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
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission Only
[X] Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to Rule 14a-12
EQUITY ONE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration No.:
(3) Filing Party:
(4) Date Filed:
EQUITY ONE, INC.
1696 N.E. MIAMI GARDENS DRIVE
NORTH MIAMI BEACH, FLORIDA 33179
--------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 24, 2002
--------------------------
TO OUR STOCKHOLDERS:
You are cordially invited to attend the 2002 annual meeting of the
stockholders of Equity One, Inc. which will be held in the Baker Room, at the
Sheraton Bal Harbour, 9701 Collins Avenue, Bal Harbor, Florida 33154, on May 24,
2002, at 10:00 a.m., local time. At the meeting, stockholders will vote on the
following matters:
1. The election of two directors to hold office until our 2005
annual meeting of stockholders;
2. The approval of an amendment to our 2000 Executive Incentive
Compensation Plan to increase the number of shares available
for grant from 1,000,000 to 2,500,000;
3. The ratification of Deloitte & Touche LLP as independent
auditors for the period ending December 31, 2002; and
4. Such other business as may properly come before the annual
meeting, including any adjournments or postponements of the
meeting.
If you own shares of our common stock as of the close of business on
April 5, 2002, you can vote those shares by proxy or at the meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE SO THAT YOUR SHARES WILL BE REPRESENTED.
STOCKHOLDERS WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING,
REVOKE THEIR PROXY AND VOTE THEIR SHARES IN PERSON.
By Order of the Board of Directors
/s/ ALAN J. MARCUS
------------------------------------
ALAN J. MARCUS
SECRETARY
North Miami Beach, Florida
April 29, 2002
TABLE OF CONTENTS
-----------------
PAGE
----
Information Concerning the Proxy..................................................................................1
Purposes of the Meeting...........................................................................................1
Outstanding Voting Securities and Voting Rights...................................................................2
Who Can Vote...................................................................................................2
General Information on Voting..................................................................................2
Security Ownership................................................................................................3
Proposal 1-- Election of Directors................................................................................5
Directors Standing for Election................................................................................5
Directors Continuing in Office.................................................................................5
Management........................................................................................................6
Executive Officers and Directors...............................................................................6
Directors' Compensation........................................................................................7
Section 16(a) Beneficial Ownership Reporting Compliance........................................................8
Committees and Meetings of the Board of Directors..............................................................8
Report of the Audit and Review Committee..........................................................................9
Report of the Compensation Committee.............................................................................10
Our Policy Regarding Executive Compensation...................................................................10
Our Policy Regarding our Chief Executive Officer's Compensation...............................................10
Internal Revenue Code Limits on Deductibility of Compensation.................................................11
Executive Compensation...........................................................................................11
Summary Compensation Table....................................................................................11
Option Grants in Fiscal 2001..................................................................................13
Aggregated Option Exercises in 2001 and Fiscal Year-End Option Value Table....................................13
Employment Contracts..........................................................................................13
Employee Benefit Plans........................................................................................14
Performance Graph................................................................................................16
Proposal 2-- Adoption of Amendments to our 2000 Executive Incentive Compensation Plan............................17
Background and Purpose........................................................................................17
Summary of Proposed Plan Changes..............................................................................17
Reasons for Changes to the 2000 Plan..........................................................................17
Summary of our 2000 Executive Incentive Compensation Plan, as Amended.........................................17
Benefits under the Amended Plan...............................................................................24
Proposal 3-- Ratification of Deloitte & Touche LLP as our Independent Auditors...................................25
Fees Paid to our Independent Auditors............................................................................25
Certain Transactions.............................................................................................26
Stockholder Proposals............................................................................................29
2002 ANNUAL MEETING
OF
STOCKHOLDERS OF EQUITY ONE, INC.
--------------------------
PROXY STATEMENT
--------------------------
Our board of directors is soliciting proxies from the holders of our
common stock to be voted at our 2002 annual meeting of stockholders to be held
in the Baker Room, at the Sheraton Bal Harbour, 9701 Collins Avenue, Bal
Harbour, Florida 33154, on May 24, 2002 at 10:00 a.m., local time, or at any
adjournments or postponements of the meeting. We are sending this proxy
statement in connection with the proxy solicitation.
We are first mailing this proxy statement and the enclosed form of
proxy on or about April 29, 2002. You should review the information provided
herein in conjunction with our 2001 annual report, which accompanies this proxy
statement. Our principal executive office is located at 1696 N.E. Miami Gardens
Drive, North Miami Beach, Florida 33179, and our telephone number is (305)
947-1664.
INFORMATION CONCERNING THE PROXY
The enclosed proxy is solicited on behalf of our board of directors.
The giving of a proxy does not preclude your right to vote in person should you
so desire. Stockholders have an unconditional right to revoke their proxy at any
time prior to exercising it, either in person at the annual meeting or by filing
with our secretary at our headquarters a written revocation or duly executed
proxy bearing a later date. No such revocation will be effective until we
receive written notice of the revocation at or prior to the annual meeting.
We will bear the cost of preparing, assembling and mailing this proxy
statement, the notice of annual meeting of stockholders and the enclosed proxy.
In addition to the use of mail, our employees may solicit proxies personally and
by telephone. Our employees will not receive compensation for soliciting proxies
other than their regular salaries. We may request banks, brokers and other
custodians, nominees and fiduciaries to forward copies of the proxy material to
their principals and to request authority for the execution of proxies. We may
reimburse them for their expenses in this process.
PURPOSES OF THE MEETING
At the annual meeting, our stockholders will consider and vote upon the
following matters:
1. The election of two directors to hold office until our 2005 annual
meeting of stockholders;
2. The approval of an amendment to our 2000 Executive Incentive
Compensation Plan to increase the number of shares available for
grant from 1,000,000 to 2,500,000;
3. The ratification of Deloitte & Touche LLP as independent auditors
for the period ending December 31, 2002; and
4. Such other business as may properly come before the annual
meeting, including any adjournments or postponements thereof.
Unless contrary instructions are indicated on the enclosed proxy, all
shares represented by valid proxies received pursuant to this solicitation and
which have not been revoked in accordance with the procedures set forth above
will be voted FOR items (1), (2) and (3) above. In the event a stockholder
specifies a different choice by means of the enclosed proxy, his or her shares
will be voted in accordance with the specification so made. The board of
directors does not know of any other matters that may be brought before the
annual meeting nor does it foresee or have reason to believe that proxy holders
will have to vote for substitute or alternate nominees for election
to the board of directors. In the event that any other matter should come before
the annual meeting or any nominee is not available for election, the persons
named in the enclosed proxy will have discretionary authority to vote all
proxies not marked to the contrary with respect to such matters in accordance
with their best judgment.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
WHO CAN VOTE
Only stockholders of record at the close of business on April 5, 2002
will be entitled to notice of and to vote at the annual meeting or any
adjournment of that meeting. On that date, there were 33,506,007 shares of our
common stock issued and outstanding, all of which are entitled to be voted at
the annual meeting.
GENERAL INFORMATION ON VOTING
Each share of our common stock is entitled to one vote on each matter
submitted to stockholders for approval at the annual meeting. Our stockholders
do not have the right to cumulate their votes for directors.
In order for business to be conducted, a quorum must be represented at
the meeting. A quorum consists of a majority of the shares entitled to vote. If
less than a majority of outstanding shares entitled to vote are represented at
the annual meeting, a majority of the shares so represented may adjourn the
annual meeting to another date, time or place, not later than 120 days after the
original record date of April 5, 2002. Notice need not be given of the new date,
time or place if announced at the meeting before an adjournment is taken.
Prior to the annual meeting, we will select one or more inspectors of
election for the meeting. The inspectors will determine the number of shares of
common stock represented at the meeting, the existence of a quorum and the
validity and effect of proxies, and shall receive, count and tabulate ballots
and votes and determine the results of the vote.
The election of the director nominees must be approved by a plurality
of the votes cast by the shares of common stock represented in person or by
proxy at the annual meeting. All other action by our stockholders must be
approved by the affirmative vote of a majority of the votes cast at the annual
meeting at which a quorum is present. Pursuant to Maryland law, abstentions and
broker non-votes are counted as present for purposes of determining the presence
of a quorum. However, abstentions are treated as present and entitled to vote,
but are not counted as votes cast "for" or "against" any matter. A broker
non-vote on a matter is considered not entitled to vote on that matter and thus
is not counted in determining whether a matter requiring approval of a majority
of the shares present and entitled to vote has been approved or whether a
plurality of the shares present and entitled to vote has been voted.
A list of stockholders entitled to vote at the annual meeting will be
available at our principal executive offices, 1696 N.E. Miami Gardens Drive,
North Miami Beach, Florida 33179, for a period of ten days prior to the annual
meeting and at the annual meeting itself for examination by any of our
stockholders.
2
SECURITY OWNERSHIP
The table below sets forth, as of April 5, 2002, the number of shares
of our common stock which were owned beneficially by:
o each person who is known by us to beneficially own more than 5%
of our common stock;
o each director and nominee for director;
o each executive officer named in the Summary Compensation Table
below who is employed with us as of April 5, 2002; and o all of
our directors and executive officers as a group.
Unless otherwise indicated, the address of each of the individuals
listed in the table is c/o Equity One, Inc., 1696 N.E. Miami Gardens Drive,
North Miami Beach, Florida 33179. Except as otherwise indicated and subject to
community property laws where applicable, to our knowledge the persons named in
the table have sole voting and investment power with respect to all shares of
common stock held by them.
The number of shares beneficially owned by each individual or group is
based upon information in documents filed by such person with the Securities and
Exchange Commission, other publicly available information or information
available to us. Percentage ownership in the following table is based on
33,506,007 shares of common stock outstanding as of April 5, 2002. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. Shares of our common stock subject to options that are
presently exercisable or exercisable within 60 days of April 5, 2002 are deemed
to be outstanding and beneficially owned by the person holding the options for
the purpose of computing the percentage of ownership of that person, but are not
treated as outstanding for the purpose of computing the percentage of any other
person.
AMOUNT AND NATURE OF PERCENTAGE OF OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP SHARES OWNED
------------------------------------ -------------------- -------------------------
Chaim Katzman (1).............................. 20,916,260 61.43%
First Capital Realty, Inc. (2)................. 10,909,078 32.56%
Gazit-Globe (1982) Ltd. (3).................... 9,262,696 27.65%
Silver Maple (2001), Inc....................... 5,629,283 16.80%
Ficus, Inc..................................... 5,279,795 15.76%
M.G.N. (USA), Inc.............................. 4,582,792 13.68%
Gazit (1995), Inc.............................. 3,540,610 10.57%
Nathan Hetz (4)................................ 3,446,156 10.29%
Alony Hetz Properties & Investments, Ltd....... 3,440,156 10.27%
Doron Valero (5)............................... 574,755 1.71%
Howard M. Sipzner ............................. 153,989 *
Alan Merkur (6)................................ 64,150 *
Noam Ben-Ozer (7).............................. 31,502 *
Shaiy Pilpel (8)............................... 31,500 *
Robert L. Cooney (9)........................... 29,300 *
Ronald S. Chase (10)........................... 25,000 *
Barbara Miller (11)............................ 21,304 *
Peter Linneman................................. 6,000 *
Dori Segal..................................... 6,000 *
All executive officers and directors of Equity
One as a group (13 persons) (12)............... 25,333,918 74.95%
- -----------------------------
* Represents ownership of less than 1.0%
3
1. Includes (i) 1,139,294 shares of common stock owned by Gazit-Globe
(1982), Ltd.; (ii) 3,540,610 shares of common stock owned by Gazit
(1995), Inc.; (iii) 4,582,792 shares of common stock owned by M.G.N.
(USA), Inc.; (iv) 5,629,283 shares of common stock owned by Silver
Maple (2001), Inc.; and (v) 5,279,795 shares of common stock owned by
Ficus, Inc., each of which Mr. Katzman may be deemed to control, and
65,193 shares of common stock for which Mr. Katzman is custodian for
his minor children.
2. Includes (i) 5,629,283 shares of common stock owned by Silver Maple
(2001), Inc. and (ii) 5,279,795 shares of common stock owned by Ficus,
Inc., both of which are wholly-owned subsidiaries of First Capital
Realty Inc.
3. Includes (i) 4,582,792 shares of common stock owned by M.G.N. (USA),
Inc. and (ii) 3,540,610 shares of common stock owned by Gazit (1995),
Inc., both of which are a wholly-owned subsidiaries of Gazit-Globe
(1982), Ltd.
4. Includes 3,440,156 shares of common stock owned by Alony Hetz
Properties & Investments, Ltd. which Mr. Hetz may be deemed to control.
5. Includes 30,000 shares of common stock issuable to Mr. Valero upon the
exercise of options which are currently exercisable.
6. Includes 43,750 shares of common stock issuable to Mr. Merkur upon the
exercise of options which are currently exercisable.
7. Includes 25,500 shares of common stock issuable to Mr. Ben-Ozer upon
the exercise of options which are currently exercisable.
8. Includes 25,500 shares of common stock issuable to Mr. Pilpel upon the
exercise of options which are currently exercisable.
9. Includes 19,000 shares of common stock issuable to Mr. Cooney upon the
exercise of options which are currently exercisable.
10. Includes 16,000 shares of common stock issuable to Mr. Chase upon the
exercise of options which are currently exercisable.
11. Includes 15,000 shares of common stock issuable to Ms. Miller upon the
exercise of options which are currently exercisable.
12. See footnotes (1) through (11) above.
4
PROPOSAL 1 -- ELECTION OF DIRECTORS
DIRECTORS STANDING FOR ELECTION
Our board of directors is divided into three classes: Class A, Class B
and Class C. Each director serves for a term ending at the third annual meeting
of the stockholders following the annual meeting at which he or she was elected,
except that any director appointed by the board of directors serves, subject to
election by the stockholders at the next annual meeting after being appointed,
for a term ending at the annual meeting of stockholders at which the term of the
class to which the director was appointed ends. Each director serves until his
or her successor is elected and qualified or until his or her earlier death,
resignation or removal.
The board of directors has no reason to believe that the nominees will
refuse or be unable to accept election; however, in the event that any nominee
is unable to accept election or if any other unforeseen contingencies should
arise, each proxy that does not direct otherwise will be voted for other persons
as may be designated by the board of directors.
CLASS A DIRECTORS. Class A directors are to be elected at the 2002
annual meeting for a term to expire at the 2005 annual meeting of stockholders.
The board of directors has nominated the following individuals to stand for
election , each of whom currently serves as our director, and proxies
representing our common stock will be voted for them absent contrary
instructions:
Peter Linneman, Ph.D.
Shaiy Pilpel, Ph.D.
For additional information regarding the Class A Directors, including a
description of their business experience, please see "Management -- Executive
Officers and Directors" beginning on page 6. Ronald Chase, a current Class A
Director, will not be seeking re-election to our board.
DIRECTORS CONTINUING IN OFFICE
CLASS B DIRECTORS. The terms of the following Class B Directors expire
at the annual meeting of stockholders in 2003:
Noam Ben-Ozer
Chaim Katzman
Doron Valero
CLASS C DIRECTORS. The terms of the following Class C Directors expire
at the annual meeting of stockholders in 2004:
Robert L. Cooney
Nathan Hetz
Dori Segal
For additional information regarding the Class B and Class C Directors,
including a description of their business experience, please see "Management -
Executive Officers and Directors" beginning on page 6.
5
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors are as follows:
NAME AGE POSITION
------------- ------- -------------------------------------------------
Chaim Katzman 52 Chairman of the Board and Chief Executive Officer
Doron Valero 45 President, Chief Operating Officer and Director
Howard M. Sipzner 40 Chief Financial Officer and Treasurer
Alan Merkur 52 Vice President and Head of Acquisitions
Barbara Miller 51 Vice President and Head of Property Management
Alan J. Marcus 45 Secretary
Noam Ben-Ozer 38 Director
Ronald S. Chase 58 Director
Robert L. Cooney 68 Director
Nathan Hetz 49 Director
Peter Linneman 51 Director
Shaiy Pilpel 52 Director
Dori Segal 40 Director
CHAIM KATZMAN has served as our Chairman of our Board and our Chief
Executive Officer, and until November 2000, as our President, since our
formation in 1992. Mr. Katzman has been involved in the purchase, development
and management of commercial and residential real estate in the southeastern
United States since 1980. Mr. Katzman purchased the controlling interest of
Gazit Inc., a publicly-traded company listed on the Tel-Aviv Stock Exchange, and
one of our principal, indirect stockholders, in May 1991, has served as its
Chairman of the Board and Chief Executive Officer since that time, and remains
its largest stockholder. Mr. Katzman has served as a director of Gazit-Globe
(1982), Ltd., a publicly-traded real estate investment company listed on the
Tel-Aviv Stock Exchange and one of our principal, direct and indirect
stockholders, since 1994 and as its Chairman since 1998. Mr. Katzman also serves
as non-executive Chairman of the Board of First Capital Realty Inc., an Ontario
real estate company the common stock of which is listed on the Toronto Stock
Exchange and which is one of our principal, indirect stockholders. Mr. Katzman
received an LL.B. from Tel Aviv University Law School in 1973. Mr. Katzman is a
member of the National Association of Real Estate Investment Trusts, or NAREIT,
and the International Council of Shopping Centers, or ICSC.
