 and 1994, see the
Summary Compensation Table above. The agreements provide that bonuses,
incentive compensation and any annual increases in base salary shall be
determined by the Compensation Committee of the Board of Trustees.
Pursuant to the employment agreements, each executive has agreed that,
during the Restriction Period (defined below), the executive will not
engage in any activities or businesses relating to the commercial real
estate industry, either directly or indirectly, unless the consent of a
majority of the independent trustees of the Trust is first obtained.
The Restriction Period shall expire on the earlier of June 23, 2000 or
- -25-
the date of the executive's termination, unless the termination is
caused by any violation of these restrictions. Each executive is
permitted to continue to engage in certain business activities in
addition to those conducted by the Trust or the Operating Partnership.
If an executive's employment with the Trust is terminated by the Trust
as a result of the executive's disability, or by the executive for any
reason in accordance with the provisions of the agreement, then in
addition to base salary and any incentive compensation payable through
the date of such termination, the executive shall be entitled to a lump
sum payment equal to the greater of 12 months' base salary or the base
salary payable for the remainder of the then-current term of the
executive's employment agreement. In such event the executive shall
also continue to receive employee and dependent benefits for the
remaining portion of the then-current term of the employment agreement.
Each employment agreement also provides that the executive will be
nominated for election as a trustee during the term thereof.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Exchange Act, the Trust's executive
officers and trustees, and persons beneficially owning more than 10% of
the common shares, are required to file with the Securities and Exchange
Commission reports of their initial ownership and changes in ownership
of common shares. The Trust believes that for 1996, its executive
officers and trustees who were required to file reports under Section
16(a) complied with such requirements in all material respects.
CERTAIN TRANSACTIONS
Executive officers of the Trust and their affiliates who were partners
in 58 property-owning partnerships in existence prior to the formation
of the Trust in 1994 (the "Pre-Existing Partnerships") retained a minor
portion of their interest in the Pre-Existing Partnerships, in order to
eliminate an adverse tax consequence to the Trust in its formation. The
Operating Partnership acquired all of the other interests in the Pre-
Existing Partnerships in the formation. As part of the formation, these
executive officers and affiliates entered into an agreement with the
Operating Partnership under which such remaining interests will be
exchanged, subject to $23.9 million of indebtedness of the partners
(Willard G. Rouse III, $592,054; George C. Congdon, $10,282,027; David
C. Hammers $10,105,520; affiliates $2,939,848) due to the Trust (which
will be assumed by the Operating Partnership), for 120,117 additional
Units. The exchange will take place in December 1997, at which time the
transferor partners will be released from liability with respect to such
indebtedness. The indebtedness was created at the time of the formation
and the proceeds were used by the partners to make capital contributions
to the Pre-Existing Partnerships. Such capital contributions were used
to eliminate encumbrances on the partnerships' properties at the time of
the Trust's formation. Such arrangements will not confer any Units or
other economic benefits on the Trust's executives in excess of the
benefits they would have received, or involve expenditure by the Trust
or Operating Partnership of any sums in excess of the sums that would
have been expended, if the Trust's executives had conveyed their entire
interest in the Pre-Existing Partnerships to the Operating Partnership
- -26-
at the time of the Trust's formation. The shareholding information of
the executive officers given above treats the Units to be received by
them in the anticipated exchange (and the common shares for which they
may be exchanged) as being owned beneficially indirectly by such persons
at this time.
The founding partners of Rouse & Associates, the Company's predecessor,
also owned all of The Norwood Company ("Norwood"), a construction
company that performed much but not all of the construction for Rouse &
Associates. After the Trust's formation in 1994, the independent
trustees of the Trust's Board of Trustees determined that it would be in
the best interests of the Trust for Norwood to continue to perform
construction for the Trust provided it was not receiving a greater
profit on Trust jobs than it was making on jobs with third parties not
related to the Trust. An agreement was reached with Norwood that at the
end of each fiscal year, it would calculate the profit it made on each
Trust job and compare it with its average profit on non-Trust jobs for
that year and refund any profit that exceede- the average profit. In
January 1995, the owners of Norwood sold the company to certain of its
employees, none of whom is a Trust employee, taking back notes which are
non-recourse to the buyers. Under those circumstances, the independent
trustees determined it was appropriate to keep the profit limitation on
Norwood jobs for another year.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Trustees, composed of
independent trustees of the Board of Trustees of the Trust, reviews the
performance of the Trust's executive officers, fixes the base
compensation of executive officers and awards appropriate bonuses,
grants, shares, and options and determines the number of common shares
to which such options should be subject. The Committee has access to
independent compensation data and is authorized, if determined
appropriate in any particular case, to engage outside compensation
consultants.
The objectives of the Committee are to support the achievement of
desired Trust performance, to provide compensation and benefits that
will attract and retain superior talent, to reward performance and to
relate a portion of compensation to the outcome of the Trust's
performance.
The executive compensation program is comprised generally of base
salary, performance bonuses and long-term incentives in the form of
share options. The compensation program may also include various
benefits, including health insurance plans and pension, profit sharing
and retirement plans in which substantially all of the Trust's employees
participate. At the present time, the only plans in effect are health,
life and disability insurance plans, a cafeteria plan and a 401(k) plan.
In connection with the initial public offering of the Trust, Messrs.
Rouse (the Chairman and Chief Executive Officer), Denny (the President
and Chief Operating Officer), and Congdon (Executive Vice President of
- -27-
Development), respectively, entered into three-year employment contracts
through June 22, 1997, which provided for base salary and benefits which
were negotiated with the underwriters of the Trust's initial public
offering, on the basis of comparable employment compensation
arrangements provided to other public real estate investment trusts at
the time of the offering. Annual increases, bonuses and incentive
compensation are to be determined by the Compensation Committee at the
end of each calendar year, subject to the express provisions of the
employment contracts. The salaries for 1997 will be increased by [ ]
of the 1996 amount. The Compensation Committee determined that a [ ]
increase for 1997 was an appropriate adjustment taking into account the
inflation rate and other factors. The bonuses for the Named Executive
Officers and the Chief Financial Officer are determined by the increase
in the Trust's funds from operations. Such bonuses could range from [
%] to [ %] of base salary based on increases in funds from operations
of less than [ %] to more than [ %]. The actual bonuses of these
executive officers for fiscal year 1996 ranged from [$ to $
]. Consistent with a policy adopted by the Compensation Committee
for all employees, an Executive Officer has the option of taking stock
in lieu of a cash bonus at the rate of shares equal to 120% of the cash
value of the bonus. Base salary levels for the Trust's other executive
officers are generally the median of salaries of officers of companies
comparable in business, size and location, as adjusted to take into
account individual experience and performance specific to the Trust.