DORON VALERO has served as our Senior Vice President, Chief Operating
Officer and as a director since 1994, and was elected as our President in
November 2000. Prior to joining us, Mr. Valero served as President and Chief
Executive Officer of Global Fund Investment, Inc., a real estate investment and
management company, from 1990 to 1993. A licensed mortgage broker in Florida,
Mr. Valero is a member of NAREIT and ICSC. Mr. Valero received a B.S.E. from
Nova University in 1986.
HOWARD M SIPZNER has served as our Chief Financial Officer since 1999
and has served as our Treasurer since 2000. Prior to joining us, Mr. Sipzner
served as Vice President of Chase Securities, Inc. from 1987 to 1999. Mr.
Sipzner received a B.A. from Queens College, City University of New York and an
M.B.A. from the Harvard Business School.
ALAN MERKUR has served as our Vice President and Head of Acquisitions
since 2000. Prior to joining us, Mr. Merkur served as President of Dartmouth
Realty Corp. from 1997 to 1999. From 1995 to 1997, he served as Regional Head of
the Fort Lauderdale office for a joint venture between Goldman Sachs and J.E.
Roberts. Mr. Merkur received a B.A. from City College of New York and a
Certificate of Real Estate from New York University.
BARBARA MILLER has served as our Vice President and Head of Property
Management since September 2000 and has served in various management positions
with us since 1994. Prior to joining us, Ms. Miller served as Regional Property
Manager of Sofran Group, a real estate developer, from 1988 to 1994.
ALAN J. MARCUS has served as our Secretary since 1996. Mr. Marcus is
the founding member of Alan J. Marcus, P.A., a law firm specializing in real
estate matters, and has been a member there for more than five years. Mr. Marcus
received a B.A., J.D. and an L.L.M. in Taxation from the University of Miami.
6
NOAM BEN-OZER was appointed as a director in 1996. Most recently, Mr.
Ben-Ozer co-founded iPhrase Technologies, Inc., a software company, where he
currently serves as Chairman of the Board. From 1994 to 1999, Mr. Ben-Ozer
served as a consultant for Bain & Company, a management consulting company. From
1993 to 1994, Mr. Ben-Ozer served as an outside consultant to Lernout & Hauspie
Speech Products. Mr. Ben-Ozer is a certified public accountant in Israel, and
received an M.B.A. from the Harvard Business School.
ROBERT L. COONEY was appointed as a director in November 1997. He
currently serves as a partner of Cooney, Schroeder & Co., a private financial
consulting firm he founded in February 1997. From 1977 until January 1997, Mr.
Cooney was Managing Director, Equity Capital Markets at Credit Suisse First
Boston. He currently serves as a director of Edison Control Corporation, a
NASDAQ OTC Bulletin Board company, which manufactures and distributes systems of
pipes, couplings, hoses and other equipment used in pumping concrete. Mr. Cooney
also serves as a director of Hoenig Group Inc., a Nasdaq National Market listed
company that provides global securities brokerage, marketing and distribution of
proprietary and independent research and other services to institutional
investors. Mr. Cooney is a graduate from the College of the Holy Cross and
received an M.B.A. from the Harvard Business School.
NATHAN HETZ was appointed as a director in November 2000. We and
several of our stockholders have agreed pursuant to a shareholders agreement,
that as long as Alony Hetz Properties & Investments, Ltd., an Israeli
corporation that specializes in real estate investments in Great Britain, Canada
and the United States, the shares of which are publicly traded on the Tel Aviv
Stock Exchange and one of our principal, indirect stockholders, or its
affiliates own three percent of our common stock, it may designate one nominee
for election to our board of directors. Alony Hetz has chosen Mr. Hetz as its
nominee pursuant to this agreement. Since November 1990, Mr. Hetz has served as
the Chief Executive Officer and is a principal shareholder of Alony Hetz
Properties & Investments, Ltd. Mr. Hetz also served until the end of 2000 on the
board of United Mizrahi Bank Ltd., one of Israel's leading banks and currently
serves on the board of First Capital Realty Inc. Mr. Hetz received a B.A. in
accounting from Tel-Aviv University in Israel and is a certified public
accountant in Israel.
PETER LINNEMAN, PH.D. was appointed as a director in November 2000.
Since 1979, Dr. Linneman has been the Albert Sussman Professor of Real Estate,
Finance and Public Policy at the University of Pennsylvania, Wharton School of
Business. Dr. Linneman has been actively involved in corporate governance,
strategy, and operation for over twenty years. During the period spanning 1993
to the present, he has served on the board of directors of Rockefeller Center
Properties, including serving as its Chairman from 1995 to 1996, Gable
Residential Properties, Kranzco Realty Trust, Albert Abela Group, Sunbelt
Properties, Crosland Group and GMFS, and is currently serving as a board member
of the last three. Dr. Linneman holds both masters and doctorate degrees in
economics from the University of Chicago, and is the principal of Linneman
Associates, a real estate advisory firm.
SHAIY PILPEL, PH.D. has served as one of our directors since 1996. Dr.
Pilpel is the President of Patten Model, Ltd., a financial modeling firm. From
1996 to 2001, he headed the trading operations at Wexford Management, an
investment firm. From 1995 to 1996, Dr. Pilpel was a managing director of
Canadian Imperial Bank of Commerce where he headed the Mortgage Arbitrage and
Quantitative Strategies proprietary trading group, and prior thereto, a
portfolio manager for Steinhardt Partners. Dr. Pilpel received a B.S. in
mathematics and B.A. in philosophy from Tel Aviv University, an M.Sc. in
mathematics from the Hebrew University in Jerusalem, a Ph.D. in Statistics from
the University of California at Berkeley and an M.B.A. from Columbia University.
DORI SEGAL was appointed as a director in November 2000. Mr. Segal has
served since October 1998 as President of Gazit-Globe (1982), Ltd., one of our
principal, direct and indirect stockholders. Since August 2000, Mr. Segal has
served as Chief Executive Officer, President and as Vice Chairman of the Board
of First Capital Realty Inc. From 1995 to 1998, Mr. Segal served as the
President of Gazit (Israel) Ltd., a real estate investment company.
DIRECTORS' COMPENSATION
Non-employee directors are eligible to receive 2,000 shares of common
stock upon their initial election to the board of directors and 2,000 shares of
common stock annually on January 1, which shares shall vest according to the
following schedule: 1,000 shares on December 31 of the year of the grant and
1,000 shares on December 31 of the following year. In addition, each
non-employee director will receive a fee of $1,000 for each board of directors
meeting or committee meeting attended in person, plus reimbursement for
reasonable expenses incurred in attending the meeting and a fee of $250 for each
telephonic meeting attended. Our officers who are directors will not be paid any
directors' fees.
7
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, executive officers and persons who own more than ten percent of their
outstanding common stock, to file with the Securities and Exchange Commission,
or SEC, initial reports of ownership and reports of changes in ownership of
common stock. Such persons are required by SEC regulations to furnish us with
copies of all such reports they file.
To our knowledge, based solely on a review of the copies of such
reports furnished to us and written representations that no other reports are
required, all Section 16(a) filing requirements applicable to our officers,
directors and greater than ten percent beneficial owners have been complied with
during the fiscal year ended December 31, 2001.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 2001, our board of directors
held a total of 15 meetings. Each of our directors attended at least 75% of the
aggregate of (i) the number of the meetings of the board of directors which were
held during the period that such person served on the board of directors and
(ii) the number of meetings of committees of the board of directors held during
the period that such person served on such committee which they were required to
attend, except Noam Ben-Ozer and Ronald Chase.
We have three standing committees: the executive committee, the audit
and review committee and the compensation committee. We do not have a nominating
committee.
During the fiscal year ended December 31, 2001, the executive committee
was composed of Messrs. Katzman, Valero and Chase. The executive committee is
authorized to perform all functions which may be lawfully delegated by the board
of directors; provided, however, that the executive committee can only act based
on a unanimous vote and may only approve acquisitions of property similar to
that in our portfolio requiring an initial equity investment of no more than
$15.0 million and acquisitions of vacant land with an initial equity investment
of no more than $5.0 million in the aggregate. The executive committee met or
took action by consent three times during the year ended December 31, 2001.
During the fiscal year ended December 31, 2001 the audit and review
committee was composed of Messrs. Cooney, Pilpel and Chase. The members of the
audit and review committee are independent, as defined under the New York Stock
Exchange listing standards. The audit and review committee's functions include
reviewing and discussing our unaudited financial statements with our management,
recommending to the board of directors the engagement of our independent
auditors, reviewing with such auditors the plan and results of their audit of
our financial statements, determining the independence of such auditors and
discussing with management and the independent auditors the quality and adequacy
of our internal controls. The audit and review committee met four times during
the year ended December 31, 2001.
During the fiscal year ended December 31, 2001, the compensation
committee was composed of Messrs. Pilpel, Cooney and Chase. The compensation
committee's functions consist of administering our 2000 Executive Incentive
Compensation Plan and 1995 Stock Option Plan, recommending and approving grants
of stock options and restricted securities under the 2000 Executive Incentive
Compensation Plan and recommending, reviewing and approving our salary and
fringe benefits policies, including compensation of our executive officers. The
compensation committee met three times during the year ended December 31, 2001.
8
REPORT OF THE AUDIT AND REVIEW COMMITTEE
THE FOLLOWING REPORT OF THE AUDIT COMMITTEE DOES NOT CONSTITUTE
SOLICITING MATERIAL AND SHOULD NOT BE DEEMED FILED OR INCORPORATED BY REFERENCE
INTO ANY OF OUR OTHER FILINGS UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
EXCHANGE ACT OF 1934.
In accordance with its written charter adopted by our board of
directors, the audit and review committee's role is to act on behalf of the
board of directors in the oversight of our accounting, auditing and financial
reporting practices. The audit committee consists of three members, each of whom
is "independent" as that term is defined by in Sections 303.01(B)(2)(a) and (3)
of the New York Stock Exchange's listing standards. A copy of the audit
committee's written charter appeared as Appendix A to last year's proxy
statement for our 2000 annual meeting.
Management is responsible for our financial reporting process including
our system of internal controls, and for the preparation of our consolidated
financial statements in accordance with generally accepted accounting
principles. Our independent auditors are responsible for auditing those
financial statements. It is the audit and review committee's responsibility to
monitor and review these processes. It is not the audit and review committee's
duty or responsibility to conduct auditing or accounting reviews or procedures.
The audit and review committee does not consist of our employees and it may not
be, and may not represent itself to be or to serve as, accountants or auditors
by profession or experts in the fields of accounting or auditing. Therefore, the
audit and review committee has relied, without independent verification, on
management's representation that the financial statements have been prepared
with integrity and objectivity and in conformity with accounting principles
generally accepted in the United States and on the representations of the
independent auditors included in their report on our financial statements. The
audit and review committee's oversight does not provide it with an independent
basis to determine that management has maintained appropriate accounting and
financial reporting principles or policies, or appropriate internal controls and
procedures designed to assure compliance with accounting standards and
applicable laws and regulations. Furthermore, the audit and review committee's
considerations and discussions with management and the independent auditors do
not assure that our financial statements are presented in accordance with
generally accepted accounting principles, that the audit of our financial
statements has been carried out in accordance with generally accepted auditing
standards or that our independent accountants are in fact "independent."
In fulfilling its oversight responsibilities, the audit committee
reviewed the audited financial statements for fiscal 2001 with management
including a discussion of the quality of the accounting principles, the
reasonableness of significant judgments and the clarity of disclosures in the
financial statements. The audit committee reviewed the financial statements for
fiscal 2001 with the independent auditors and discussed with them all of the
matters required to be discussed by Statement of Auditing Standards No. 61
(Communications with Audit Committees), as amended, including the auditors'
judgments as to the quality, not just the acceptability, of our accounting
principles. In addition, the audit committee has received the written
disclosures and the letter from the independent auditors required by
Independence Standard No. 1 (Independence Discussions with Audit Committees) and
has discussed with the independent auditors their independence from our
management and us. Finally, the audit committee has considered whether the
provision by the independent auditors of non-audit services to us is compatible
with maintaining the auditors' independence. The audit committee discussed with
the independent accountants any relationships that may have an impact on their
objectivity and independence and satisfied itself as to the accountant's
independence.
Based on the review and discussions with management and the independent
accountants, and subject to the limitations on its role and responsibilities
described above, the audit committee recommended to our board of directors, and
the board of directors has approved, that the audited financial statements be
included in our Annual Report on Form 10-K/A for the year ended December 31,
2001, as filed with the Securities and Exchange Commission on March 18, 2002.
The undersigned members of the audit committee have submitted this report to us.
MEMBERS OF THE AUDIT AND REVIEW COMMITTEE
Robert Cooney
Ronald Chase
Shaiy Pilpel
9
REPORT OF THE COMPENSATION COMMITTEE
THE FOLLOWING REPORT OF THE COMPENSATION COMMITTEE DOES NOT CONSTITUTE
SOLICITING MATERIAL AND SHOULD NOT BE DEEMED FILED OR INCORPORATED BY REFERENCE
INTO ANY OF OUR OTHER FILINGS UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
EXCHANGE ACT OF 1934.
OUR POLICY REGARDING EXECUTIVE COMPENSATION
The compensation committee is generally responsible for determining the
compensation of our executive officers. The compensation committee's general
philosophy with respect to the compensation of our executive officers is to
offer competitive compensation programs designed to:
o attract and retain key executives critical to our long-term
success;
o reward the executive's contribution and personal performance; and
o align the interests of our executives with our stockholders.
COMPONENTS OF EXECUTIVE COMPENSATION
The three components of our executive compensation program are base
salary, cash bonus and long-term incentive compensation consisting of options
and/or grants of restricted stock.
BASE SALARY. In addition to complying with the executive compensation
policy and to the requirements of applicable employment agreements, compensation
for each of the executive officers for 2001 was based on the executive's duties
and responsibilities, our performance, both financial and otherwise, and the
success of the executive in developing and executing our business plan.
BONUS. Some of our executive officers received cash bonuses for fiscal
2001 ranging from approximately 20% to 75% of base salary based on the degree of
our achievement of our financial and other objectives. Since 2000, the
compensation committee has established a bonus deferral plan, whereby each
executive officer may elect to receive restricted common stock at a 15% discount
to the fair market value of the common stock in lieu of all or some of his or
her cash bonus. Restricted common stock granted through the bonus deferral plan
will vest 50% on the first anniversary of the grant date and 50% on the second
anniversary of the grant date. If the executive terminates his or her employment
with us, the unvested portion of any restricted common stock received under the
bonus deferral plan would be forfeited.
STOCK OPTIONS AND RESTRICTED STOCK. The compensation committee believes
that stock options and grants of restricted stock are important long-term
incentives to our executive officers to remain with us and to improve our
financial performance. The 2000 Executive Incentive Compensation Plan enables
the compensation committee to designate grants of stock options and restricted
stock to executive officers and employees to better align their interests with
those of the stockholders. During the year ended December 31, 2001, the
compensation committee awarded 128,600 shares of restricted stock to 26 of our
employees and awarded options to purchase 175,000 shares of common stock to one
employee. In determining grants of stock options and restricted stock, the
compensation committee considers a number of factors, including the employee's
position, responsibilities and performance, the number of outstanding stock or
options held by the employee and competitive practices of other companies
generally.
OUR POLICY REGARDING OUR CHIEF EXECUTIVE OFFICER'S COMPENSATION
We base our chief executive officer's compensation on the same
philosophy and policies as for all other executive officers. Our chief executive
officer has a compensation program that is generally governed by his employment
agreement and combines base salary, cash bonuses and long-term incentive
compensation, consisting of grants of options and restricted stock. The
compensation committee determines his overall compensation based on the growth
of our funds from operations per share relative to the growth in funds from
operations per share of a peer group of comparable real estate investment
trusts. The compensation committee believes that linking a substantial portion
of the chief executive officer's total compensation to our performance will more
closely align the interests of the chief executive officer and our stockholders.
The overall levels of compensation are influenced to a degree, by the
compensation practices of publicly-traded REITs of a comparable size and scope.
10
INTERNAL REVENUE CODE LIMITS ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the U.S. Internal Revenue Code limits the tax
deductibility by a corporation of compensation in excess of $1 million paid to
the chief executive officer and any other of its four most highly compensated
executive officers. However, compensation which qualifies as "performance-based"
is excluded from the $1 million limit if, among other requirements, the
compensation is payable only upon attainment of pre-established, objective
performance goals under a plan approved by shareholders. The compensation
committee does not presently expect total cash compensation payable for salaries
to exceed the $1 million limit for any individual executive. Having considered
the requirements of Section 162(m), the compensation committee believes that
stock option grants to date meet the requirement that such grants be
"performance-based" and are, therefore, exempt from the limitations on
deductibility. The compensation committee will continue to monitor the
compensation levels potentially payable under our cash compensation programs,
but intends to retain the flexibility necessary to provide total cash
compensation in line with competitive practice, our compensation philosophy, and
our best interests.