Because the companies used for comparative purposes are generally local
to the markets served by the Company, they do not overlap completely the
companies in the NAREIT Index referred to in the performance graph under
"Share Price Performance Graph."
The Compensation Committee determines the bonuses for executive officers
other than the Named Executive Officers based upon attainment of certain
performance goals relating to each participant's duties to the Trust and
as established annually by the Trust's Chief Operating Officer, which
may include growth in funds from operations.
The Compensation Committee believes that employee equity ownership
provides significant additional motivation to employees to maximize
value for the Trust's shareholders and, therefore, grants share options
to certain of the Trust's employees, including executive officers. It
is anticipated that options will be exercisable at the prevailing market
price of the common shares at the time of grant and, therefore, will
have value only if the Trust's share price increases over the exercise
price after the option is granted. The Committee believes that the
grant of share options provides a long-term incentive to the grantees to
contribute to the growth of the Trust and establishes a direct link
between compensation and shareholder return. The terms of options,
including vesting, exercisability and term, are determined by the
Compensation Committee, subject to requirements imposed by the Trust's
Share Incentive Plan under which such options may be granted. The
decisions are based upon relative position and responsibilities of each
employee, historical and expected contributions of each employee to the
Trust, previous grants to each employee under the Plan and a review of
competitive equity compensation for employees of similar rank in
companies that are comparable to the Trust's industry, geographic
- -28-
location and size. For information regarding recent options granted to
the Trust's Named Executive Officers, reference is made to the tables
set forth in this Proxy Statement under the caption "Compensation of
Executive Officers."
Compensation Committee
John A. Miller (Chair)
Frederick F. Buchholz
David L. Lingerfelt
- -29-
SHARE PRICE PERFORMANCE GRAPH
The following table compares the cumulative total shareholder return on
the common shares for the period beginning June 30, 1994 and ending
December 31, 1996 with the cumulative total return on the Standard &
Poor's 500 Stock Index ("S&P 500") and the NAREIT Equity REIT Total
Return Index ("NAREIT Index") over the same period. Total return values
for the S&P 500, the NAREIT Index and the common shares were calculated
based on cumulative total return assuming the investment of $100 in the
NAREIT Index, the S&P 500 and the common shares on June 30, 1994, and
assuming reinvestment of dividends. The shareholder return shown on the
graph below is not necessarily indicative of future performance.
COMPARISON OF CUMULATIVE TOTAL RETURN
LIBERTY PROPERTY TRUST COMMON SHARES, NAREIT EQUITY REIT
TOTAL RETURN INDEX AND S&P 500 INDEX
[PLOTTED LINE GRAPH USING DATA LISTED BELOW IS INSERTED HERE]
1994 1995 1996
---------------------- ----------------------------- -----------------------------
JUNE 30 SEPT 30 DEC 31 MAR 31 JUNE 30 SEPT 30 DEC 31 MAR 31 JUNE 30 SEPT 30 DEC 31
------- ------- ------ ------ ------- ------- ------ ------ ------- ------- ------
Liberty Property
Trust 100.00 99.38 100.52 101.19 104.61 115.52 115.12 114.42 112.40 125.48 151.37
NAREIT Index (1) 100.00 97.95 97.97 97.80 103.56 108.43 112.93 115.50 120.63 128.53 152.75
S&P 500 100.00 104.92 104.90 115.11 126.03 136.05 144.16 151.90 158.71 163.61 177.30
- --------------------
(1) The NAREIT Index (consisting of 166 real estate investment trusts
with a total market capitalization of $78.3 billion at December 31,1996)
is maintained by the National Association of Real Estate Investment
Trusts, Inc., is published monthly, and is based on the last closing
prices of the preceding month.
PROPOSALS OF SECURITY HOLDERS
All proposals of any shareholder of the Trust that such holder wishes to
be presented at the next Annual Meeting of Shareholders and included in
the proxy statement and form of proxy prepared for that meeting must be
received by the Trust at its principal executive offices no later than
November 21, 1997. All such proposals must be submitted in writing to
the Secretary of the Trust at the address appearing on the notice
accompanying this proxy statement.
INDEPENDENT AUDITORS
Ernst & Young LLP performed the customary auditing services for the
fiscal year ended December 31, 1996. The Trust has selected Ernst &
Young LLP as its independent auditors to perform these services for the
next fiscal year. A representative of Ernst & Young LLP is expected to
be present at the Meeting. Such representative will be available to
respond to questions from the floor and will be afforded an opportunity
to make any statement which he or she may deem appropriate.
- -30-
SOLICITATION OF PROXIES
The cost of the solicitation of proxies will be borne by the Trust. In
addition to the use of the mails, solicitations may be made by telephone
and personal interviews by officers, directors and regularly engaged
employees of the Trust. It is not anticipated that anyone will be
engaged specifically by the Trust or by any other person to solicit
proxies. Brokerage houses, custodians, nominees and fiduciaries will be
requested to forward this proxy statement to the beneficial owners of
the stock held of record by such persons, and the Trust will reimburse
them for their charges and expenses in this connection.
ANNUAL REPORT ON FORM 10-K
The Trust will provide without charge to each person solicited by this
Proxy Statement, at the written request of any such person, a copy of
the Trust's Annual Report on Form 10-K (including the financial
statements and the schedules thereto) as filed with the Securities and
Exchange Commission for its most recent fiscal year. Such written
requests should be directed to the Director of Investor Relations at the
address of the Trust appearing on the first page of this Proxy
Statement.
- -31-
LIBERTY PROPERTY TRUST
65 Valley Stream Parkway, Suite 100
Malvern, Pennsylvania 19355
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned shareholder of LIBERTY PROPERTY TRUST (the "Trust")
hereby appoints Willard G. Rouse III and Joseph P. Denny, and each of
them acting individually, as the attorney and proxy of the undersigned,
with the powers the undersigned would possess if personally present, and
with full power of substitution, to vote all shares of beneficial
interest of the Trust at the annual meeting of shareholders of the Trust
to be held on Wednesday, May 21, 1997 at 9:00 a.m. at the Wyndham
Franklin Plaza, Horizons Ballroom, 17th and Race Streets, Philadelphia,
Pennsylvania 19103, and any adjournment or postponement thereof, upon
all subjects that may properly come before the meeting, including the
matters described in the proxy statement furnished herewith, subject to
any directions indicated on the reverse side.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE SIDE
Please mark
votes as in
this example.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder(s). If no direction is made, this
proxy will be voted "FOR" all of the nominees of the Board of Trustees
in the election of trustees. This proxy also delegates discretionary
authority to vote with respect to any other business which may properly
come before the meeting or any adjournment or postponement thereof.
1. Election of three Class III trustees to hold office until 2000.
Nominees: Joseph P. Denny, David L. Lingerfelt and John A. Miller, CLU
FOR WITHHOLD
/ / / /
MARK HERE
FOR ADDRESS
CHANGE AND
NOTE AT LEFT
/ /
- ------------------------------------
FOR ALL NOMINEES, EXCEPT WITHHOLD FOR THOSE
WHOSE NAMES ARE HAND WRITTEN IN THE SPACES ABOVE.
- -32-
2. Amendments to Declaration of Trust
FOR WITHHOLD
/ / / /
3. Amendment of Liberty Property Trust 1994
Share Incentive Plan
FOR WITHHOLD
/ / / /
The undersigned hereby acknowledges receipt of the notice of annual
meeting, the proxy statement furnished in connection therewith and the
annual report and hereby ratifies all that the said attorneys and
proxies may do by virtue hereof.
NOTE: Please mark, date and sign this proxy card and return it in the
enclosed envelope. Please sign as your name appears hereon. If shares
are registered in more than one name, all owners should sign. If
signing in a fiduciary or representative capacity, please give full
title and attach evidence of authority. Corporations please sign will
full corporate name by a duly authorized officer and affix corporate
seal.
- -33-
LIBERTY PROPERTY TRUST
AMENDED AND RESTATED SHARE INCENTIVE PLAN
1. Purpose. Liberty Property Trust (the "Company") hereby amends and
restates the Liberty Property Trust Share Incentive Plan (the "Plan") as
set forth herein. The Plan is intended to recognize the contributions
made to the Company by key employees, consultants and advisors of the
Company or an Affiliate (including employees who are members of the
Board of Trustees) of the Company or any Affiliate, to provide such
persons with additional incentive to devote themselves to the future
success of the Company or an Affiliate, and to improve the ability of
the Company or an Affiliate to attract, retain, and motivate individuals
upon whom the Company's sustained growth and financial success depend,
by providing such persons with an opportunity to acquire or increase
their proprietary interest in the Company through receipt of rights to
acquire common shares of beneficial interest, $.001 par value per share
(the "Shares"), in the Company, and through transfers of Shares subject
to conditions of forfeiture. In addition, the Plan is intended as an
additional incentive to members of the Board of Trustees (the
"Trustees") who are not employees of the Company or an Affiliate to
serve on the Board of Trustees and to devote themselves to the future
success of the Company by providing them with an opportunity to acquire
or increase their proprietary interest in the Company through the
receipt of Options to acquire Shares.
2. Definitions. Unless the context clearly indicates otherwise, the
following terms shall have the following meanings:
(a) "Affiliate" means a corporation which is a parent corporation
or a subsidiary corporation with respect to the Company within the
meaning of Section 424(e) or (f) of the Code. In addition, "Affiliate"
means any other entity in which the Company owns an interest which would
be an Affiliate as defined in the preceding sentence but for the fact
that such entity is not a corporation. Employees of any such non-
corporate affiliate shall not be granted ISOs under the Plan.
(b) "Award" means a grant of Shares subject to conditions of
forfeiture made pursuant to the terms of the Plan.
(c) "Award Agreement" means the agreement between the Company and
a Grantee with respect to an Award made pursuant to the Plan.
(d) "Awardee" means a person to whom an Award has been granted
pursuant to the Plan.
(e) "Board of Trustees" means the Board of Trustees of the
Company.
(f) "Change of Control" has the meaning as set forth in Section 10
of the Plan.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
- -34-
(h) "Committee" has the meaning set forth in Section 3 of the
Plan.
(i) "Company" means Liberty Property Trust, a Maryland real estate
investment trust.
(j) "Disability" has the meaning set forth in Section 22(e)(3) of
the Code.
(k) "Fair Market Value" has the meaning set forth in Subsection
8(b) of the Plan.
(l) "Grantee" means a person to whom an Option or an Award has
been granted pursuant to the Plan.
(m) "ISO" means an Option granted under the Plan which is intended
to qualify as an "incentive stock option" within the meaning of Section
422(b) of the Code.
(n) "Non-employee Trustee" means a member of the Board of
Trustees who is not an employee of the Company or an Affiliate and who
qualifies both as a "non-employee director" as that term is used in Rule
16b-3 and as an "outside director" as that term is used in applicable
IRS regulations promulgated under Code Section 162(m).
(o) "Non-qualified Stock Option" means an Option granted under
the Plan which is not intended to qualify, or otherwise does not
qualify, as an "incentive stock option" within the meaning of Section
422(b) of the Code.
(p) "Option" means either an ISO or a Non-qualified Stock Option
granted under the Plan.
(q) "Optionee" means a person to whom an Option has been granted
under the Plan, which Option has not been exercised and has not expired
or terminated.
(r) "Option Document" means the document described in Section 8
or Section 9 of the Plan, as applicable, which sets forth the terms and
conditions of each grant of Options.
(s) "Option Price" means the price at which Shares may be
purchased upon exercise of an Option, as calculated pursuant to
Subsection 8(b) or Subsection 9(a) of the Plan.
(t) "Restricted Share" means a Share subject to conditions of
forfeiture and transfer granted to any person pursuant to an Award under
the Plan.
(u) "Retirement" shall mean a termination of an Optionee's
employment or services for the Company or an Affiliate at any time after
such Optionee has reached age 65.
(v) "Rule 16b-3" means Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended, or any successor rule.
- -35-
(w) "Section 16 Officer" means any person who is an "officer"
within the meaning of Rule 16a-1(f) promulgated under the Securities
Exchange Act of 1934, as amended, or any successor rule.
(x) "Shares" means the shares of beneficial interest, $.01 par
value per share, of the Company.
(y) "Trustee" means a member of the Board of Trustees.