MEMBERS OF THE COMPENSATION COMMITTEE
Robert Cooney
Ronald Chase
Shaiy Pilpel
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following compensation table sets forth, for the fiscal years ended
December 31, 1999, 2000 and 2001, the cash and certain other compensation paid
or accrued by us to our chief executive officer and the four other mostly highly
compensated executive officers whose total 2001 salary and bonus exceeded
$100,000, collectively referred to as the "named executive officers":
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------- ---------------------------
OTHER ANNUAL RESTRICTED SECURITIES
NAME AND PRINCIPAL COMPENSATION STOCK AWARDS UNDERLYING
POSITION YEAR SALARY BONUS (1) (2) OPTIONS
- -------------------------- ---- -------- ------------ ----------- ------------- ----------
Chaim Katzman 2001 $302,965 $52 (3) $40,089 (3) $267,261 (3) --
Chairman of the Board 2000 $293,562 $933 (4) $38,714 (4) $717,936 (4) --
and Chief Executive 1999 $286,000 $118,254 -- --
Officer
Doron Valero 2001 $227,217 $70,735 (5) $17,590 (5) $117,268 (5) --
President and 2000 $220,171 $440 (6) $29,074 (6) $653,672 (6) --
Chief Operating Officer 1999 $214,000 $88,690 -- -- --
Howard Sipzner 2001 $189,091 $42,146 (7) $17,590 (7) $358,911 (7) --
Chief Financial Officer 2000 $175,667 $14,324 (8) $20,738 (8) $324,370 (8) 175,000
Officer and Treasurer 1999 $56,667 $71,066 -- $23,788 (9) --
Alan Merkur 2001 $150,000 $73,298 (10) $10,226 (10) $142,945 (10) 175,000
Vice President and 2000 $129,792 $90,215 (11) $9,173 (11) $80,592 (11) --
Director of 1999 $116,000 $51,713 -- -- --
Acquisitions
Barbara Miller 2001 $100,000 $35,000 -- $49,844 (12) --
Vice President and 2000 $93,982 $251 (13) $2,021 (13) 13,475 (13) --
Head of Property 1999 -- -- -- -- --
Management
- -------------------------------
1. These amounts represent the dollar value of the difference between the
price paid by the named executive officer for the common stock pursuant to
the bonus deferral plan established by the compensation committee of the
board, whereby the named executive officer may elect to receive restricted
common stock at a 15% discount to the fair market value of the common
stock in lieu of a cash bonus, and the fair market value of the common
stock on the day of the purchase. The aggregate amount of any other
perquisite and benefit is less than the lesser of $50,000 or 10% of the
named executive officer's annual salary and bonus and is therefore
omitted.
2. Represents the dollar value of restricted share awards made during the
indicated year calculated by multiplying the average of the high and low
price of our common stock on the date of the grant of the award by the
number of shares awarded. This valuation does not take into account the
diminution in value attributable to the restrictions applicable to the
common shares. Restricted share awards typically vest
11
over a two to three year period. In the event of a change of control, the
compensation committee of our board may accelerate the lapsing of
restrictions or the expiration of vesting periods of any award of
restricted stock. A change of control is defined under the 2000 Executive
Incentive Compensation Plan as summarized below under the caption "Summary
of our 2000 Executive Incentive Compensation Plan, as Amended." The number
and value of the aggregate restricted share holdings of each named
executive officer as of December 31, 2001, based on an average of its high
and low stock price of $13.635 per share, were as follows:
NUMBER OF RESTRICTED VALUE AT DECEMBER
NAME COMMON SHARE AWARDS 31, 2001
--------------------- -------------------- -----------------
Chaim Katzman........ 39,900 $544,037
Doron Valero......... 33,700 $459,500
Howard Sipzner....... 33,264 $453,555
Alan Merkur.......... 10,900 $148,622
Barbara Miller....... 4,633 $63,171
Distributions are paid on all restricted common stock awards at the same
rate as on unrestricted common shares.
3. Mr. Katzman elected to defer receipt of $227,172 of his $227,224 bonus by
electing to receive 19,600 shares of restricted common stock at a 15%
discount to the fair market value (90 day average closing price) on March
25, 2002 in accordance with the bonus deferral plan established by the
compensation committee of the board. The shares vest 50% on each of March
31, 2003 and March 31, 2004. The 15% discount is shown as Other Annual
Compensation.
4. Mr. Katzman elected to defer receipt of $219,238 of his $220,171 bonus by
electing to receive 24,900 shares of restricted common stock at a 15%
discount to the fair market value (90 day average closing price) on March
26, 2001 in accordance with the bonus deferral plan established by the
compensation committee of the board. 12,450 of these shares vested on
March 31, 2002 and the remaining 12,450 will vest on March 31, 2003. The
15% discount is shown as Other Annual Compensation. Also includes 45,000
shares of restricted stock which were awarded to Mr. Katzman as additional
compensation by the board of directors on January 1, 2000. 15,000 of these
shares vested on each of December 31, 2000 and December 31, 2001 and the
remaining 15,000 shares vest on December 31, 2002.
5. Mr. Valero elected to defer receipt of $99,678 of his $170,413 bonus by
electing to receive 8,600 shares of restricted common stock at a 15%
discount to the fair market value (90 day average closing price) on March
25, 2002 in accordance with the bonus deferral plan established by the
compensation committee of the board. The shares vest 50% on each of March
31, 2003 and March 3, 2004. The 15% discount is shown as Other Annual
Compensation.
6. Mr. Valero elected to defer receipt of $164,689 of his $165,129 bonus by
electing to receive 18,700 shares of restricted common stock at a 15%
discount to the fair market value (90 day average closing price) on March
26, 2001 in accordance with the bonus deferral plan established by the
compensation committee of the board. 9,350 of these shares vested on March
31, 2002 and the remaining 9,350 will vest on March 31, 2003. The 15%
discount is shown as Other Annual Compensation. Also includes 45,000
shares of restricted stock which were awarded to Mr. Valero as additional
compensation by the board of directors on January 1, 2000. 15,000 of these
shares vested on each of December 31, 2000 and December 31, 2001 and the
remaining 15,000 shares will vest on December 31, 2002.
7. Mr. Sipzner elected to defer receipt of $99,672 of his $141,818 bonus by
electing to receive 8,600 shares of restricted common stock at a 15%
discount to the fair market value (average of high and low trading price)
on December 31, 2001 in accordance with the terms of his employment
agreement. The shares vest 50% on each of March 31, 2003 and March 31,
2004. The 15% discount is shown as Other Annual Compensation. Also
includes 18,000 shares of restricted stock which were awarded on March 28,
2002 to Mr. Sipzner as a long-term compensation award for 2001. These
shares will vest 50% on each of March 27, 2003 and March 27, 2004.
8. Mr. Sipzner elected to defer receipt of $117,426 of his $131,750 bonus by
electing to receive 14,000 shares of restricted common stock at a 15%
discount to the fair market value (average of high and low trading price)
on December 29, 2000 in accordance with the terms of his employment
agreement. 7,000 of these shares vested on March 19, 2002 and the
remaining 7,000 shares will vest on March 19, 2003. The 15% discount is
shown as Other Annual Compensation. Also includes 18,000 shares of
restricted stock which were awarded on March 15, 2001 to Mr. Sipzner as a
long-term compensation award for 2000. 9,000 of these shares vested on
March 14, 2002 and the remaining 9,000 shares will vest on March 14, 2003.
9. Reflects 2,529 shares of restricted stock which were awarded on March 15,
2000 to Mr. Sipzner as a long-term compensation award for 1999. 1,265 of
these shares vested on March 15, 2001 and the remaining 1,264 shares
vested on March 15, 2002.
10. Mr. Merkur elected to defer receipt of $57,952 of his $131,250 bonus by
electing to receive 5,000 shares of common stock at a 15% discount to the
fair market value (90 days average closing price) on March 25, 2002 in
accordance with the bonus deferral plan established by the compensation
committee of the board. The shares vest 50% on each of March 31, 2003 and
March 31, 2004. The 15% discount is shown as Other Annual Compensation.
Also includes 7,500 shares of restricted stock which were awarded on
January 1, 2001 to Mr. Merkur as additional compensation by the board of
directors. 2,500 of these shares vested on December 31, 2001 and 2,500
shares will vest on each of December 31, 2002 and December 31, 2003.
11. Mr. Merkur elected to defer receipt of $51,973 of his $117,188 bonus by
electing to receive 5,900 shares of restricted common stock at a 15%
discount to the fair market value (90 day average closing price) on March
26, 2001 in accordance with the bonus deferral plan established by the
compensation committee of the board. 2,950 of these shares vested on March
31, 2002 and the remaining 2,950 shares will vest on March 31, 2003. The
15% discount is shown as Other Annual Compensation. Also includes 2,000
shares of restricted stock which were awarded to Mr. Merkur as additional
compensation by the board of directors on July 1, 2000. 1,000 of these
shares vested on December 31, 2000, and 1,000 shares vested on December
31, 2001. Mr. Merkur received an additional $25,000 cash bonus in lieu of
certain options to purchase common stock which options he elected to not
receive.
12. Reflects 5,000 shares of restricted stock which were awarded on January 1,
2001 to Ms. Miller as additional compensation. 1,667 of these shares
vested on December 31, 2001 and 1,667 shares will vest on December 31,
2002 and the remaining 1,666 shares will vest on December 31, 2003.
13. Ms. Miller elected to defer receipt of $11,416 of her $11,667 bonus by
electing to receive 1,300 shares of restricted common stock at a 15%
discount to the fair market value (90 day average closing price) on March
24, 2001 in accordance with the bonus deferred plan established by the
compensation committee of the board. 650 of these shares vested on March
31, 2002 and the remaining 650 shares will vest on March 31, 2003. The 15%
discount is shown in other Annual Compensation.
12
OPTION GRANTS IN FISCAL 2001
The following table sets forth each grant of stock options during the
fiscal year ended December 31, 2001 to each of the named executive officers. No
stock appreciation rights were granted to these individuals during that year.
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (1)
--------------------------------------------------- -----------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS EMPLOYEES IN PRICE (PER EXPIRATION
NAME GRANTED FISCAL YEAR SHARE) DATE 5% 10%
- ------------------------------ ---------- ----------- ----------- ---------- ------------ -----------
Chaim Katzman................. -- -- -- -- -- --
Doron Valero.................. -- -- -- -- -- --
Howard Sipzner................ -- -- -- -- -- --
Alan Merkur................... 175,000 100% $10.00 3/31/2010 $1,032,695 $2,479,569
Barbara Miller................ -- -- -- -- -- --
- ----------------
(1) Potential realizable value is based on the assumption that the common stock
price appreciates at the annual rate shown, compounded annually, from the
date of grant until the end of the option term. The amounts have been
calculated based on the requirements promulgated by the Securities and
Exchange Commission. The actual value, if any, a named executive officer
may realize will depend on the excess of the stock price over the exercise
price on the date the option is exercised, if the executive were to sell
the shares on the date of exercise. Therefore, there is no assurance that
the value realized will be equal to or near the potential realizable value
as calculated in this table.
AGGREGATED OPTION EXERCISES IN 2001 AND FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth certain information concerning the
exercise of stock options by the named executive officers during the fiscal year
ended December 31, 2001 and unexercised stock options held by the named
executive officers as of December 31, 2001.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AS OF IN-THE-MONEY OPTIONS AS OF
SHARES DECEMBER 31, 2001 DECEMBER 31, 2001 (2)
ACQUIRED ON VALUE --------------------------- ----------------------------
NAME EXERCISE REALIZED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- ----------- ------------ ----------- ------------- ----------- -------------
Chaim Katzman 287,984 $362,860 -- -- -- --
Doron Valero 215,347 $271,337 30,000 -- $40,950 --
Howard Sipzner -- -- 87,500 87,500 $336,000 $336,000
Alan Merkur -- -- -- 175,000 -- $654,500
Barbara Miller -- -- 15,000 -- $56,100 --
- --------------------
(1) In accordance with SEC rules, value realized is the difference between the
exercise price of $10.00 per share and the fair market value on the
exercise date of $11.26 per share multiplied by the number of shares
acquired upon the exercise of options.
(2) Value of unexercised in-the-money options is the sum of the value of each
option granted, calculated on a grant by grant basis. The value of each
option is equal to of the product of the number of shares that could be
acquired upon the exercise of unexercised options as of the end of 2001
multiplied by the difference between the exercise price for the grant and
the year-end market price, of $13.74 per share, excluding grants for which
the difference is equal to or less than zero.
EMPLOYMENT CONTRACTS
We have entered into employment agreements with Chaim Katzman, our
chairman of the board and chief executive officer, and Doron Valero, our
president and chief operating officer, each of which expires on December 31,
2002. Each of these employment agreements is automatically renewable for an
additional seven-year term unless either party gives written notice of an intent
not to renew. Pursuant to their employment agreements, Messrs. Katzman and
Valero received initial base salaries of $240,000 and $180,000, respectively,
which base salary is increased annually by the consumer price index for the year
immediately preceding each anniversary of the agreements. Their employment
agreements provide that they may receive a bonus as determined by our board of
directors. In the event Messrs. Katzman's or Valero's employment is terminated
by us "without cause," as defined
13
in their employment agreement, they will receive all base compensation due under
the remaining term of the employment agreement, all stock options held by them
will vest, and they will be reimbursed for any legal fees and expenses incurred
by them as a result of such termination. Mr. Katzman's employment agreement also
provides that upon termination without cause, or upon the occurrence of a change
in control, Mr. Katzman will receive a severance payment equal to two years of
his current salary and a "put" option to tender all of his shares of our stock
to us at a specified price.
Effective September 1, 1999, we entered into an employment agreement
with Howard Sipzner, our chief financial officer and treasurer, which expires on
August 31, 2003. Mr. Sipzner's employment agreement is automatically renewable
for successive one-year terms unless either party gives written notice of the
intent not to renew prior to a certain date established in the agreement.
Pursuant to his employment agreement, Mr. Sipzner initially received an annual
base salary of $170,000 which, by the terms of the agreement, was increased to
$187,000 after one year from the effective date of the agreement. This annual
base salary increases annually by the rate of increase of the consumer price
index for the prior year. His employment agreement provides that he shall
receive a cash bonus and a restricted common stock bonus based upon our
performance relative to that of a peer group of real estate investment trusts.
In the event Mr. Sipzner's employment is terminated by us "without cause," as
defined in his employment agreement, Mr. Sipzner will receive: his base salary
for 180 days from the date of such termination; his incentive compensation
calculated through the end of the 180-day period; a lump sum payment equal to
the incentive compensation paid in the preceding year plus the greater of (a)
the prior year's base salary, or (b) one-half of the remaining base salary
through the end of the initial term of the agreement; and vesting of all
restricted stock granted to him.
EMPLOYEE BENEFIT PLANS
1995 STOCK OPTION PLAN. Our board of directors adopted, and our
stockholders approved, a 1995 Stock Option Plan. Although we have exhausted the
number of shares available for issuance under this plan and therefore cannot
grant any additional awards thereunder, options to purchase 409,169 shares were
outstanding as of April 1, 2002. We have reserved 1,000,000 shares of common
stock for issuance under the plan.
The plan requires that the exercise price for stock options granted
under the plan be determined by the compensation committee at the time of grant.
The exercise price may be paid in cash or, at the discretion of the committee,
in outstanding shares of common stock, or by any combination of both.
If a merger, reorganization or other event occurs that affects the
common stock so that an adjustment is appropriate in order to prevent dilution
or enlargement of the rights of the participants in the plan, the committee is
authorized to adjust the outstanding options, including adjustments to exercise
prices of options and other affected terms of options. The committee is also
authorized to adjust performance conditions and other terms of options in
response to these kinds of events or in response to changes in applicable laws,
regulations or accounting principles.
2000 EXECUTIVE INCENTIVE COMPENSATION PLAN. Our board of directors
adopted our 2000 Executive Incentive Compensation Plan in April 2000 and our
shareholders approved the adoption of the plan in June 2000. We have reserved
1,000,000 shares of common stock for issuance under the plan as of April 1,
2001, of which options to purchase 128,331 shares were outstanding as of that
date. In addition, we have issued 229,929 shares of restricted stock under the
plan as of that date. There remain 641,740 shares of common stock available for
issuance under the plan. Under the plan, officers, employees, members of the
board of directors and independent contractors are eligible to receive awards.