3. Administration of the Plan. The Plan shall be administered by the
Board of Trustees of the Company if all members of the Board of Trustees
are Non-employee Trustees; provided, however, that the Board of Trustees
may designate a committee or committee(s) of the Board of Trustees
composed of two or more of its Trustees to administer the Plan in its
stead. If any member of the Board of Trustees is not a Non-employee
Trustee, the Board of Trustees shall (i) designate a committee composed
of two or more Trustees, each of whom is a Non-employee Trustee (the
"Non-employee Trustee Committee"), to operate and administer the Plan in
its stead, (ii) designate two committees to operate and administer the
Plan in its stead, one of such committees composed of two or more of its
Non-employee Trustees (the "Non-employee Trustee Committee") to operate
and administer the Plan with respect to the Company's Section 16
Officers and the Trustees who are not members of the Non-employee
Trustee Committee, and another committee composed of two or more
Trustees (which may include Trustees who are not Non-employee Trustees)
to operate and administer the Plan with respect to persons other than
Section 16 Officers or Trustees or (iii) designate only one committee
composed of two or more Non-employee Trustees (the "Non-employee Trustee
Committee") to operate and administer the Plan with respect to the
Company's Section 16 Officers and Trustees (other than those Trustees
serving on the Non-employee Trustee Committee) and itself operate and
administer the Plan with respect to persons other than Section 16
Officers or Trustees. Any of such committees designated by the Board of
Trustees, and the Board of Trustees itself in its administrative
capacity with respect to the Plan, is referred to as the "Committee."
With the exception of the timing of grants of Options, the price at
which Shares may be purchased, and the number of Shares covered by
Options granted to each member of the Non-employee Trustee Committee,
all of which shall be as specifically set forth in Section 9, the other
provisions set forth herein, as it pertains to members of the Non-
employee Trustee Committee, shall be administered by the Board of
Trustees.
(a) Meetings. The Committee shall hold meetings at such times
and places as it may determine. Acts approved at a meeting by a
majority of the members of the Committee or acts approved in writing by
the unanimous consent of the members of the Committee shall be the valid
acts of the Committee.
(b) Grants and Awards. Except with respect to Options granted
under Subsection 8(j) and to Non-employee Trustee Committee Members
pursuant to Section 9, the Committee shall from time to time at its
- -36-
discretion direct the Company to grant Options and Awards pursuant to
the terms of the Plan. The Committee shall have plenary authority to
(i) determine the persons to whom, and the times at which Options and
Awards are to be granted as well as the terms applicable to Options and
Awards, (ii) determine the type of Option to be granted and the number
of Shares subject thereto, (iii) determine the Awardees to whom, and the
times at which, Restricted Shares are granted, the number of Shares
awarded, and the purchase price per Share, if any, and (iv) approve the
form and terms and conditions of the Option Documents and Award
Agreements; all subject, however, to the express provisions of the Plan.
In making such determinations, the Committee may take into account the
nature of the Grantee's services and responsibilities, the Grantee's
present and potential contribution to the Company's success and such
other factors as it may deem relevant. Notwithstanding the foregoing,
grants of Options to Non-employee Trustee Committee Members shall be
made exclusively in accordance with Section 9 and such other provisions
of the Plan that specifically apply to such Options. The interpretation
and construction by the Committee of any provisions of the Plan or of
any Option or Award granted under it shall be final, binding and
conclusive.
(c) Exculpation. No member of the Committee shall be personally
liable for monetary damages as such for any action taken or any failure
to take any action in connection with the administration of the Plan or
the granting of Options or Awards thereunder unless (i) the member of
the Committee has breached or failed to perform the duties of his office
under applicable law and (ii) the breach or failure to perform
constitutes self-dealing, willful misconduct or recklessness; provided,
however, that the provisions of this Subsection 3(c) shall not apply to
the responsibility or liability of a member of the Committee pursuant to
any criminal statute or to the liability of a member of the Committee
for the payment of taxes pursuant to local, state or federal law.
(d) Indemnification. Service on the Committee shall constitute
service as a member of the Board of Trustees. Each member of the
Committee shall be entitled without further act on his part to indemnity
from the Company to the fullest extent provided by applicable law and
the Company's Declaration of Trust and/or By-laws in connection with or
arising out of any action, suit or proceeding with respect to the
administration of the Plan or the granting of Options or Awards
thereunder in which he or she may be involved by reason of his or her
being or having been a member of the Committee, whether or not he or she
continues to be such member of the Committee at the time of the action,
suit or proceeding.
4. Grants and Awards under the Plan. Options under the Plan may be in
the form of a Non-qualified Stock Option, an ISO, or Awards of
Restricted Shares, or any combination thereof, at the discretion of the
Committee.
5. Eligibility. All key employees, consultants and advisors of the
Company or an Affiliate and members of the Board of Trustees shall be
eligible to receive Options and Awards hereunder. The Committee, in its
sole discretion, shall determine whether an individual qualifies as a
- -37-
key employee. Notwithstanding anything to the contrary contained
herein, consultants and advisors shall only be eligible to receive
Options or Awards provided bona fide services shall be rendered by such
persons, and such services are not in connection with a capital raising
transaction.
6. Shares Subject to Plan. The aggregate maximum number of Shares for
which Options or Awards may be granted pursuant to the Plan (including
Shares for which Options or Awards were granted under the Plan prior to
this restatement) is five million one hundred thousand (5,100,000),
subject to adjustment as provided in Section 11 of the Plan. The Shares
shall be issued from authorized and unissued Shares or Shares held in or
hereafter acquired for the treasury of the Company. If an Option
terminates or expires without having been fully exercised for any
reason, or if Shares granted pursuant to an Award have been conveyed
back to the Company pursuant to the terms of an Award Agreement, the
Shares for which the Option was not exercised or the Shares that were
conveyed back to the Company may again be the subject of one or more
Options or Awards granted pursuant to the Plan.
7. Term of the Plan. The amended and restated Plan is effective as of
March __, 1997, the date of its adoption by the Board of Trustees (the
"Approval Date"), subject to the approval of the amended and restated
Plan within twelve months of the Approval Date by a majority of the
votes cast at a duly called meeting of the shareholders at which a
quorum representing a majority of all outstanding voting interests of
the Company is, either in person or by proxy, present and voting, or by
a method and in a degree that would be treated as adequate under
applicable state law in the case of an action requiring shareholder
approval. No Option or Award may be granted under the Plan ten years
after the Approval Date. If the Plan is not approved by shareholder
vote as described above, all Options and Awards granted under the Plan
as amended and restated that could not have been granted under the Plan
as in effect without regard to this Amended and Restated Plan shall be
null and void.
8. Option Documents and Terms. Each Option granted under the Plan
shall be a Non-qualified Stock Option unless the Option shall be
specifically designated at the time of grant to be an ISO for federal
income tax purposes. To the extent any Option designated an ISO is
determined for any reason not to qualify as an incentive stock option
within the meaning of Section 422 of the Code, such Option shall be
treated as a Non-qualified Stock Option for all purposes under the
provisions of the Plan. Options granted pursuant to the Plan shall be
evidenced by the Option Documents in such form as the Committee shall
from time to time approve, which Option Documents shall comply with and
be subject to the following terms and conditions and such other terms
and conditions as the Committee shall from time to time require which
are not inconsistent with the terms of the Plan. However, the
provisions of this Section 8 shall not be applicable to Options granted
to non-employee members of the Board of Trustees, except as otherwise
provided in Subsection 9(c).
(a) Number of Option Shares. Each Option Document shall state
- -38-
the number of Shares to which it pertains. An Optionee may receive more
than one Option, which may include Options which are intended to be
ISO's and Options which are not intended to be ISO's, but only on the
terms and subject to the conditions and restrictions of the Plan.
Notwithstanding anything to the contrary contained herein, no employee
shall be granted Options to acquire more than two hundred fifty thousand
(250,000) Shares during any calendar year.
(b) Option Price. Each Option Document shall state the Option
Price which, for a Non-qualified Stock Option, may be less than, equal
to, or greater than the Fair Market Value of the Shares on the date the
Option is granted and, for an ISO, shall be at least 100% of the Fair
Market Value of the Shares on the date the Option is granted as
determined by the Committee in accordance with this Subsection 8(b);
provided, however, that if an ISO is granted to an Optionee who then
owns, directly or by attribution under Section 424(d) of the Code,
interests in the Company or any parent or subsidiary corporation
possessing more than ten percent of the total combined voting power of
all classes of interests of the Company or such parent or subsidiary,
then the Option Price shall be at least 110% of the Fair Market Value of
the Shares on the date the Option is granted. If the Shares are traded
in a public market, then the Fair Market Value per Share shall be, if
the Shares are listed on a national securities exchange or included in
the NASDAQ National Market System, the last reported sale price thereof
on the relevant date, or, if the Shares are not so listed or included
(or if there was no reported sale on the relevant date), the mean
between the last reported "bid" and "asked" prices thereof on the
relevant date, as reported on NASDAQ or by the exchange, as applicable,
or, if not so reported, as reported by the National Daily Quotation
Bureau, Inc. or as reported in a customary financial reporting service,
as applicable, or, in the event such method of determination of fair
market value is determined to be inaccurate or such information as is
needed for such determination as set forth above is not available, as
the Committee determines in good faith.
(c) Exercise. No Option shall be deemed to have been exercised
prior to the receipt by the Company of written notice of such exercise
and of payment in full of the Option Price for the Shares to be
purchased. Each such notice shall specify the number of Shares to be
purchased and shall (unless the Shares are covered by a then current
registration statement or qualified Offering Statement under Regulation
A under the Securities Act of 1933, as amended (the "Act")), contain the
Optionee's acknowledgment in form and substance satisfactory to the
Company that (a) such Shares are being purchased for investment and not
for distribution or resale (other than a distribution or resale which,
in the opinion of counsel satisfactory to the Company, may be made
without violating the registration provisions of the Act), (b) the
Optionee has been advised and understands that (i) the Shares have not
been registered under the Act and are "restricted securities" within the
meaning of Rule 144 under the Act and are subject to restrictions on
transfer and (ii) the Company is under no obligation to register the
Shares under the Act or to take any action which would make available to
the Optionee any exemption from such registration, (c) such Shares may
not be transferred without compliance with all applicable federal and
- -39-
state securities laws, and (d) an appropriate legend referring to the
foregoing restrictions on transfer and any other restrictions imposed
under the Option Documents may be endorsed on the certificates.
Notwithstanding the foregoing, if the Company determines that issuance
of Shares should be delayed pending (A) registration under federal or
state securities laws, (B) the receipt of an opinion of counsel
satisfactory to the Company that an appropriate exemption from such
registration is available, (C) the listing or inclusion of the Shares on
any securities exchange or an automated quotation system or (D) the
consent or approval of any governmental regulatory body whose consent or
approval is deemed necessary in connection with the issuance of such
Shares, the Company may defer exercise of any Option granted hereunder
until any of the events described in this sentence has occurred.
(d) Medium of Payment. An Optionee shall pay for Shares (i) in
cash, (ii) by certified or cashier's check payable to the order of the
Company, or (iii) by such other mode of payment as the Committee may
approve, including payment through a broker in accordance with
procedures permitted by Regulation T of the Federal Reserve Board.
Furthermore, the Committee may provide in an Option Document that
payment may be made in whole or in part in Shares held by the Optionee.
If payment is made in whole or in part in Shares, then the Optionee
shall deliver to the Company certificates registered in the name of such
Optionee representing the Shares owned by such Optionee, free of all
liens, claims and encumbrances of every kind and having an aggregate
Fair Market Value on the date of delivery that is at least as great as
the Option Price of the Shares (or relevant portion thereof) with
respect to which such Option is to be exercised by the payment in
Shares, endorsed in blank or accompanied by stock powers duly endorsed
in blank by the Optionee. In the event that certificates for Shares
delivered to the Company represent a number of Shares in excess of the
number of Shares required to make payment for the Option Price of the
Shares (or relevant portion thereof) with respect to which such Option
is to be exercised by payment in Shares, the certificate or certificates
issued to the Optionee shall represent (i) the Shares in respect of
which payment is made, and (ii) such excess number of Shares.
Notwithstanding the foregoing, the Committee may impose from time to
time such limitations and prohibitions on the use of Shares to exercise
an Option as it deems appropriate.
(e) Termination of Options.
(i) No Option shall be exercisable after the first to
occur of the following:
(A) Expiration of the Option term specified in the
Option Document, which, in the case of an ISO, shall not occur after (1)
ten years from the date of grant, or (2) five years from the date of
grant of an ISO if the Optionee on the date of grant owns, directly or
by attribution under Section 424(d) of the Code, interests in the
Company or any parent or subsidiary corporation possessing more than ten
percent (10%) of the total combined voting power of all classes of
interests of the Company or such parent or subsidiary;
- -40-
(B) The third month anniversary of the date of
termination of the Optionee's services or employment with the Company or
an Affiliate for any reason other than death, Disability or Retirement.