The types of awards that may be made under the plan are grants of stock options,
stock appreciation rights, or SARs, restricted stock, deferred stock, other
property. Options may be either incentive stock options that qualify for
favorable tax treatment for the optionee under Section 422 of the Internal
Revenue Code of 1986 or nonqualified stock options. If shares awarded under the
plan are forfeited, then those shares will again become available for new awards
under the plan. The maximum amount that may be paid out as an annual incentive
award or other cash award in any fiscal year is limited to $2,000,000 per
person, and the maximum amount that may be earned as a performance award or
other cash award in respect of a performance period is $5,000,000 per person.
The compensation committee of our board of directors administers the
plan. The committee has complete discretion to make all decisions relating to
the interpretation and operation of the plan, including the discretion to
determine which eligible individuals are to receive any award, and to determine
the type, number, vesting requirements and other features and conditions of each
award.
14
The exercise price for incentive stock options granted under the plan
may not be less than 100% of the fair market value of the common stock on the
option grant date. Unless otherwise determined by the committee, the fair market
value of our common stock is the closing sales price per share as reported on
the New York Stock Exchange on the date as of which such value is being
determined or, if there is no sale on that date, then on the last previous day
on which a sale was reported. The exercise price may be paid in cash or by other
means, including a cashless exercise method as determined by the compensation
committee.
The plan includes an automatic grant program for our non-employee
directors. Under the plan, non-employee directors are automatically granted
2,000 shares of restricted stock upon their initial election to the board of
directors and 2,000 shares of restricted stock each year on January 1. Each
award will vest in two equal installments of 1,000 shares of common stock on the
first and second December 31 after the date on which the shares of restricted
stock were granted.
Our board of directors may amend or terminate our plan at any time. If
the board amends the plan, stockholder approval of the amendment will be sought
only if required by an applicable law. The plan will continue in effect
indefinitely unless the board decides to terminate the plan earlier, or until
such time as there are no shares of our common stock that remain available for
issuance under the plan.
15
PERFORMANCE GRAPH
The following graph compares the performance of our common stock with
the Russell 2000 Index and the NAREIT All Equity Index, each as provided by SNL
Securities L.C., between May 14, 1998, the date of the initial public offering
of our common stock, and December 31, 2001. The graph assumes that $100 was
invested on May 14, 1998 in our common stock, the Russell 2000 Index and the
NAREIT All Equity REIT Index, or NAREIT Index, and that all dividends were
reinvested. The lines represent semi-annual index levels derived from compounded
daily returns. The indices are re-weighted daily, using the market
capitalization on the previous tracking day. If the semi-annual interval is not
a trading day, the preceding trading day is used.
(GRAPHIC OMITTED)
PERFORMANCE DATA
- -----------------------------------------------------------------------------------------------------------------------
INDEX 05/14/98 06/30/98 12/31/98 06/30/99 12/31/99 06/30/00 12/31/00 06/30/01 12/31/01
- -----------------------------------------------------------------------------------------------------------------------
Equity One, Inc. 100.0 96.5 91.3 104.9 116.6 113.4 123.2 146.9 187.6
Russell 2000 100.0 96.2 89.4 97.7 108.4 111.7 105.1 112.4 107.7
NAREIT Index 100.0 99.0 86.0 90.1 82.0 93.0 103.6 115.5 118.1
16
PROPOSAL 2-- ADOPTION OF AMENDMENTS TO OUR 2000 EXECUTIVE INCENTIVE
COMPENSATION PLAN
BACKGROUND AND PURPOSE
Our board of directors and stockholders adopted our 2000 Executive
Incentive Compensation Plan in April 2000 and June 2000 to assist us and our
subsidiaries in attracting, motivating, retaining and rewarding employees,
officers, directors and independent contractors by enabling these persons to
acquire or increase a proprietary interest in us in order to strengthen the
mutuality of interests between these persons and our stockholders, and providing
such persons with annual and long term performance incentives to expend their
maximum efforts in the creation of stockholder value. The terms of the plan
provide for grants of stock options, stock appreciation rights, or SARs,
restricted stock, deferred stock, other stock-related awards and performance or
annual incentive awards that may be settled in cash, stock or other property,
which are collectively defined as the awards. The effective date of the plan is
April 24, 2000. On April 22, 2002 the board of directors adopted a resolution to
amend the plan, subject to the approval of our stockholders at the 2002 annual
meeting.
Stockholder approval of an amendment to the plan is required:
o to comply with certain exclusions from the limitations of Section
162(m) of the Internal Revenue Code of 1986, as amended, which
are further described below;
o in order for the 2000 plan to be eligible under the "plan lender"
exemption from the margin requirements of Regulation G
promulgated under the Securities Exchange Act of 1934, as
amended; and
o by the rules of the New York Stock Exchange.
SUMMARY OF PROPOSED PLAN CHANGES
If the amendment to our plan is adopted by our stockholders, the number
of shares of common stock reserved and available for delivery in connection with
awards under the plan will be increased from 1,000,000 shares to 2,500,000
shares.
REASONS FOR CHANGES TO THE 2000 PLAN
Our board of directors believes that the number of shares currently
available under the plan may be insufficient in light of the continued growth in
our operations, including potential increases in the number of employees if and
to the extent we complete acquisitions of other companies or businesses. If we
did not have sufficient available shares under the plan, our ability to
adequately compensate our employees without utilizing cash and other funds which
could otherwise be used with respect to our growing operations would be unduly
restricted. As a result, our board of directors has determined that it is in our
best interests to increase the number of shares available for issuance in the
aggregate so that we will be able to continue to use stock options and other
equity awards to reward, retain and attract qualified employees.
SUMMARY OF OUR 2000 EXECUTIVE INCENTIVE COMPENSATION PLAN, AS AMENDED
The terms of the plan provide for grants of stock options, SARs,
restricted stock, deferred stock, other stock-related awards and performance or
annual incentive awards that may be settled in cash, stock or other property.
The following is a summary of certain principal features of the amended plan.
This summary is qualified in its entirety by reference to the complete text of
the plan, as amended, which is attached to this proxy statement as "APPENDIX A."
Stockholders are urged to read the actual text of the plan in its entirety.
SHARES AVAILABLE FOR AWARDS; ANNUAL PER-PERSON LIMITATIONS. Under the
plan, the total number of shares of common stock that may be subject to the
granting of awards at any time during its term shall be equal to 2,500,000
shares, plus the number of shares with respect to which awards previously
granted under the plan that terminate without being exercised, and the number of
shares that are surrendered in payment of any awards or any tax withholding
requirements.
17
In addition, the plan imposes individual limitations on the amount of
certain awards in part to comply with Code Section 162(m). Under these
limitations, during any fiscal year the number of options, SARs, restricted
shares of common stock, deferred shares of common stock, shares as a bonus or in
lieu of other of our obligations, and other stock-based awards granted to any
one participant may not exceed 500,000 shares for each type of such award,
subject to adjustment in certain circumstances. The maximum amount that may be
paid out as an annual incentive award or other cash award in any fiscal year to
any one participant is $2,000,000, and the maximum amount that may be earned as
a performance award or other cash award in respect of a performance period by
any one participant is $5,000,000.
The compensation committee is authorized to adjust the limitations
described in the two preceding paragraphs and is authorized to adjust
outstanding awards, including adjustments to exercise prices of options and
other affected terms of awards, in the event that a recapitalization, forward or
reverse split, reorganization, merger, consolidation, spin-off, combination,
repurchase, share exchange or other similar corporate transaction or event
affects the common stock so that an adjustment is appropriate in order to
prevent dilution or enlargement of the rights of participants. The compensation
committee is also authorized to adjust performance conditions and other terms of
awards in response to these kinds of events or in response to changes in
applicable laws, regulations or accounting principles.
ELIGIBILITY. The persons eligible to receive awards under the plan are
our officers, directors, employees and independent contractors. An employee on
leave of absence may be considered as still in our employ for purposes of
eligibility for participation in the plan.
ADMINISTRATION. The compensation committee of the board of directors
has been appointed to administer the plan. Subject to the terms of the plan, the
compensation committee, or in the absence of a compensation committee, our board
of directors, is authorized to determine the following:
o to select eligible persons to receive awards;
o determine the type and number of awards to be granted and the
number of shares of common stock to which awards will relate;
o specify times at which awards will be exercisable or settleable,
including performance conditions that may be required as a
condition to exercising the award;
o set other terms and conditions of awards;
o prescribe forms of award agreements;
o interpret and specify rules and regulations relating to the plan;
and
o make all other determinations that may be necessary or advisable
for the administration of the plan.
STOCK OPTIONS AND SARS. The compensation committee is authorized to
grant stock options, including the following:
o incentive stock options, or ISOs, which can result in potentially
favorable tax treatment to the participant, and non-qualified
stock options, and
o SARs entitling the participant to receive the amount by which the
fair market value of a share of common stock on the date of
exercise, or the change in control price following a change in
control, exceeds the grant price of the SAR.
The exercise price per share of an option and the grant price of an SAR
are determined by the compensation committee. In the case of an ISO, the grant
price must not be less than the fair market value of a share of common stock on
the date of grant. For purposes of the plan, the term "fair market value" means
the fair market value of common stock, awards or other property as determined by
the compensation committee or under procedures established by the compensation
committee. Unless otherwise determined by the compensation committee, the fair
market value of common stock as of any given date shall be the closing sales
price per share of common stock as reported on the New York Stock Exchange on
the date as of which such value is being determined or, if there is no sale on
that date, then on the last previous day on which a sale was reported. The
maximum term of each option or SAR, the times at which each option or SAR will
be exercisable and provisions requiring forfeiture of unexercised options or
SARs at or following termination of employment generally are fixed by the
compensation committee, except that no option may have a term exceeding ten
years. Options may be exercised by payment of the exercise price in cash, shares
of common stock, outstanding awards or other property having a fair market value
equal to the
18
exercise price, as the compensation committee may determine from time to time.
Methods of exercise and settlement and other terms of the SARs are determined by
the compensation committee. SARs granted under the plan may include "limited
SARs" exercisable for a stated period of time following our change in control,
as discussed below.
RESTRICTED AND DEFERRED STOCK. The compensation committee is authorized
to grant restricted stock and deferred stock. Restricted stock is a grant of
shares of common stock which may not be sold or disposed of, and which may be
forfeited in the event of certain terminations of employment, prior to the end
of a restricted period specified by the compensation committee. A participant
granted restricted stock generally has all of the rights of our stockholders,
unless otherwise determined by the compensation committee. An award of deferred
stock confers upon a participant the right to receive shares of common stock at
the end of a specified deferral period, subject to possible forfeiture of the
award in the event of certain terminations of employment prior to the end of a
specified restricted period. Prior to settlement, an award of deferred stock
carries no voting or dividend rights or other rights associated with share
ownership, although dividend equivalents may be granted, as discussed below.
DIVIDEND EQUIVALENTS. The compensation committee is authorized to grant
dividend equivalents conferring on participants the right to receive, currently
or on a deferred basis, cash, shares of common stock, other awards or other
property equal in value to dividends paid on a specific number of shares of
common stock or other periodic payments. Dividend equivalents may be granted
alone or in connection with another award, may be paid currently or on a
deferred basis and, if deferred, may be deemed to have been reinvested in
additional shares of common stock, awards or otherwise as specified by the
compensation committee.
BONUS STOCK AND AWARDS IN LIEU OF CASH OBLIGATIONS. The compensation
committee is authorized to grant shares of common stock as a bonus free of
restrictions, or to grant shares of common stock or other awards in lieu of our
obligations to pay cash under the plan or other plans or compensatory
arrangements, subject to such terms as the compensation committee may specify.
OTHER STOCK-BASED AWARDS. The compensation committee is authorized to
grant awards that are denominated or payable in, valued by reference to, or
otherwise based on or related to shares of common stock. Such awards might
include convertible or exchangeable debt securities, other rights convertible or
exchangeable into shares of common stock, purchase rights for shares of common
stock, awards with value and payment contingent upon our performance or any
other factors designated by the compensation committee, and awards valued by
reference to the book value of shares of common stock or the value of securities
of or the performance of specified subsidiaries or business units. The
compensation committee determines the terms and conditions of such awards.
PERFORMANCE AWARDS, INCLUDING ANNUAL INCENTIVE AWARDS. The right of a
participant to exercise or receive a grant or settlement of an award, and the
timing thereof, may be subject to such performance conditions, including
subjective individual goals, as may be specified by the compensation committee.
In addition, the plan authorizes specific annual incentive awards, which
represent a conditional right to receive cash, shares of common stock or other
awards upon achievement of certain pre-established performance goals and
subjective individual goals during a specified fiscal year. Performance awards
and annual incentive awards granted to persons whom the compensation committee
expects will, for the year in which a deduction arises, be "covered employees,"
will, if and to the extent intended by the compensation committee, be subject to
provisions that should qualify such awards as "performance-based compensation"
not subject to the limitation on tax deductibility by us under Section 162(m) of
the Internal Revenue Code. For purposes of Section 162(m), the term "covered
employee" means our chief executive officer and each other person whose
compensation is required to be disclosed in our filings with the SEC by reason
of that person being among the four highest compensated officers as of the end
of a taxable year. If and to the extent required under Section 162(m) of the
Internal Revenue Code, any power or authority relating to a performance award or
annual incentive award intended to qualify under Section 162(m) of the Internal
Revenue Code is to be exercised by the compensation committee and not our board
of directors.
Subject to the requirements of the plan, the compensation committee
will determine performance award and annual incentive award terms, including the
required levels of performance with respect to specified business criteria, the
corresponding amounts payable upon achievement of such levels of performance,
termination and forfeiture provisions and the form of settlement. In granting
annual incentive or performance awards, the compensation committee may establish
unfunded award "pools," the amounts of which will be based upon the achievement
of a performance goal or goals based on one or more of certain business criteria
described in the plan. This includes, for example, our percentage growth in per
share funds from operations as compared to the per share funds from operations
percentage growth of a peer group of industry competitors. During the first 90
days of a fiscal
19
year or performance period, the compensation committee will determine who will
potentially receive annual incentive or performance awards for that fiscal year
or performance period, either out of the pool or otherwise.
After the end of each fiscal year or performance period, the
compensation committee will determine the following:
o the amount of any pools and the maximum amount of potential
annual incentive or performance awards payable to each
participant in the pools; and
o the amount of any other potential annual incentive or performance
awards payable to participants in the plan.
The compensation committee may, in its discretion, determine that the
amount payable as an annual incentive or performance award will be reduced from
the amount of any potential award.
OTHER TERMS OF AWARDS. Awards may be settled in the form of cash,
shares of common stock, other awards or other property, in the discretion of the
compensation committee. The compensation committee may require or permit
participants to defer the settlement of all or part of an award in accordance
with such terms and conditions as the compensation committee may establish,
including payment or crediting of interest or dividend equivalents on deferred
amounts, and the crediting of earnings, gains and losses based on deemed
investment of deferred amounts in specified investment vehicles. The
compensation committee is authorized to place cash, shares of common stock or
other property in trusts or make other arrangements to provide for payment of
our obligations under the plan. The compensation committee may condition any
payment relating to an award on the withholding of taxes and may provide that a
portion of any shares of common stock or other property to be distributed will
be withheld, or previously acquired shares of common stock or other property be
surrendered by the participant, to satisfy withholding and other tax
obligations. Awards granted under the plan generally may not be pledged or
otherwise encumbered and are not transferable except by will or by the laws of
descent and distribution, or to a designated beneficiary upon the participant's
death, except that the compensation committee may, in its discretion, permit
transfers for estate planning or other purposes subject to any applicable
restrictions under Rule 16b-3.
Awards under the plan are generally granted without a requirement that
the participant pay consideration in the form of cash or property for the grant,
as distinguished from the exercise, except to the extent required by law. The
compensation committee may, however, grant awards in exchange for other awards
under the plan, awards under other of our plans, or other rights to payment from
us, and may grant awards in addition to and in tandem with such other awards,
rights or other awards.
ACCELERATION OF VESTING; CHANGE IN CONTROL. The compensation committee
may, in its discretion, accelerate the exercisability, the lapsing of
restrictions or the expiration of deferral or vesting periods of any award, and
such accelerated exercisability, lapse, expiration and, if so provided in the
award agreement, vesting shall occur automatically in the case of our "change in
control," as defined in the plan, including the cash settlement of SARs and
"limited SARs" which may be exercisable in the event of a change in control. In
addition, the compensation committee may provide in an award agreement that the
performance goals relating to any performance based award will be deemed to have
been met upon the occurrence of any "change in control." Upon the occurrence of
a change in control, if so provided in the award agreement, stock options and
limited SARs, and other SARs which so provide, may be cashed out based on a
defined "change in control price," which will be the higher of the cash and fair
market value of property that is the highest price per share paid, including
extraordinary dividends, in any reorganization, merger, consolidation,
liquidation, dissolution or sale of substantially all of our assets, or the
highest fair market value per share, generally based on market prices, at any
time during the 60 days before and 60 days after a change in control.
For purposes of the plan, the term "change in control" generally means
the following:
o approval by the stockholders of a reorganization, merger or
consolidation or other transaction or series of transactions if
persons who were stockholders immediately prior to such
reorganization, merger or consolidation or other transaction do
not, immediately thereafter, own more than 26% of the combined
voting power of the reorganized, merged or consolidated company's
then outstanding, voting securities, or our liquidation or
dissolution or the sale of all or substantially all of our
assets, unless the reorganization, merger, consolidation or other
corporate transaction, liquidation, dissolution or sale is
subsequently abandoned; or
20
o a change in the composition of our board of directors such that
the persons constituting our board of directors on the date the
award is granted, known as the "incumbent board" and subsequent
directors approved by the incumbent board, or approved by such
subsequent directors, cease to constitute at least a majority of
the board of directors; or
o the acquisition by any person, entity or "group," within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended, of more than 35% of either the
then outstanding shares of our common stock or the combined
voting power of our then outstanding voting securities entitled
to vote generally in the election of directors, also defined as a
"controlling interest," excluding, for this purpose, any
acquisitions by us or our subsidiaries, by any person, entity or
"group" that as of the date on which the award is granted owns
beneficial ownership of a controlling interest or by any of our
employee benefit plans.
AMENDMENT AND TERMINATION. Our board of directors may amend, alter,
suspend, discontinue or terminate the plan or the committee's authority to grant
awards without further stockholder approval, except stockholder approval must be
obtained for any amendment or alteration if such approval is required by law or
regulation or under the rules of any stock exchange or quotation system on which
shares of common stock are then listed or quoted. Thus, stockholder approval may
not necessarily be required for every amendment to the plan which might increase
the cost of the plan or alter the eligibility of persons to receive awards.
Stockholder approval will not be deemed to be required under laws or
regulations, such as those relating to ISOs, that condition favorable treatment
of participants on such approval, although our board of directors may, in its
discretion, seek stockholder approval in any circumstance in which it deems such
approval advisable. Unless earlier terminated by our board of directors, the
plan will terminate at such time as no shares of common stock remain available
for issuance under the plan and we have no further rights or obligations with
respect to outstanding awards under the plan.
SECURITIES ACT REGISTRATION. We have not, but may in the future,
registered the shares of common stock available for awards under the plan
pursuant to a Registration Statement on Form S-8 filed with the SEC.
FEDERAL INCOME TAX CONSEQUENCES OF AWARDS. The following is a brief
description of the federal income tax consequences generally arising with
respect to awards of options under the plan. The plan, as amended, is not
qualified under the provisions of section 401(a) of the Internal Revenue Code of
1986, as amended, and is not subject to any of the provisions of the Employee
Retirement Income Security Act of 1974, as amended.
On exercise of a nonqualified stock option granted under the plan, as
amended, an optionee will recognize ordinary income equal to the excess, if any,
of the fair market value on the date of exercise of the shares of our common
stock acquired on exercise of the option over the exercise price. If the
optionee is our employee, that income will be subject to the withholding of
federal income tax. The optionee's tax basis in those shares will be equal to
their fair market value on the date of exercise of the option, and his holding
period for those shares will begin on that date.
If an optionee pays for shares of stock on exercise of an option by
delivering shares of our common stock, the optionee will not recognize gain or
loss on the shares delivered, even if their fair market value at the time of
exercise differs from the optionee's tax basis in them. The optionee, however,
otherwise will be taxed on the exercise of the option in the manner described
above as if he had paid the exercise price in cash. If a separate identifiable
stock certificate is issued for that number of shares equal to the number of
shares delivered on exercise of the option, the optionee's tax basis in the
shares represented by that certificate will be equal to his tax basis in the
shares delivered, and his holding period for those shares will include his
holding period for the shares delivered. The optionee's tax basis and holding
period for the additional shares received on exercise of the option will be the
same as if the optionee had exercised the option solely in exchange for cash.
We will be entitled to a deduction for federal income tax purposes
equal to the amount of ordinary income taxable to the optionee, provided that
amount constitutes an ordinary and necessary business expense for us and is
reasonable in amount, and either the employee includes that amount in income or
we timely satisfy our reporting requirements with respect to that amount.
The plan, as amended, provides for the grant of stock options that
qualify as "incentive stock options" as defined in section 422 of the Internal
Revenue Code. Under the Internal Revenue Code, an optionee generally is not
subject to tax upon the grant or exercise of an incentive stock option. In
addition, if the optionee holds a share received on exercise of an incentive
stock option for at least two years from the date the option was granted and at
21
least one year from the date the option was exercised, referred to as the
"required holding period," the difference, if any, between the amount realized
on a sale or other taxable disposition of that share and the holder's tax basis
in that share will be long-term capital gain or loss.
If an optionee disposes of a share acquired on exercise of an incentive
stock option before the end of the required holding period, referred to as a
"disqualifying disposition," the optionee generally will recognize ordinary
income in the year of the disqualifying disposition equal to the excess, if any,
of the fair market value of the share on the date the incentive stock option was
exercised over the exercise price. If, however, the disqualifying disposition is
a sale or exchange on which a loss, if realized, would be recognized for federal
income tax purposes, and if the sales proceeds are less than the fair market
value of the share on the date of exercise of the option, the amount of ordinary
income recognized by the optionee will not exceed the gain, if any, realized on
the sale. If the amount realized on a disqualifying disposition exceeds the fair
market value of the share on the date of exercise of the option, that excess
will be short-term or long-term capital gain, depending on whether the holding
period for the share exceeds one year.
An optionee who exercises an incentive stock option by delivering
shares of our common stock acquired previously pursuant to the exercise of an
incentive stock option before the expiration of the required holding period for
those shares is treated as making a disqualifying disposition of those shares.
This rule prevents "pyramiding" the exercise of an incentive stock option, which
means exercising an incentive stock option for one share and using that share,
and others so acquired, to exercise successive incentive stock options, without
the imposition of current income tax.
For purposes of the alternative minimum tax, the amount by which the
fair market value of a share our common stock acquired on exercise of an
incentive stock option exceeds the exercise price of that option generally will
be an adjustment included in the optionee's alternative minimum taxable income
for the year in which the option is exercised. If, however, there is a
disqualifying disposition of the share in the year in which the option is
exercised, there will be no adjustment with respect to that share. If there is a
disqualifying disposition in a later year, no income with respect to the
disqualifying disposition is included in the optionee's alternative minimum
taxable income for that year. In computing alternative minimum taxable income,
the tax basis of a share acquired on exercise of an incentive stock option is
increased by the amount of the adjustment taken into account with respect to
that share for alternative minimum tax purposes in the year the option is
exercised.
We are not allowed an income tax deduction with respect to the grant or
exercise of an incentive stock option or the disposition of a share acquired on
exercise of an incentive stock option after the required holding period.
However, if there is a disqualifying disposition of a share, we are allowed a
deduction in an amount equal to the ordinary income includible in income by the
optionee, provided that amount constitutes an ordinary and necessary business
expense for us and is reasonable in amount, and either the employee includes
that amount in income or we timely satisfy our reporting requirements with
respect to that amount.
Generally, the recipient of a stock award will recognize ordinary
compensation income at the time the stock is received equal to the excess, if
any, of the fair market value of the stock received over any amount paid by the
recipient in exchange for the stock. If, however, the stock is non-vested when
it is received under the plan, as amended, for example, if the employee is
required to work for a period of time in order to have the right to sell the
stock, the recipient generally will not recognize income until the stock becomes
vested, at which time the recipient will recognize ordinary compensation income
equal to the excess, if any, of the fair market value of the stock on the date
it becomes vested over any amount paid by the recipient in exchange for the
stock. A recipient may file an election with the Internal Revenue Service,
within 30 days of his or her receipt of the stock award, to recognize ordinary
compensation income, as of the date the recipient receives the award, equal to
the excess, if any, of the fair market value of the stock on the date the award
is granted over any amount paid by the recipient in exchange for the stock.
The recipient's basis for the determination of gain or loss upon the
subsequent disposition of shares acquired as stock awards will be the amount
paid for such shares plus any ordinary income recognized either when the stock
is received or when the stock becomes vested. Upon the disposition of any stock
received as a stock award under the plan, as amended, the difference between the
sale price and the recipient's basis in the shares will be treated as a capital
gain or loss and generally will be characterized as long-term capital gain or
loss if the shares have been held for more the one year from the date as of
which he or she would be required to recognize any compensation income.
22
We may grant SARs separate from any other award, referred to as
"stand-alone SARs," or in tandem with options, referred to as "tandem SARs,"
under the plan, as amended. Generally, the recipient of a stand-alone SAR will
not recognize any taxable income at the time the stand-alone SAR is granted.
With respect to stand-alone SARs, if the recipient receives the
appreciation inherent in the SARs in cash, the cash will be taxable as ordinary
compensation income to the recipient at the time that the cash is received. If
the recipient receives the appreciation inherent in the SARs in shares of our
common stock, the recipient will recognize ordinary compensation income equal to
the excess of the fair market value of our common stock on the day it is
received over any amounts paid by the recipient for our common stock.
With respect to tandem SARs, if the recipient elects to surrender the
underlying option in exchange for cash or shares of our common stock equal to
the appreciation inherent in the underlying option, the tax consequences to the
recipient will be the same as discussed above relating to the stand-alone SARs.
If the recipient elects to exercise the underlying option, the holder will be
taxed at the time of exercise as if he or she had exercised a nonqualified stock
option, as discussed above. For example, the recipient will recognize ordinary
income for federal tax purposes measured by the excess of the then fair market
value of the shares of our common stock over the exercise price.
In general, there will be no federal income tax deduction allowed to us
upon the grant or termination of stand-alone SARs or tandem SARs. Upon the
exercise of either a stand-alone SAR or a tandem SAR, we will be entitled to a
deduction for federal income tax purposes equal to the amount of ordinary income
that the employee is required to recognize as a result of the exercise, provided
that the deduction is not otherwise disallowed under the Internal Revenue Code.
Generally, the recipient of a dividend equivalent award will recognize
ordinary compensation income at the time the dividend equivalent award is
received equal to the fair market value dividend equivalent award received. We
will generally be entitled to a deduction for federal income tax purposes equal
to the amount of ordinary income that the employee is required to recognize as a
result of the dividend equivalent award, provided that the deduction is not
otherwise disallowed under the Internal Revenue Code
The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to
the Code, which generally disallows a public company's tax deduction for
compensation to covered employees in excess of $1 million in any tax year
beginning on or after January 1, 1994. Compensation that qualifies as
"performance-based compensation" is excluded from the $1 million deductibility
cap, and therefore remains fully deductible by the company that pays it. We
intend that options granted to employees whom the compensation committee expects
to be covered employees at the time a deduction arises in connection with such
options, will qualify as such "performance-based compensation," so that such
options will not be subject to the Section 162(m) deductibility cap of $1
million. Future changes in Section 162(m) or the regulations thereunder may
adversely affect our ability to ensure that options under the plan will qualify
as "performance-based compensation" that is fully deductible by us under Section
162(m).
The information set forth above is a summary only and does not purport
to be complete. In addition, the information is based upon current federal
income tax rules and therefore is subject to change when those rules change.
Moreover, because the tax consequences to any recipient may depend on his
particular situation, each recipient should consult his tax adviser as to the
federal, state, local and other tax consequences of the grant or exercise of an
award or the disposition of common stock acquired as a result of an award.
23
BENEFITS UNDER THE AMENDED PLAN.
The table sets forth the amount and dollar value of awards received by
the named executive officers and by certain other groups of individuals under
the plan and outstanding as of April 5, 2002:
RESTRICTED STOCK STOCK OPTIONS
------------------------- ------------------------
DOLLAR NUMBER OF DOLLAR NUMBER OF
NAME AND POSITION VALUE(1) UNITS VALUE(2) UNITS
- --------------------------------------------------------- ---------- ---------- --------- ---------
Chaim Katzman........................................... $440,367 32,050 -- --
Doron Valero............................................ $246,633 17,950 -- --
Howard Sipzner.......................................... $585,324 42,600 -- --
Alan Merkur............................................. $177,933 12,950 $479,958 128,331
Barbara Miller.......................................... $54,736 3,984 -- --
All current executive officers as a group (5 persons)... $1,504,993 109,534 $479,958 128,331
All current directors who are not executive officers
(6 persons)............................................. $233,580 17,000 -- --
All employees, other than current executive officers
(22 persons)............................................ $309,594 22,532 -- --
- ----------------------
(1) For purposes of this table, the value of each share of restricted stock was
determined based on the average high and low price on December 31, 2001 of
$13.635.
(2) For purposes of this table, the value of each option was deemed to be the
amount, if any, by which the closing market price of a share of common
stock on December 31, 2001 of $13.74 exceeds the option's exercise price.
The value is determined without regard to whether the option is currently
exercisable or not. All options are nonqualified options with exercise
prices of $10.00 per share (the fair market value), become exercisable at
the rate determined by the compensation committee, and have a term of nine
years.
It cannot be determined at this time what grants, if any, will be made
to any person or group of persons under the plan if the amendment to our plan is
approved by our stockholders. If the amendment had been in effect for our last
fiscal year, the amount of grants under the plan would not have differed from
the grants actually made.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE PROPOSAL TO
APPROVE AND RATIFY THE AMENDMENT TO THE 2000 EXECUTIVE INCENTIVE COMPENSATION
PLAN.
24
PROPOSAL 3-- RATIFICATION OF DELOITTE & TOUCHE LLP AS OUR INDEPENDENT
AUDITORS
Our board of directors of recommends that the appointment of Deloitte &
Touche LLP, independent certified public accountants, as our auditors for the
fiscal year ending December 31, 2002, be ratified by our stockholders. Deloitte
& Touche LLP served as our independent auditors for the previous fiscal year
ended December 31, 2001. Although the appointment of Deloitte & Touche LLP as
our independent auditors of does not require ratification, the board of
directors considers it appropriate to obtain such ratification. Accordingly, the
vote of stockholders on this matter is advisory in nature and has no binding
effect upon the board of director's appointment of Deloitte & Touche LLP.
Representatives of Deloitte & Touche LLP are expected to be on hand at the
annual meeting and will be afforded the opportunity to make a statement if they
so desire and to respond to appropriate questions.
FEES PAID TO OUR INDEPENDENT AUDITORS
The rules of the Securities and Exchange Commission require us to
disclose fees billed by our independent auditors for services rendered to us for
the fiscal year ended December 31, 2001.
AUDIT FEES
The aggregate fees billed by Deloitte & Touche LLP for professional
services rendered for the audit of our annual financial statements for the
fiscal year ended December 31, 2001 and for the reviews of the financial
statements included in our Quarterly Reports on Form 10-Q for that fiscal year
were approximately $165,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
Deloitte & Touche LLP did not render professional services to us for
information technology services relating to financial information systems design
and implementation for the fiscal year ended December 31, 2001.
ALL OTHER FEES
The aggregate fees billed by Deloitte & Touche LLP for services
rendered to us, other than the services described above under "Audit Fees" and
"Financial Information Systems Design and Implementation Fees," for the fiscal
year ended December 31, 2001 were approximately $547,000. Non-audit related
services were incurred for tax research and preparation, registration statements
and transaction analysis related to the acquisitions of Centrefund Realty (U.S.)
Corporation and United Investors Realty Trust.
25
CERTAIN TRANSACTIONS
SALE OF COMMON STOCK TO ALONY HETZ PROPERTIES & INVESTMENTS, LTD.
In October 2000, we entered into a subscription agreement with Alony
Hetz Properties & Investments, Ltd., or Alony Hetz, an Israeli corporation the
shares of which are traded on the Tel-Aviv Stock Exchange, pursuant to which
Alony Hetz agreed that it or one of its affiliates would purchase 1,925,000
shares of our common stock at a purchase price of $10.875 per share prior to
December 31, 2002. In addition, pursuant to the subscription agreement and a
related stockholders' agreement, as subsequently amended, we granted Alony Hetz
a warrant to purchase 1,025,000 shares of our common stock at an exercise price
of $10.875 per share and agreed, among other things, that as long as Alony Hetz
owned 3% of our common stock, we would nominate a person chosen by Alony Hetz
for election to our board of directors.
Pursuant to these agreements, on the initial closing date of November
17, 2000, AH Investments US, L.P., an affiliate of Alony Hetz, purchased
1,000,000 shares of our common stock for a total purchase price of $10,875,000.
In addition, on August 17, 2001, AH Investments US, L.P. purchased the remaining
925,000 shares of common stock under the subscription agreement and exercised a
portion of its warrant to purchase an additional 375,000 shares, for a total
aggregate purchase price of $14,137,500. These proceeds were used by us for
general corporate purposes and to fund a portion of the cash consideration
associated with our acquisition of United Investors Realty Trust, as described
below.
Finally, on September 14, 2001, AH Investments US, L.P. exercised the
remaining portion of its warrant to purchase 650,000 shares of our common stock
for an aggregate purchase price of $7,068,750. These proceeds were also used by
us for general corporate purposes and to fund a portion of the cash
consideration associated with our acquisition of United Investors Realty Trust.