(C) A finding by the Committee, after full
consideration of the facts presented on behalf of both the Company and
the Optionee, that the Optionee has breached his or her employment or
service contract with the Company or an Affiliate, or has been engaged
in disloyalty to the Company or an Affiliate, including, without
limitation, fraud, embezzlement, theft, commission of a felony or proven
dishonesty in the course of his or her employment or service, or has
disclosed trade secrets or confidential information of the Company or an
Affiliate. In such event, in addition to immediate termination of the
Option, the Optionee shall automatically forfeit all Shares for which
the Company has not yet delivered the Share certificates upon refund by
the Company of the Option Price. Notwithstanding anything herein to the
contrary, the Company may withhold delivery of Share certificates
pending the resolution of any inquiry that could lead to a finding
resulting in a forfeiture;
(D) The date, if any, set by the Board of Trustees as
an accelerated expiration date in the event of the liquidation or
dissolution of the Company; or
(E) The occurrence of such other event or events as
may be set forth in the Option Document as causing an accelerated
expiration of the Option.
(ii) Notwithstanding the foregoing, the Committee may
extend the period during which all or any portion of an Option may be
exercised to a date no later than the Option term specified in the
Option Document pursuant to Subsection 8(e)(i)(A), provided that any
change pursuant to this Subsection 8(e)(ii) which would cause an ISO to
become a Non-qualified Stock Option may be made only with the consent of
the Optionee.
(iii) The terms of an executive severance agreement or other
agreement between the Company and an Optionee, approved by the
Committee, whether entered into prior or subsequent to the grant of an
Option, which provide for Option exercise dates later than those set
forth in Subsection 8(e)(i) but permitted by this Subsection 8(e)(ii)
shall be deemed to be Option terms approved by the Committee and
consented to by the Optionee.
(iv) Unless otherwise expressly permitted in the Option
Document, no Option granted pursuant to this Section 8 shall be
exercisable following the termination of the Optionee's services as a
member of the Board of Trustees or employment with the Company or any
Affiliate with respect to any Shares in excess of those which could have
been acquired by exercise of the Option on the date of such termination
of services or employment.
(f) Transfers. No Option granted under the Plan may
be transferred, except by will or by the laws of descent and
- -41-
distribution. During the lifetime of the person to whom an Option is
granted, such Option may be exercised only by such person.
Notwithstanding the foregoing, (1) a Non-qualified Stock Option may be
transferred pursuant to the terms of a "qualified domestic relations
order," within the meaning of Sections 401(a)(13) and 414(p) of the Code
or within the meaning of Title I of the Employee Retirement Income
Security Act of 1974, as amended, and (2) the Committee may provide, in
an Option Document, that an Optionee may transfer Options to his or her
children, grandchildren or spouse or to one or more trusts for the
benefit of such family members or to partnerships in which such family
members are the only partners (a "Family Transfer"), provided that the
Optionee receives no consideration for such Family Transfer and the
Option Documents relating to Options transferred in such Family Transfer
continue to be subject to the same terms and conditions that were
applicable to such Options immediately prior to the Family Transfer.
(g) Limitation on ISO Grants. In no event shall the
aggregate Fair Market Value of the Shares with respect to which ISOs
issued under the Plan and incentive stock options issued under any other
incentive stock option plans of the Company or its Affiliates which are
exercisable for the first time by the Optionee during any calendar year
exceed $100,000. Any ISOs issued in excess of this limitation shall be
treated as Non-qualified Stock Options issued under the Plan. For
purposes of this subsection 8(g), the Fair Market Value of Shares shall
be determined as of the date of grant of the ISO or other incentive
stock option.
(h) Other Provisions. Subject to the provisions of
the Plan, the Option Documents shall contain such other provisions
including, without limitation, provisions authorizing the Committee to
accelerate the exercisability of all or any portion of an Option granted
pursuant to the Plan, additional restrictions upon the exercise of the
Option or additional limitations upon the term of the Option, as the
Committee shall deem advisable.
(i) Amendment. Subject to the provisions of the
Plan, the Committee shall have the right to amend Option Documents
issued to an Optionee, subject to the Optionee's consent if such
amendment is not favorable to the Optionee, except that the consent of
the Optionee shall not be required for any amendment made pursuant to
Subsection 8(e)(i)(C) or Section 10 of the Plan, as applicable.
(j) No Options shall be granted under the Plan if,
taking into account the grant of such options, five or fewer individuals
would own more than 50% of the outstanding Shares, as computed for
purposes of Code Section 856(h).
9. Special Provisions Relating to Grants of Options to Non-employee
Members of the Board of Trustees. Options granted pursuant to the Plan
to non-employee members of the Board of Trustees shall be granted,
without any further action by the Committee, in accordance with the
terms and conditions set forth in this Section 9. Options granted
pursuant to this Section 9 shall be evidenced by Option Documents in
such form as the Committee shall from time to time approve, which Option
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Documents shall comply with and be subject to the following terms and
conditions and such other terms and conditions as the Committee shall
from time to time require which are not inconsistent with the terms of
the Plan and would not cause a Non-employee Trustee to lose his or her
status as a "non-employee director" (as that term is used for purposes
of Rule 16b-3) due to the grant of Options to such person pursuant to
this Section 9.
(a) Timing of Grants; Number of Shares Subject of Options;
Exercisability of Options; Option Price. Each non-employee member of
the Board of Trustees shall be granted annually, commencing on the date
of the initial public offering of Shares, and on each anniversary of
such date thereafter, an Option to purchase five thousand (5,000) Shares
provided such person is a member of the Board of Trustees on such grant
date. Each such Option shall be a Non-qualified Stock Option
exercisable with respect to twenty percent (20%) of the Shares subject
to such Option after the first anniversary of the date of grant,
exercisable with respect to fifty percent (50%) of the Shares after the
second anniversary of the date of grant, and fully exercisable after the
third anniversary of the date of grant. The Option Price shall be equal
to the Fair Market Value of the Shares on the date the Option is
granted.
(b) Termination of Options Granted Pursuant to Section 9. No
Option granted pursuant to this Section 9 shall be exercisable after the
first to occur of the following:
(i) The tenth anniversary of the date of grant.
(ii) The third month anniversary of the date of termination of the
Optionee's services as a member of the Board of Trustees for any reason
other than death, Disability or Retirement.
Notwithstanding anything to the contrary contained herein, no Option
granted pursuant to this Section 9 shall be exercisable following the
termination of the Optionee's services as a member of the Board of
Trustees with respect to any Shares in excess of those which could have
been acquired by exercise of the Option on the date of such termination
of services.
(c) Applicability of Section 8 to Options Granted Pursuant to Section
9. The following provisions of Section 8 shall be applicable to Options
granted pursuant to this Section 9: Subsection 8(a) (provided that all
Options granted pursuant to this Section 9 shall be Non-qualified Stock
Options); the last sentence of Subsection 8(b); Subsection 8(c);
Subsection 8(d) (provided that Option Documents relating to Options
granted pursuant to this Section 9 shall provide that payment may be
made in whole or in part in Shares); and Subsection 8(f) (provided that
Option Documents relating to Options granted pursuant to this Section 9
shall not permit Family Transfers).