As a result of these transactions, Alony Hetz is now one of our
principal, indirect stockholders. In addition, Nathan Hetz, one of the principal
shareholders and the chief executive officer of Alony Hetz, was appointed by us
and has served as one of our directors since November 2000.
ACQUISITION OF CENTREFUND REALTY (U.S.) CORPORATION
On September 20, 2001, pursuant to the terms of a stock exchange
agreement dated as of May 18, 2001 among us, First Capital Realty Inc. (formerly
known as Centrefund Realty Corporation), or First Capital, and First Capital
America Holding Corp., we acquired all of the outstanding common stock of
Centrefund Realty (U.S.) Corporation, or CEFUS. In connection with the
acquisition of CEFUS, we issued an aggregate of 10.5 million shares of our
common stock to Silver Maple (2001), Inc. and Ficus, Inc., indirect subsidiaries
of First Capital, in exchange for the CEFUS common stock. The transaction was
valued at approximately $281 million, including transaction costs and the
assumption of approximately $150 million of debt.
Prior to the acquisition of CEFUS, Chaim Katzman, our chairman of the
board and chief executive officer, may have been deemed to be the beneficial
owner of approximately 67.4% of our outstanding common stock and may have also
been deemed to be the beneficial owner of approximately 68.1% of the outstanding
common stock of First Capital. In addition, Nathan Hetz, one of our directors
and a director of First Capital, is a director and significant shareholder of
both A.H. Holdings Canada Ltd., which prior to the transaction owned
approximately 19% of the outstanding common stock of First Capital, and AH
Investments US, L.P., which prior to the acquisition owned approximately 19.9%
of our outstanding common stock. Finally, Dori Segal, another of our directors,
is a director and the president and chief executive officer of First Capital. He
and his family own common stock of an affiliate of Gazit-Globe (1982), Ltd., an
Israeli corporation whose shares are traded on the Tel Aviv Stock Exchange and
which directly and indirectly owns our common stock and that of First Capital.
ACQUISITION OF UNITED INVESTORS REALTY TRUST
On September 21, 2001, we completed our acquisition of United Investors
Realty Trust, or UIRT, through a series of two mergers. In connection with the
mergers, each UIRT shareholder elected to receive either cash or shares of our
common stock in exchange for their common shares of UIRT. In connection with the
acquisition of UIRT, we paid cash in the aggregate amount of $32.9 million and
issued approximately 2.9 million shares of our
26
common stock to former UIRT shareholders. The transaction was valued at
approximately $147.6 million, including transaction costs and the assumption of
approximately $79.9 million of debt.
Prior to the acquisition of UIRT, M.G.N. (USA), Inc., or M.G.N., a
wholly owned subsidiary of Gazit-Globe (1982), Ltd., another of our stockholders
which is controlled by Chaim Katzman, our chairman of the board and chief
executive officer, was a significant shareholder of UIRT. Prior to the
transaction, M.G.N. owned approximately 9.9% of the outstanding common shares of
UIRT and owned approximately 16.4% of our outstanding common stock. As a result
of the acquisition, M.G.N. received 553,217 additional shares of our common
stock. In addition, AH Investments US, L.P., which is an affiliate of Nathan
Hetz, one of our directors, and which owned 11.7% of our outstanding common
stock prior to the UIRT acquisition, owned 238,600 common shares of UIRT. AH
Investments US, L.P. received 153,419 shares of our common stock in the
acquisition.
Finally, Doron Valero and Howard Sipzner, each of whom is either an
executive officer or director of ours, owned shares of UIRT. In connection with
the acquisition, Mr. Valero received 3,215 shares and Mr. Sipzner received 140
shares of our common stock.
JANUARY 2002 PRIVATE PLACEMENT
On January 18, 2002, we completed a private placement of 688,000 shares
of our common stock to a limited number of accredited investors. In connection
with the private placement, we sold an aggregate of 344,000 shares of our common
stock at a price of $12.80 per share to unaffiliated investors and 344,000
shares of our common stock at price of $13.05 per share to three of our
principal stockholders, AH Investments US, L.P., Silver Maple (2001), Inc. and
M.G.N. (USA), Inc. These stockholders bought 70,000, 150,000 and 124,000 shares
from us in the private placement.
FEBRUARY 2002 LAND PURCHASES
On February 25, 2002, we exercised options to purchase all of the
outstanding shares of common stock of two companies owned by several of our
affiliates, including Chaim Katzman, the chairman of our board and chief
executive officer, and Doron Valero, our president and chief operating officer.
The sole asset of the first of these companies is an 8.5 acre parcel of
land located at the southeast corner of S.W. 147th Avenue and Coral Way in
Miami, Florida. In connection with the exercise of our option, we paid an
exercise price of $2.0 million. Because of the affiliated nature of this
transaction, our board received an independent appraisal of the parcel equal to
$3,100,000 prior to authorizing us to exercise our option. Messrs. Katzman and
Valero received $84,240 and $55,580 upon our payment of the exercise price as a
result of their ownership of the company.
The sole asset of the second company was a 6.2 acre property, which is
adjacent to our Bird Ludlam shopping center in Miami, Florida. In connection
with the exercise of our option, we paid an exercise price of $1.0 million.
Messrs. Katzman and Valero received $42,120 and $27,790 upon our payment of the
exercise price as a result of their ownership of the company. Subsequent to our
purchase of this company, on February 26, 2002, we sold the property to a third
party for $400,000 in cash and an 8% interest-only note in the amount of $1.4
million due on February 26, 2003.
MARCH 2002 PUBLIC OFFERING
On March 27, 2002, we completed an underwritten public offering of
3,450,000 shares of our common stock at $13.25 per share. The offering included
450,000 shares issued upon the exercise of the underwriters' option to purchase
additional shares to cover over-allotments. The offering's lead manager was Legg
Mason Wood Walker, Incorporated and the co-managers were McDonald Investments
Inc. and BB&T Capital Markets, a division of Scott & Stringfellow, Inc.
In connection with the public offering, the underwriters reserved
500,000 shares of common stock for sale at the public offering price to three of
our principal stockholders, Gazit (1995), Inc., Silver Maple (2001), Inc. and AH
Investments US, L.P. These stockholders bought 200,000, 125,000 and 175,000
shares in the offering.
27
LOANS TO EXECUTIVES
On September 30, 2001, Chaim Katzman, the chairman of our board and
chief executive officer, executed a promissory note to us in the principal
amount of $2,879,840 in connection with his exercise of options to purchase
287,984 shares of our common stock. The note bears interest at a rate of 5% per
annum. The aggregate amount of indebtedness outstanding under the note as of
March 31, 2002 was $2,879,840.
On September 30, 2001, Doron Valero, our president and chief operating
officer, executed a promissory note to us in the principal amount of $2,153,470
in connection with his exercise of options to purchase 215,347 shares of our
common stock. The note bears interest at a rate of 5% per annum. The aggregate
amount of indebtedness outstanding under the note as of March 31, 2002 was
$2,153,470.
The outstanding balance of each of these notes is due on September 30,
2006.
OTHER TRANSACTIONS
We paid legal fees in the approximate amount of $138,994, $155,899 and
$176,000 during the years ended December 31, 1999, 2000 and 2001 to the Law
Office of Alan J. Marcus, our corporate secretary.
28
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at our 2002 annual
meeting of the stockholders pursuant to the provisions of Rule 14a-8 of the
Securities and Exchange Commission, or SEC, promulgated under the Securities
Exchange Act of 1934, as amended, must be received by us at our executive
offices by December 26, 2002 for inclusion in our proxy statement and form of
proxy relating to such meeting.
Rule 14a-4 of the SEC's proxy rules allows a company to use
discretionary voting authority to vote on matters coming before an annual
meeting of stockholders, if the company does not have notice of the matter at
least 45 days before the date corresponding to the date on which the company
first mailed its proxy materials for the prior year's annual meeting of
stockholders or the date specified by an overriding advance notice provision in
the company's bylaws. Our bylaws require at least 60 days, but not more than 90
days advance notice of business to be brought before an annual meeting of
stockholders. Accordingly, for our 2002 annual meeting of the stockholders, a
stockholder must submit such written notice to the corporate secretary on or
before March 23, 2002.
By Order of The Board of Directors
/s/ ALAN J. MARCUS
------------------------------------
ALAN J. MARCUS
SECRETARY
North Miami Beach, Florida
April 29, 2002
29
APPENDIX A
----------
EQUITY ONE, INC.
AMENDED AND RESTATED
2000 EXECUTIVE INCENTIVE COMPENSATION PLAN
EQUITY ONE, INC.
AMENDED AND RESTATED
2000 EXECUTIVE INCENTIVE COMPENSATION PLAN
1. Purpose..................................................................................................1
2. Definitions..............................................................................................1
3. Administration...........................................................................................4
(a) Authority of the Committee......................................................................4
(b) Manner of Exercise of Committee Authority.......................................................5
(c) Limitation of Liability.........................................................................5
4. Stock Subject to Plan....................................................................................5
(a) Limitation on Overall Number of Shares Subject to Awards........................................5
(b) Application of Limitations......................................................................6
5. Eligibility; Per-Person Award Limitations................................................................6
6. Specific Terms of Awards.................................................................................6
(a) General.........................................................................................6
(b) Options.........................................................................................6
(c) Stock Appreciation Rights.......................................................................8
(d) Restricted Stock................................................................................8
(e) Deferred Stock.................................................................................10
(f) Bonus Stock and Awards in Lieu of Obligations..................................................11
(g) Dividend Equivalents...........................................................................11
(h) Other Stock-Based Awards.......................................................................11
7. Certain Provisions Applicable to Awards.................................................................12
(a) Stand-Alone, Additional, Tandem, and Substitute Awards.........................................12
(b) Term of Awards.................................................................................12
(c) Form and Timing of Payment Under Awards; Deferrals.............................................12
(d) Exemptions from Section 16(b) Liability........................................................13
8. Performance and Annual Incentive Awards.................................................................13
(a) Performance Conditions.........................................................................13
(b) Performance Awards Granted to Designated Covered Employees.....................................13
(c) Annual Incentive Awards Granted to Designated Covered Employees................................15
(d) Written Determinations.........................................................................16
(e) Status of Section 8(b) and Section 8(c) Awards Under Code Section 162(m).......................16
9. Change in Control.......................................................................................16
(a) Effect of "Change in Control...................................................................16
(b) Definition of "Change in Control...............................................................17
(c) Definition of "Change in Control Price.........................................................18
10. General Provisions......................................................................................18
(a) Compliance With Legal and Other Requirements...................................................18
(b) Limits on Transferability; Beneficiaries.......................................................19
(c) Adjustments....................................................................................19
(d) Taxes..........................................................................................20
(e) Changes to the Plan and Awards.................................................................20
(f) Limitation on Rights Conferred Under Plan......................................................20
(g) Unfunded Status of Awards; Creation of Trusts..................................................21
(h) Nonexclusivity of the Plan.....................................................................21
(i) Payments in the Event of Forfeitures; Fractional Shares........................................21
(j) Governing Law..................................................................................21
(k) Plan Effective Date and Stockholder Approval; Termination of Plan..............................21
APPENDIX A
----------
EQUITY ONE, INC.
AMENDED AND RESTATED
2000 EXECUTIVE INCENTIVE COMPENSATION PLAN
1. PURPOSE. The purpose of this AMENDED AND RESTATED 2000 EXECUTIVE
INCENTIVE COMPENSATION PLAN (the "Plan") is to assist EQUITY ONE, INC., a
Maryland corporation (the "Company") and its subsidiaries in attracting,
motivating, retaining and rewarding high-quality executives and other employees,
officers, directors and independent contractors by enabling such persons to
acquire or increase a proprietary interest in the Company in order to strengthen
the mutuality of interests between such persons and the Company's stockholders,
and providing such persons with annual and long term performance incentives to
expend their maximum efforts in the creation of shareholder value. In the event
that the Company is or becomes a Publicly Held Corporation (as hereinafter
defined), the Plan is intended to qualify certain compensation awarded under the
Plan for tax deductibility under Section 162(m) of the Code (as hereafter
defined) to the extent deemed appropriate by the Committee (or any successor
committee) of the Board of Directors of the Company.
2. DEFINITIONS. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof.
(a) "Annual Incentive Award" means a conditional right granted
to a Participant under Section 8(c) hereof to receive a cash payment, Stock or
other Award, unless otherwise determined by the Committee, after the end of a
specified fiscal year.
(b) "Award" means any Option, SAR (including Limited SAR),
Restricted Stock, Deferred Stock, Stock granted as a bonus or in lieu of another
award, Dividend Equivalent, Other Stock-Based Award, Performance Award or Annual
Incentive Award, together with any other right or interest, granted to a
Participant under the Plan.
(c) "Beneficiary" means the person, persons, trust or trusts
which have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or to which Awards or
other rights are transferred if and to the extent permitted under Section 10(b)
hereof. If, upon a Participant's death, there is no designated Beneficiary or
surviving designated Beneficiary, then the term Beneficiary means the person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.
(d) "Beneficial Owner", "Beneficially Owning" and "Beneficial
Ownership" shall have the meanings ascribed to such terms in Rule 13d-3 under
the Exchange Act and any successor to such Rule.
(e) "Board" means the Company's Board of Directors.
(f) "Cause" shall, with respect to any Participant, have the
equivalent meaning (or the same meaning as "cause" or "for cause") set forth in
any employment agreement between the Participant and the Company or Parent
Corporation or Subsidiary or, in the absence of any such agreement, such term
shall mean (i) the failure by the Participant to perform his or her duties as
assigned by the Company (or Parent Corporation or Subsidiary) in a reasonable
manner, (ii) any violation or breach by the Participant of his or her employment
agreement with the Company (or Parent Corporation or Subsidiary), if any, (iii)
any violation or breach by the Participant of his or her non-competition and/or
non-disclosure agreement with the Company (or Parent Corporation or Subsidiary),
if any, (iv) any act by the Participant of dishonesty or bad faith with respect
to the Company (or Parent Corporation or Subsidiary), (v) chronic addition to
alcohol, drugs or other similar substances affecting the Participant's work
performance, or (vi) the commission by the Participant of any act, misdemeanor,
or crime reflecting unfavorably upon the Participant or the Company. The good
faith determination by the Committee of whether the Participant's employment was
terminated by the Company for "Cause" shall be final and binding for all
purposes hereunder.
(g) "Change in Control" means a Change in Control as defined
with related terms in Section 9 of the Plan.
(h) "Change in Control Price" means the amount calculated in
accordance with Section 9(c) of the Plan.
(i) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, including regulations thereunder and successor provisions and
regulations thereto.
(j) "Committee" means a committee designated by the Board to
administer the Plan; provided, however, that the Committee shall consist of at
least two directors, and, in the event the Company is or becomes a Publicly Held
Corporation (as hereinafter defined), each member of which shall be (i) a
"non-employee director" within the meaning of Rule 16b-3 under the Exchange Act,
unless administration of the Plan by "non-employee directors" is not then
required in order for exemptions under Rule 16b-3 to apply to transactions under
the Plan, and (ii) an "outside director" within the meaning of Section 162(m) of
the Code, unless administration of the Plan by "outside directors" is not then
required in order to qualify for tax deductibility under Section 162(m) of the
Code.
(k) "Corporate Transaction" means a Corporate Transaction as
defined in Section 9(b)(i) of the Plan.
(l) "Covered Employee" means an Eligible Person who is a
Covered Employee as specified in Section 8(e) of the Plan.
(m) "Deferred Stock" means a right, granted to a Participant
under Section 6(e) hereof, to receive Stock, cash or a combination thereof at
the end of a specified deferral period.
(n) "Director" means a member of the Board.
2
(o) "Disability" means a permanent and total disability
(within the meaning of Section 22(e) of the Code), as determined by a medical
doctor satisfactory to the Committee.
(p) "Dividend Equivalent" means a right, granted to a
Participant under Section 6(g) hereof, to receive cash, Stock, other Awards or
other property equal in value to dividends paid with respect to a specified
number of shares of Stock, or other periodic payments.
(q) "Effective Date" means the effective date of the Plan,
which shall be April 24, 2000.
(r) "Eligible Person" means each Executive Officer of the
Company (as defined under the Exchange Act) and other officers, Directors and
employees of the Company or of any Subsidiary, and independent contractors with
the Company or any Subsidiary. The foregoing notwithstanding, only employees of
the Company or any Subsidiary shall be Eligible Persons for purposes of
receiving any Incentive Stock Options. An employee on leave of absence may be
considered as still in the employ of the Company or a Subsidiary for purposes of
eligibility for participation in the Plan.
(s) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, including rules thereunder and successor
provisions and rules thereto.
(t) "Executive Officer" means an executive officer of the
Company as defined under the Exchange Act.
(u) "Fair Market Value" means the fair market value of Stock,
Awards or other property as determined by the Committee or the Board, or under
procedures established by the Committee or the Board. Unless otherwise
determined by the Committee or the Board, the Fair Market Value of Stock as of
any given date shall be the closing sale price per share reported on a
consolidated basis for stock listed on the principal stock exchange or market on
which Stock is traded on the date as of which such value is being determined or,
if there is no sale on that date, then on the last previous day on which a sale
was reported.