10. Change of Control. In the event of a Change of Control, the
Committee may take whatever action it deems necessary or desirable with
respect to the Options and Awards outstanding (other than Options
granted pursuant to Subsection 8(j) and Section 9), including, without
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limitation, accelerating the expiration or termination date in the
respective Option Documents to a date no earlier than thirty (30) days
after notice of such acceleration is given to the Optionees. In
addition to the foregoing, in the event of a Change of Control, Options
granted pursuant to the Plan and held by Optionees who are employees of
the Company or an Affiliate or members of the Board of Trustees at the
time of a Change of Control shall become immediately exercisable in full
and the restrictions applicable to Restricted Shares awarded to Awardees
who are employees of the Company or an Affiliate or members of the Board
of Trustees at the time of a Change of Control shall immediately lapse.
Any amendment to this Section 10 which diminishes the rights of
Optionees, shall not be effective with respect to Options outstanding at
the time of adoption of such amendment, whether or not such outstanding
Options are then exercisable.
A "Change of Control" shall be deemed to have occurred upon the
earliest to occur of the following events: (i) the date the
shareholders of the Company (or the Board of Trustees, if shareholder
action is not required) approve a plan or other arrangement pursuant to
which the Company will be dissolved or liquidated, or (ii) the date the
shareholders of the Company (or the Board of Trustees, if shareholder
action is not required) approve a definitive agreement to sell or
otherwise dispose of substantially all of the assets of the Company, or
(iii) the date the shareholders of the Company (or the Board of
Trustees, if shareholder action is not required) and the shareholders of
the other constituent corporation or entity (or its board of directors
or trustees if shareholder action is not required) have approved a
definitive agreement to merge or consolidate the Company with or into
such other corporation or other entity, other than, in either case, a
merger or consolidation of the Company in which holders of Shares
immediately prior to the merger or consolidation will have at least a
majority of the ownership of interests of the surviving corporation or
entity (and, if one class of common stock or other equity interest is
not the only class of voting securities entitled to vote on the election
of directors or trustees of the surviving entity, a majority of the
voting power of the surviving entity's voting securities) immediately
after the merger or consolidation, which equity interest (and, if
applicable, voting securities) is to be held in the same proportion as
such holders' ownership of Shares immediately before the merger or
consolidation, or (iv) the first day, after the date this Plan is
effective on which there has occurred a change in the majority of the
positions on the Board of Trustees or if any person (or any group of
associated persons acting in concert) acquires, directly or indirectly,
more than a percentage of the voting stock of the Trust in excess of
that held by the "Senior Executives" (as defined in the Registration
Statement) in the aggregate as of the date of the closing of the initial
public offering of the Common Shares, in either case without the advance
written consent of the current Board of Trustees.
11. Adjustments on Changes in Capitalization.
(a) Corporate Transactions. In the event that the outstanding Shares
are changed by reason of a reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, combination or
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exchange of shares and the like (not including the issuance of Shares on
the conversion of other securities of the Company which are outstanding
on the date of grant and which are convertible into Shares) or dividends
payable in Shares, an equitable adjustment shall be made by the
Committee in the aggregate number of Shares available under the Plan and
in the number of Shares and price per Share subject to outstanding
Options. Unless the Committee makes other provisions for the equitable
settlement of outstanding options, if the Company shall be reorganized,
consolidated, or merged with another corporation, or if all or
substantially all of the assets of the Company shall be sold or
exchanged, an Optionee shall at the time of issuance of the Shares under
such corporate event be entitled to receive upon the exercise of his or
her Option the same number and kind of shares or the same amount of
property, cash or securities as he or she would have been entitled to
receive upon the occurrence of any such corporate event as if he or she
had been, immediately prior to such event, the holder of the number of
shares covered by his or her Option.
(b) Proportionate Application. Any adjustment under this Section 11 in
the number of Shares subject to Options shall apply proportionately to
only the unexercised portion of any Option granted hereunder. If
fractions of a Share would result from any such adjustment, the
adjustment shall be revised to the next lower whole number of Shares.
(c) Committee Authority. The Committee shall have authority to
determine the adjustments to be made under this Section, and any such
determination by the Committee shall be final, binding and conclusive.
12. Terms and Conditions of Awards. Awards granted pursuant to the
Plan shall be evidenced by written Award Agreements in such form as the
Committee shall from time to time approve, which Award Agreements shall
comply with and be subject to the following terms and conditions and
such other terms and conditions which the Committee shall from time to
time require which are not inconsistent with the terms of the Plan. The
Committee may, in its sole discretion, shorten or waive any term or
condition with respect to all or any portion of any Award.
Notwithstanding the foregoing, all restrictions shall lapse or terminate
with respect to Restricted Shares upon the death or Disability of the
Awardee.
(a) Number of Shares. Each Award Agreement shall state the number of
Shares to which it pertains.
(b) Purchase Price. Each Award Agreement shall specify the purchase
price, if any, which applies to the Award. If the Board of Trustees
specifies a purchase price, the Awardee shall be required to make
payment on or before the date specified in the Award Agreement. An
Awardee shall pay for such Shares (i) in cash, (ii) by certified check
payable to the order of the Company, or (iii) by such other mode of
payment as the Committee may approve.
(c) Restrictions on Transfer and Forfeitures. A share certificate
representing the Restricted Shares granted to an Awardee shall be
registered in the Awardee's name but shall be held in escrow by the
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Company or an appropriate officer of the Company, together with an
undated share transfer power executed by the Awardee with respect to
each share certificate representing Restricted Shares in such Awardee's
name. The Awardee shall generally have the rights and privileges of a
shareholder as to such Restricted Shares including the right to vote
such Restricted Shares and to receive and retain all cash dividends with
respect to such Shares, except that the following restrictions shall
apply: (i) the Awardee shall not be entitled to delivery of the
certificate until the expiration or termination of any period designated
by the Committee ("Restricted Period") and the satisfaction of any other
conditions prescribed by the Committee; and (ii) all distributions with
respect to the Restricted Shares other than cash dividends, such as
share dividends, share splits or distributions of property, and any
distributions (other than cash dividends) subsequently made with respect
to other distributions, shall be delivered to the Company or an
appropriate officer of the Company, together with appropriate share
transfer powers or other instruments of transfer signed and delivered to
the Company or appropriate officer of the Company by the Awardee, to be
held by the Company or appropriate officer of the Company and released
to either the Awardee or the Company, as the case may be, together with
the Shares to which they relate; (iii) the Awardee will have no right to
sell, exchange, transfer, pledge, hypothecate or otherwise dispose of
any of the Restricted Shares or distributions (other than cash
dividends) with respect thereto; and (iv) all of the Restricted Shares
shall be forfeited and all rights of the Awardee with respect to such
Restricted Shares shall terminate without further obligation on the part
of the Company unless the Awardee has remained a regular full-time
employee of the Company or an Affiliate, any of its subsidiaries or any
parent or any combination thereof until the expiration or termination of
the Restricted Period and the satisfaction of any other conditions
prescribed by the Committee applicable to such Restricted Share. Upon
the forfeiture of any Restricted Share, such forfeited shares shall be
transferred to the Company without further action by the Awardee.
(d) Lapse of Restrictions. Upon the expiration or termination of
the Restricted Period and the satisfaction of any other conditions
prescribed by the Committee as provided for in the Plan, the
restrictions applicable to the Restricted Share shall lapse and a stock
certificate for the number of shares of Common Stock with respect to
which the restrictions have lapsed shall be delivered, free of all such
restrictions, except any that may be imposed by law, to the Awardee or
the beneficiary or estate, as the case may be. The Company shall not be
required to deliver any fractional share of Common Stock but will pay,
in lieu thereof, the fair market value (determined as of the date the
restrictions lapse) of such fractional share to the Awardee or the
Awardee's beneficiary or estate, as the case may be. The Award may
provide for the lapse of restrictions on transfer and forfeiture
conditions in installments. Notwithstanding the foregoing, unless the
Shares are covered by a then current registration statement or a
Notification under Regulation A under the Act, the Company may require
as a condition to the transfer of Share certificates to an Awardee under
this Subsection 12(d) that the Awardee provide the Company with an
acknowledgment in form and substance satisfactory to the Company that
(a) such Shares are being purchased for investment and not for
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distribution or resale (other than a distribution or resale which, in
the opinion of counsel satisfactory to the Company, may be made without
violating the registration provisions of the Act), (b) the Optionee has
been advised and understands that (i) the Shares have not been
registered under the Act and are "restricted securities" within the
meaning of Rule 144 under the Act and are subject to restrictions on
transfer and (ii) the Company is under no obligation to register the
Shares under the Act or to take any action which would make available to
the Optionee any exemption from such registration, (c) such Shares may
not be transferred without compliance with all applicable federal and
state securities laws, and (d) an appropriate legend referring to the
foregoing restrictions on transfer may be endorsed on the certificates.
Notwithstanding the foregoing, if the Company determines that the
transfer of Share certificates should be delayed pending (A)
registration under federal or state securities laws, (B) the receipt of
an opinion of counsel satisfactory to the Company that an appropriate
exemption from such registration is available, (C) the listing or
inclusion of the Shares on any securities exchange or an automated
quotation system or (D) the consent or approval of any governmental
regulatory body whose consent or approval is necessary in connection
with the issuance of such Shares, the Company may defer transfer of
Share certificates hereunder until any of the events described in this
sentence has occurred.
(e) Section 83(b) Election. An Awardee who files an election with the
Internal Revenue Service to include the fair market value of any
Restricted Share in gross income while they are still subject to
restrictions shall promptly furnish the Company with a copy of such
election together with the amount of any federal, state, local or other
taxes required to be withheld to enable the Company to claim an income
tax deduction with respect to such election.
(f) Rights as Shareholder. Upon payment of the purchase price, if
any, for Shares covered by an Award and compliance with the
acknowledgment requirement of subsection 12(d), the Grantee shall have
all of the rights of a shareholder with respect to the Shares covered
thereby, including the right to vote the Shares and receive all
dividends and other distributions paid or made with respect thereto,
except to the extent otherwise provided by the Committee or in the Award
Agreement.
(g) Amendment. Subject to the provisions of the Plan, the Committee
shall have the right to amend Awards issued to an Awardee, subject to
the Awardee's consent if such amendment is not favorable to the Awardee,
except that the consent of the Awardee shall not be required for any
amendment made pursuant to Section 10 of the Plan.
13. Amendment of the Plan. The Board of Trustees of the Company may
amend the Plan from time to time in such manner as it may deem
advisable. Nevertheless, the Board of Trustees of the Company may not
change the class of individuals eligible to receive an ISO or increase
the maximum number of Shares as to which Options or Awards may be
granted without obtaining approval, within twelve months before or after
such action, by vote of a majority of the votes cast at a duly called
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meeting of the shareholders at which a quorum representing a majority of
all outstanding voting interests of the Company is, either in person or
by proxy, present and voting on the matter, or by a method and in a
degree that would be treated as adequate under applicable state law in
the case of an action requiring shareholder approval. No amendment to
the Plan shall adversely affect any outstanding Option or Award,
however, without the consent of the Grantee.
14. No Commitment to Retain. The grant of an Option or an Award
pursuant to the Plan shall not be construed to imply or to constitute
evidence of any agreement, express or implied, on the part of the
Company or any Affiliate to retain the Grantee in the employ of the
Company or an Affiliate and/or as a member of the Company's Board of
Trustees or in any other capacity.
15. Withholding of Taxes. Whenever the Company proposes or is
required to deliver or transfer Shares in connection with an Award or
the exercise of an Option, the Company shall have the right to (a)
require the recipient to remit or otherwise make available to the
Company an amount sufficient to satisfy any federal, state and/or local
withholding tax requirements prior to the delivery or transfer of any
certificate or certificates for such Shares or (b) take whatever other
action it deems necessary to protect its interests with respect to its
tax liabilities. The Company's obligation to make any delivery or
transfer of Shares shall be conditioned on the Grantee's compliance, to
the Company's satisfaction, with any withholding requirement.
16. Interpretation. The Plan is intended to enable transactions under
the Plan with respect to Trustees and officers (within the meaning of
Section 16(a) under the Securities Exchange Act of 1934, as amended) to
satisfy the conditions of Rule 16b-3; to the extent that any provision
of the Plan would cause a conflict with such conditions or would cause
the administration of the Plan as provided in Section 3 to fail to
satisfy the conditions of Rule 16b-3, such provision shall be deemed
null and void to the extent permitted by applicable law. This section
shall not be applicable if no class of the Company's equity securities
is then registered pursuant to Section 12 of the Securities Exchange Act
of 1934, as amended.
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