(v) "Incentive Stock Option" or "ISO" means any Option
intended to be designated as an incentive stock option within the meaning of
Section 422 of the Code or any successor provision thereto.
(w) "Incumbent Board" means the Incumbent Board as defined in
Section 9(b)(ii) of the Plan.
(x) "Limited SAR" means a right granted to a Participant under
Section 6(c) hereof.
(y) "Option" means a right granted to a Participant under
Section 6(b) hereof, to purchase Stock or other Awards at a specified price
during specified time periods.
(z) "Other Stock-Based Awards" means Awards granted to a
Participant under Section 6(h) hereof.
3
(aa) "Parent Corporation" means any corporation (other than
the Company) in an unbroken chain of corporations ending with the Company, if
each of the corporations in the chain (other than the Company) owns stock
possessing 50% or more of the combined voting power of all classes of stock in
one of the other corporations in the chain.
(bb) "Participant" means a person who has been granted an
Award under the Plan which remains outstanding, including a person who is no
longer an Eligible Person.
(cc) "Performance Award" means a right, granted to an Eligible
Person under Section 8 hereof, to receive Awards based upon performance criteria
specified by the Committee or the Board.
(dd) "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, and shall include a "group" as defined in Section 13(d) thereof.
(ee) "Publicly Held Corporation" shall mean a publicly held
corporation as that term is used under Section 162(m)(2) of the Code.
(ff) "Restricted Stock" means Stock granted to a Participant
under Section 6(d) hereof, that is subject to certain restrictions and to a risk
of forfeiture.
(gg) "Rule 16b-3" and "Rule 16a-1(c)(3)" means Rule 16b-3 and
Rule 16a-1(c)(3), as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act.
(hh) "Stock" means the Company's Common Stock, and such other
securities as may be substituted (or resubstituted) for Stock pursuant to
Section 10(c) hereof.
(ii) "Stock Appreciation Rights" or "SAR" means a right
granted to a Participant under Section 6(c) hereof.
(jj) "Subsidiary" means any corporation or other entity in
which the Company has a direct or indirect ownership interest of 50% or more of
the total combined voting power of the then outstanding securities or interests
of such corporation or other entity entitled to vote generally in the election
of directors or in which the Company has the right to receive 50% or more of the
distribution of profits or 50% or more of the assets on liquidation or
dissolution.
3. ADMINISTRATION.
(a) AUTHORITY OF THE COMMITTEE. The Plan shall be administered
by the Committee; provided, however, that except as otherwise expressly provided
in this Plan or, during the period that the Company is a Publicly Held
Corporation, in order to comply with Code Section 162(m) or Rule 16b-3 under the
Exchange Act, the Board may exercise any power or authority granted to the
Committee under this Plan. The Committee or the Board shall have full and final
authority, in each case subject to and consistent with the provisions of the
Plan, to select Eligible Persons to become Participants, grant Awards, determine
the type, number and
4
other terms and conditions of, and all other matters relating to, Awards,
prescribe Award agreements (which need not be identical for each Participant)
and rules and regulations for the administration of the Plan, construe and
interpret the Plan and Award agreements and correct defects, supply omissions or
reconcile inconsistencies therein, and to make all other decisions and
determinations as the Committee or the Board may deem necessary or advisable for
the administration of the Plan. In exercising any discretion granted to the
Committee or the Board under the Plan or pursuant to any Award, the Committee or
the Board shall not be required to follow past practices, act in a manner
consistent with past practices, or treat any Eligible Person in a manner
consistent with the treatment of other Eligible Persons.
(b) MANNER OF EXERCISE OF COMMITTEE AUTHORITY. In the event
that the Company is or becomes a Publicly Held Corporation, the Committee, and
not the Board, shall exercise sole and exclusive discretion on any matter
relating to a Participant then subject to Section 16 of the Exchange Act with
respect to the Company to the extent necessary in order that transactions by
such Participant shall be exempt under Rule 16b-3 under the Exchange Act. Any
action of the Committee or the Board shall be final, conclusive and binding on
all persons, including the Company, its subsidiaries, Participants,
Beneficiaries, transferees under Section 10(b) hereof or other persons claiming
rights from or through a Participant, and stockholders. The express grant of any
specific power to the Committee or the Board, and the taking of any action by
the Committee or the Board, shall not be construed as limiting any power or
authority of the Committee or the Board. The Committee or the Board may delegate
to officers or managers of the Company or any subsidiary, or committees thereof,
the authority, subject to such terms as the Committee or the Board shall
determine, (i) to perform administrative functions, (ii) with respect to
Participants not subject to Section 16 of the Exchange Act, to perform such
other functions as the Committee or the Board may determine, and (iii) with
respect to Participants subject to Section 16, to perform such other functions
of the Committee or the Board as the Committee or the Board may determine to the
extent performance of such functions will not result in the loss of an exemption
under Rule 16b-3 otherwise available for transactions by such persons, in each
case to the extent permitted under applicable law and subject to the
requirements set forth in Section 8(d). The Committee or the Board may appoint
agents to assist it in administering the Plan.
(c) LIMITATION OF LIABILITY. The Committee and the Board, and
each member thereof, shall be entitled to, in good faith, rely or act upon any
report or other information furnished to him or her by any executive officer,
other officer or employee of the Company or a Subsidiary, the Company's
independent auditors, consultants or any other agents assisting in the
administration of the Plan. Members of the Committee and the Board, and any
officer or employee of the Company or a subsidiary acting at the direction or on
behalf of the Committee or the Board, shall not be personally liable for any
action or determination taken or made in good faith with respect to the Plan,
and shall, to the extent permitted by law, be fully indemnified and protected by
the Company with respect to any such action or determination.
4. STOCK SUBJECT TO PLAN.
(a) LIMITATION ON OVERALL NUMBER OF SHARES SUBJECT TO AWARDS.
Subject to adjustment as provided in Section 10(c) hereof, the total number of
shares of Stock reserved and
5
available for delivery in connection with Awards under the Plan shall be the sum
of (i) 2,500,000, plus (ii) the number of shares with respect to Awards
previously granted under the Plan that terminate without being exercised,
expire, are forfeited or canceled, and the number of shares of Stock that are
surrendered in payment of any Awards or any tax withholding with regard thereto.
Any shares of Stock delivered under the Plan may consist, in whole or in part,
of authorized and unissued shares or treasury shares.
(b) APPLICATION OF LIMITATIONS. The limitation contained in
Section 4(a) shall apply not only to Awards that are settleable by the delivery
of shares of Stock but also to Awards relating to shares of Stock but settleable
only in cash (such as cash-only SARs). The Committee or the Board may adopt
reasonable counting procedures to ensure appropriate counting, avoid double
counting (as, for example, in the case of tandem or substitute awards) and make
adjustments if the number of shares of Stock actually delivered differs from the
number of shares previously counted in connection with an Award.
5. ELIGIBILITY; PER-PERSON AWARD LIMITATIONS. Awards may be granted
under the Plan only to Eligible Persons. In each fiscal year during any part of
which the Plan is in effect, an Eligible Person may not be granted Awards
relating to more than 500,000 shares of Stock, subject to adjustment as provided
in Section 10(c), under each of Sections 6(b), 6(c), 6(d), 6(e), 6(f), 6(g),
6(h), 8(b) and 8(c). In addition, the maximum amount that may be earned as an
Annual Incentive Award or other cash Award in any fiscal year by any one
Participant shall be $2,000,000, and the maximum amount that may be earned as a
Performance Award or other cash Award in respect of a performance period by any
one Participant shall be $5,000,000.
6. SPECIFIC TERMS OF AWARDS.
(a) GENERAL. Awards may be granted on the terms and conditions
set forth in this Section 6. In addition, the Committee or the Board may impose
on any Award or the exercise thereof, at the date of grant or thereafter
(subject to Section 10(e)), such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee or the Board
shall determine, including terms requiring forfeiture of Awards in the event of
termination of employment by the Participant and terms permitting a Participant
to make elections relating to his or her Award. The Committee or the Board shall
retain full power and discretion to accelerate, waive or modify, at any time,
any term or condition of an Award that is not mandatory under the Plan. Except
in cases in which the Committee or the Board is authorized to require other
forms of consideration under the Plan, or to the extent other forms of
consideration must be paid to satisfy the requirements of Maryland law, no
consideration other than services may be required for the grant (but not the
exercise) of any Award.
(b) OPTIONS. The Committee and the Board each is authorized to
grant Options to Participants on the following terms and conditions:
(i) EXERCISE PRICE. The exercise price per share of
Stock purchasable under an Option shall be determined by the
Committee or the Board, provided that such exercise price
shall not, in the case of Incentive Stock Options, be less
than 100% of the Fair Market Value of the Stock on the date of
grant of the
6
Option and shall not, in any event, be less than the par value
of a share of Stock on the date of grant of such Option. If an
employee owns or is deemed to own (by reason of the
attribution rules applicable under Section 424(d) of the Code)
more than 10% of the combined voting power of all classes of
stock of the Company or any Parent Corporation or Subsidiary
and an Incentive Stock Option is granted to such employee, the
option price of such Incentive Stock Option (to the extent
required by the Code at the time of grant) shall be no less
than 110% of the Fair Market Value of the Stock on the date
such Incentive Stock Option is granted.
(ii) TIME AND METHOD OF EXERCISE. The Committee or
the Board shall determine the time or times at which or the
circumstances under which an Option may be exercised in whole
or in part (including based on achievement of performance
goals and/or future service requirements), the time or times
at which Options shall cease to be or become exercisable
following termination of employment or upon other conditions,
the methods by which such exercise price may be paid or deemed
to be paid (including in the discretion of the Committee or
the Board a cashless exercise procedure), the form of such
payment, including, without limitation, cash, Stock, other
Awards or awards granted under other plans of the Company or
any subsidiary, or other property (including notes or other
contractual obligations of Participants to make payment on a
deferred basis), and the methods by or forms in which Stock
will be delivered or deemed to be delivered to Participants.
(III) ISOS. The terms of any ISO granted under the
Plan shall comply in all respects with the provisions of
Section 422 of the Code. Anything in the Plan to the contrary
notwithstanding, no term of the Plan relating to ISOs
(including any SAR in tandem therewith) shall be interpreted,
amended or altered, nor shall any discretion or authority
granted under the Plan be exercised, so as to disqualify
either the Plan or any ISO under Section 422 of the Code,
unless the Participant has first requested the change that
will result in such disqualification. Thus, if and to the
extent required to comply with Section 422 of the Code,
Options granted as Incentive Stock Options shall be subject to
the following special terms and conditions:
(A) the Option shall not be exercisable more
than ten years after the date such Incentive Stock Option is
granted; provided, however, that if a Participant owns or is
deemed to own (by reason of the attribution rules of Section
424(d) of the Code) more than 10% of the combined voting power
of all classes of stock of the Company or any Parent
Corporation and the Incentive Stock Option is granted to such
Participant, the term of the Incentive Stock Option shall be
(to the extent required by the Code at the time of the grant)
for no more than five years from the date of grant; and
(B) The aggregate Fair Market Value
(determined as of the date the Incentive Stock Option is
granted) of the shares of stock with respect to which
7
Incentive Stock Options granted under the Plan and all other
option plans of the Company or its Parent Corporation during
any calendar year exercisable for the first time by the
Participant during any calendar year shall not (to the extent
required by the Code at the time of the grant) exceed
$100,000.
(IV) REPURCHASE RIGHTS. The Committee and the Board
shall have the discretion to grant Options which are
exercisable for unvested shares of Common Stock. Should the
Optionee cease to be employed with or perform services to the
Company (or a Parent Corporation or Subsidiary) while holding
such unvested shares, the Company shall have the right to
repurchase, at the exercise price paid per share, any or all
of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure
for exercise and the appropriate vesting schedule for the
purchased shares) shall be established by the Committee or the
Board and set forth in the document evidencing such repurchase
right.
(c) STOCK APPRECIATION RIGHTS. The Committee and the Board
each is authorized to grant SAR's to Participants on the following terms and
conditions:
(i) RIGHT TO PAYMENT. A SAR shall confer on the
Participant to whom it is granted a right to receive, upon
exercise thereof, the excess of (A) the Fair Market Value of
one share of stock on the date of exercise (or, in the case of
a "Limited SAR" that may be exercised only in the event of a
Change in Control, the Fair Market Value determined by
reference to the Change in Control Price, as defined under
Section 9(c) hereof), over (B) the grant price of the SAR as
determined by the Committee or the Board. The grant price of
an SAR shall not be less than the Fair Market Value of a share
of Stock on the date of grant except as provided under Section
7(a) hereof.
(ii) OTHER TERMS. The Committee or the Board shall
determine at the date of grant or thereafter, the time or
times at which and the circumstances under which a SAR may be
exercised in whole or in part (including based on achievement
of performance goals and/or future service requirements), the
time or times at which SARs shall cease to be or become
exercisable following termination of employment or upon other
conditions, the method of exercise, method of settlement, form
of consideration payable in settlement, method by or forms in
which Stock will be delivered or deemed to be delivered to
Participants, whether or not a SAR shall be in tandem or in
combination with any other Award, and any other terms and
conditions of any SAR. Limited SARs that may only be exercised
in connection with a Change in Control or other event as
specified by the Committee or the Board, may be granted on
such terms, not inconsistent with this Section 6(c), as the
Committee or the Board may determine. SARs and Limited SARs
may be either freestanding or in tandem with other Awards.
(d) RESTRICTED STOCK. The Committee and the Board each is
authorized to grant Restricted Stock to Participants on the following terms and
conditions:
8
(i) GRANT AND RESTRICTIONS. Restricted Stock shall be
subject to such restrictions on transferability, risk of
forfeiture and other restrictions, if any, as the Committee or
the Board may impose, which restrictions may lapse separately
or in combination at such times, under such circumstances
(including based on achievement of performance goals and/or
future service requirements), in such installments or
otherwise, as the Committee or the Board may determine at the
date of grant or thereafter. Except to the extent restricted
under the terms of the Plan and any Award agreement relating
to the Restricted Stock, a Participant granted Restricted
Stock shall have all of the rights of a stockholder, including
the right to vote the Restricted Stock and the right to
receive dividends thereon (subject to any mandatory
reinvestment or other requirement imposed by the Committee or
the Board). During the restricted period applicable to the
Restricted Stock, subject to Section 10(b) below, the
Restricted Stock may not be sold, transferred, pledged,
hypothecated, margined or otherwise encumbered by the
Participant.
(ii) FORFEITURE. Except as otherwise determined by
the Committee or the Board at the time of the Award, upon
termination of a Participant's employment during the
applicable restriction period, the Participant's Restricted
Stock that is at that time subject to restrictions shall be
forfeited and reacquired by the Company; provided that the
Committee or the Board may provide, by rule or regulation or
in any Award agreement, or may determine in any individual
case, that restrictions or forfeiture conditions relating to
Restricted Stock shall be waived in whole or in part in the
event of terminations resulting from specified causes, and the
Committee or the Board may in other cases waive in whole or in
part the forfeiture of Restricted Stock.
(iii) CERTIFICATES FOR STOCK. Restricted Stock
granted under the Plan may be evidenced in such manner as the
Committee or the Board shall determine. If certificates
representing Restricted Stock are registered in the name of
the Participant, the Committee or the Board may require that
such certificates bear an appropriate legend referring to the
terms, conditions and restrictions applicable to such
Restricted Stock, that the Company retain physical possession
of the certificates, and that the Participant deliver a stock
power to the Company, endorsed in blank, relating to the
Restricted Stock.
(iv) DIVIDENDS AND SPLITS. As a condition to the
grant of an Award of Restricted Stock, the Committee or the
Board may require that any cash dividends paid on a share of
Restricted Stock be automatically reinvested in additional
shares of Restricted Stock or applied to the purchase of
additional Awards under the Plan. Unless otherwise determined
by the Committee or the Board, Stock distributed in connection
with a Stock split or Stock dividend, and other property
distributed as a dividend, shall be subject to restrictions
and a risk of forfeiture to the same extent as the Restricted
Stock with respect to which such Stock or other property has
been distributed.
9
(v) AUTOMATIC RESTRICTED STOCK GRANTS TO NON-EMPLOYEE
DIRECTORS. Non-Employee Directors shall be eligible to receive
Restricted Stock Awards under this Section 6(d)(v).
(A) INITIAL GRANTS. On the date that an
eligible Non-Employee Director is first elected to the Board,
such Non-Employee Director shall receive 2,000 shares of
Restricted Stock (an "Initial Grant"); PROVIDED that any
Non-Employee Director who is a member of the Board as of the
Effective Date of this Plan shall be entitled to received an
Initial Grant. The Initial Grant shall be subject to the
availability and adjustment of shares of Stock issuable under
the Plan pursuant to Section 4 and shall not be subject to the
discretion of any person or persons.
(B) SERVICE GRANTS. On each January 1 while
the Plan remains in effect, each then Non-Employee Director
shall be granted an additional 2,000 shares of Restricted
Stock (a "Service Grant"), subject to the availability and
adjustment of shares of Stock issuable under the Plan pursuant
to Section 4 and shall not be subject to the discretion of any
person or persons.
(C) TERMS OF INITIAL GRANTS AND SERVICE
GRANTS. Unless otherwise determined by the Committee or in any
Restricted Stock Agreement, each Restricted Stock Award
granted pursuant to this Section 6(d)(v) shall vest in two (2)
equal installments of 1,000 shares of Stock on the first and
second December 31 subsequent to the date on which the shares
of Restricted Stock are granted.
(e) DEFERRED STOCK. The Committee and the Board each is
authorized to grant Deferred Stock to Participants, which are rights to receive
Stock, cash, or a combination thereof at the end of a specified deferral period,
subject to the following terms and conditions:
(i) AWARD AND RESTRICTIONS. Satisfaction of an Award
of Deferred Stock shall occur upon expiration of the deferral
period specified for such Deferred Stock by the Committee or
the Board (or, if permitted by the Committee or the Board, as
elected by the Participant). In addition, Deferred Stock shall
be subject to such restrictions (which may include a risk of
forfeiture) as the Committee or the Board may impose, if any,
which restrictions may lapse at the expiration of the deferral
period or at earlier specified times (including based on
achievement of performance goals and/or future service
requirements), separately or in combination, in installments
or otherwise, as the Committee or the Board may determine.
Deferred Stock may be satisfied by delivery of Stock, cash
equal to the Fair Market Value of the specified number of
shares of Stock covered by the Deferred Stock, or a
combination thereof, as determined by the Committee or the
Board at the date of grant or thereafter. Prior to
satisfaction of an Award of Deferred Stock, an Award of
Deferred Stock carries no voting or dividend or other rights
associated with share ownership.
10
(ii) FORFEITURE. Except as otherwise determined by
the Committee or the Board, upon termination of a
Participant's employment during the applicable deferral period
thereof to which forfeiture conditions apply (as provided in
the Award agreement evidencing the Deferred Stock), the
Participant's Deferred Stock that is at that time subject to
deferral (other than a deferral at the election of the
Participant) shall be forfeited; provided that the Committee
or the Board may provide, by rule or regulation or in any
Award agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Deferred
Stock shall be waived in whole or in part in the event of
terminations resulting from specified causes, and the
Committee or the Board may in other cases waive in whole or in
part the forfeiture of Deferred Stock.
(iii) DIVIDEND EQUIVALENTS. Unless otherwise
determined by the Committee or the Board at date of grant,
Dividend Equivalents on the specified number of shares of
Stock covered by an Award of Deferred Stock shall be either
(A) paid with respect to such Deferred Stock at the dividend
payment date in cash or in shares of unrestricted Stock having
a Fair Market Value equal to the amount of such dividends, or
(B) deferred with respect to such Deferred Stock and the
amount or value thereof automatically deemed reinvested in
additional Deferred Stock, other Awards or other investment
vehicles, as the Committee or the Board shall determine or
permit the Participant to elect.
(f) BONUS STOCK AND AWARDS IN LIEU OF OBLIGATIONS. The
Committee and the Board each is authorized to grant Stock as a bonus, or to
grant Stock or other Awards in lieu of Company obligations to pay cash or
deliver other property under the Plan or under other plans or compensatory
arrangements, provided that, in the case of Participants subject to Section 16
of the Exchange Act, the amount of such grants remains within the discretion of
the Committee to the extent necessary to ensure that acquisitions of Stock or
other Awards are exempt from liability under Section 16(b) of the Exchange Act.
Stock or Awards granted hereunder shall be subject to such other terms as shall
be determined by the Committee or the Board.
(g) DIVIDEND EQUIVALENTS. The Committee and the Board each is
authorized to grant Dividend Equivalents to a Participant entitling the
Participant to receive cash, Stock, other Awards, or other property equal in
value to dividends paid with respect to a specified number of shares of Stock,
or other periodic payments. Dividend Equivalents may be awarded on a
free-standing basis or in connection with another Award. The Committee or the
Board may provide that Dividend Equivalents shall be paid or distributed when
accrued or shall be deemed to have been reinvested in additional Stock, Awards,
or other investment vehicles, and subject to such restrictions on
transferability and risks of forfeiture, as the Committee or the Board may
specify.
(h) OTHER STOCK-BASED AWARDS. The Committee and the Board each
is authorized, subject to limitations under applicable law, to grant to
Participants such other Awards that may be denominated or payable in, valued in
whole or in part by reference to, or otherwise based on, or related to, Stock,
as deemed by the Committee or the Board to be consistent with the purposes of
the Plan, including, without limitation, convertible or exchangeable debt
securities, other rights convertible or exchangeable into Stock, purchase rights
11
for Stock, Awards with value and payment contingent upon performance of the
Company or any other factors designated by the Committee or the Board, and
Awards valued by reference to the book value of Stock or the value of securities
of or the performance of specified subsidiaries or business units. The Committee
or the Board shall determine the terms and conditions of such Awards. Stock
delivered pursuant to an Award in the nature of a purchase right granted under
this Section 6(h) shall be purchased for such consideration (including without
limitation loans from the Company or a Parent Corporation or a Subsidiary), paid
for at such times, by such methods, and in such forms, including, without
limitation, cash, Stock, other Awards or other property, as the Committee or the
Board shall determine. The Committee and the Board shall have the discretion to
grant such other Awards which are exercisable for unvested shares of Common
Stock. Should the Optionee cease to be employed with or perform services to the
Company (or a Parent Corporation or Subsidiary) while holding such unvested
shares, the Company shall have the right to repurchase, at the exercise price
paid per share, any or all of those unvested shares. The terms upon which such
repurchase right shall be exercisable (including the period and procedure for
exercise and the appropriate vesting schedule for the purchased shares) shall be
established by the Committee or the Board and set forth in the document
evidencing such repurchase right. Cash awards, as an element of or supplement to
any other Award under the Plan, may also be granted pursuant to this Section
6(h).
7. CERTAIN PROVISIONS APPLICABLE TO AWARDS.
(a) STAND-ALONE, ADDITIONAL, TANDEM, AND SUBSTITUTE AWARDS.
Awards granted under the Plan may, in the discretion of the Committee or the
Board, be granted either alone or in addition to, in tandem with, or in
substitution or exchange for, any other Award or any award granted under another
plan of the Company, any subsidiary, or any business entity to be acquired by
the Company or a subsidiary, or any other right of a Participant to receive
payment from the Company or any subsidiary. Such additional, tandem, and
substitute or exchange Awards may be granted at any time. If an Award is granted
in substitution or exchange for another Award or award, the Committee or the
Board shall require the surrender of such other Award or award in consideration
for the grant of the new Award. In addition, Awards may be granted in lieu of
cash compensation, including in lieu of cash amounts payable under other plans
of the Company or any subsidiary, in which the value of Stock subject to the
Award is equivalent in value to the cash compensation (for example, Deferred
Stock or Restricted Stock), or in which the exercise price, grant price or
purchase price of the Award in the nature of a right that may be exercised is
equal to the Fair Market Value of the underlying Stock minus the value of the
cash compensation surrendered (for example, Options granted with an exercise
price "discounted" by the amount of the cash compensation surrendered).
(b) TERM OF AWARDS. The term of each Award shall be for such
period as may be determined by the Committee or the Board; provided that in no
event shall the term of any Option or SAR exceed a period of ten years (or such
shorter term as may be required in respect of an ISO under Section 422 of the
Code).
(c) FORM AND TIMING OF PAYMENT UNDER AWARDS; DEFERRALS.
Subject to the terms of the Plan and any applicable Award agreement, payments to
be made by the Company or a subsidiary upon the exercise of an Option or other
Award or settlement of an Award may be
12
made in such forms as the Committee or the Board shall determine, including,
without limitation, cash, other Awards or other property, and may be made in a
single payment or transfer, in installments, or on a deferred basis. The
settlement of any Award may be accelerated, and cash paid in lieu of Stock in
connection with such settlement, in the discretion of the Committee or the Board
or upon occurrence of one or more specified events (in addition to a Change in
Control). Installment or deferred payments may be required by the Committee or
the Board (subject to Section 10(e) of the Plan) or permitted at the election of
the Participant on terms and conditions established by the Committee or the
Board. Payments may include, without limitation, provisions for the payment or
crediting of a reasonable interest rate on installment or deferred payments or
the grant or crediting of Dividend Equivalents or other amounts in respect of
installment or deferred payments denominated in Stock.
(d) EXEMPTIONS FROM SECTION 16(B) LIABILITY. If and to the
extent that the Company is or becomes a Publicly Held Corporation, it is the
intent of the Company that this Plan comply in all respects with applicable
provisions of Rule 16b-3 or Rule 16a-1(c)(3) to the extent necessary to ensure
that neither the grant of any Awards to nor other transaction by a Participant
who is subject to Section 16 of the Exchange Act is subject to liability under
Section 16(b) thereof (except for transactions acknowledged in writing to be
non-exempt by such Participant). Accordingly, if any provision of this Plan or
any Award agreement does not comply with the requirements of Rule 16b-3 or Rule
16a-1(c)(3) as then applicable to any such transaction, such provision will be
construed or deemed amended to the extent necessary to conform to the applicable
requirements of Rule 16b-3 or Rule 16a-1(c)(3) so that such Participant shall
avoid liability under Section 16(b). In addition, the purchase price of any
Award conferring a right to purchase Stock shall be not less than any specified
percentage of the Fair Market Value of Stock at the date of grant of the Award
then required in order to comply with Rule 16b-3.
8. PERFORMANCE AND ANNUAL INCENTIVE AWARDS.
(a) PERFORMANCE CONDITIONS. The right of a Participant to
exercise or receive a grant or settlement of any Award, and the timing thereof,
may be subject to such performance conditions as may be specified by the
Committee or the Board. The Committee or the Board may use such business
criteria and other measures of performance as it may deem appropriate in
establishing any performance conditions, and may exercise its discretion to
reduce the amounts payable under any Award subject to performance conditions,
except as limited under Sections 8(b) and 8(c) hereof in the case of a
Performance Award or Annual Incentive Award intended to qualify under Code
Section 162(m). At such times as the Company is a Publicly Held Corporation, if
and to the extent required under Code Section 162(m), any power or authority
relating to a Performance Award or Annual Incentive Award intended to qualify
under Code Section 162(m), shall be exercised by the Committee and not the
Board.
(b) PERFORMANCE AWARDS GRANTED TO DESIGNATED COVERED
EMPLOYEES. If and to the extent that the Committee determines that a Performance
Award to be granted to an Eligible Person who is designated by the Committee as
likely to be a Covered Employee should qualify as "performance-based
compensation" for purposes of Code Section 162(m), the grant,
13
exercise and/or settlement of such Performance Award shall be contingent upon
achievement of preestablished performance goals and other terms set forth in
this Section 8(b).
(i) PERFORMANCE GOALS GENERALLY. The performance
goals for such Performance Awards shall consist of one or more
business criteria and a targeted level or levels of
performance with respect to each of such criteria, as
specified by the Committee consistent with this Section 8(b).
Performance goals shall be objective and shall otherwise meet
the requirements of Code Section 162(m) and regulations
thereunder including the requirement that the level or levels
of performance targeted by the Committee result in the
achievement of performance goals being "substantially
uncertain." The Committee may determine that such Performance
Awards shall be granted, exercised and/or settled upon
achievement of any one performance goal or that two or more of
the performance goals must be achieved as a condition to
grant, exercise and/or settlement of such Performance Awards.
Performance goals may differ for Performance Awards granted to
any one Participant or to different Participants.
(ii) BUSINESS CRITERIA. The following business
criterion for the Company, on a consolidated basis, and/or
specified subsidiaries or business units of the Company
(except with respect to the total stockholder return and
earnings per share criteria), shall be used exclusively by the
Committee in establishing performance goals for such
Performance Awards: percentage growth in per share funds from
operations of the Company as compared to the per share funds
from operations percentage growth of a peer group of industry
competitors selected by the Compensation Committee. The
foregoing business criterion shall also be exclusively used in
establishing performance goals for Annual Incentive Awards
granted to a Covered Employee under Section 8(c) hereof that
are intended to qualify as "performanced-based compensation"
under Code Section 162(m).
(iii) PERFORMANCE PERIOD; TIMING FOR ESTABLISHING
PERFORMANCE GOALS. Achievement of performance goals in respect
of such Performance Awards shall be measured over a
performance period of up to ten years, as specified by the
Committee. Performance goals shall be established not later
than 90 days after the beginning of any performance period
applicable to such Performance Awards, or at such other date
as may be required or permitted for "performance-based
compensation" under Code Section 162(m).
(iv) PERFORMANCE AWARD POOL. The Committee may
establish a Performance Award pool, which shall be an unfunded
pool, for purposes of measuring Company performance in
connection with Performance Awards. The amount of such
Performance Award pool shall be based upon the achievement of
a performance goal or goals based on one or more of the
business criteria set forth in Section 8(b)(ii) hereof during
the given performance period, as specified by the Committee in
accordance with Section 8(b)(iii) hereof. The Committee may
specify the amount of the Performance Award pool as a
percentage of any of such business criteria, a percentage
thereof in excess of a threshold amount, or as
14
another amount which need not bear a strictly mathematical
relationship to such business criteria.
(v) SETTLEMENT OF PERFORMANCE AWARDS; OTHER TERMS.
Settlement of such Performance Awards shall be in cash, Stock,
other Awards or other property, in the discretion of the
Committee. The Committee may, in its discretion, reduce the
amount of a settlement otherwise to be made in connection with
such Performance Awards. The Committee shall specify the
circumstances in which such Performance Awards shall be paid
or forfeited in the event of termination of employment by the
Participant prior to the end of a performance period or
settlement of Performance Awards.
(c) ANNUAL INCENTIVE AWARDS GRANTED TO DESIGNATED COVERED
EMPLOYEES. The Committee may, within its discretion, grant one or more Annual
Incentive Awards to any Eligible Person, subject to the terms and conditions set
forth in this Section 8(c).
(i) ANNUAL INCENTIVE AWARD POOL. The Committee may
establish an Annual Incentive Award pool, which shall be an
unfunded pool, for purposes of measuring Company performance
in connection with Annual Incentive Awards. In the case of
Annual Incentive Awards intended to qualify as
"performance-based compensation" for purposes of Code Section
162(m), the amount of such Annual Incentive Award pool shall
be based upon the achievement of a performance goal or goals
based on one or more of the business criteria set forth in
Section 8(b)(ii) hereof during the given performance period,
as specified by the Committee in accordance with Section
8(b)(iii) hereof. The Committee may specify the amount of the
Annual Incentive Award pool as a percentage of any such
business criteria, a percentage thereof in excess of a
threshold amount, or as another amount which need not bear a
strictly mathematical relationship to such business criteria.
(ii) POTENTIAL ANNUAL INCENTIVE AWARDS. Not later
than the end of the 90th day of each fiscal year, or at such
other date as may be required or permitted in the case of
Awards intended to be "performance-based compensation" under
Code Section 162(m), the Committee shall determine the
Eligible Persons who will potentially receive Annual Incentive
Awards, and the amounts potentially payable thereunder, for
that fiscal year, either out of an Annual Incentive Award pool
established by such date under Section 8(c)(i) hereof or as
individual Annual Incentive Awards. In the case of individual
Annual Incentive Awards intended to qualify under Code Section
162(m), the amount potentially payable shall be based upon the
achievement of a performance goal or goals based on one or
more of the business criteria set forth in Section 8(b)(ii)
hereof in the given performance year, as specified by the
Committee; in other cases, such amount shall be based on such
criteria as shall be established by the Committee. In all
cases, the maximum Annual Incentive Award of any Participant
shall be subject to the limitation set forth in Section 5
hereof.
15
(iii) PAYOUT OF ANNUAL INCENTIVE AWARDS. After the
end of each fiscal year, the Committee shall determine the
amount, if any, of (A) the Annual Incentive Award pool, and
the maximum amount of potential Annual Incentive Award payable
to each Participant in the Annual Incentive Award pool, or (B)
the amount of potential Annual Incentive Award otherwise
payable to each Participant. The Committee may, in its
discretion, determine that the amount payable to any
Participant as an Annual Incentive Award shall be reduced from
the amount of his or her potential Annual Incentive Award,
including a determination to make no Award whatsoever. The
Committee shall specify the circumstances in which an Annual
Incentive Award shall be paid or forfeited in the event of
termination of employment by the Participant prior to the end
of a fiscal year or settlement of such Annual Incentive Award.
(d) WRITTEN DETERMINATIONS. All determinations by the
Committee as to the establishment of performance goals, the amount of any
Performance Award pool or potential individual Performance Awards and as to the
achievement of performance goals relating to Performance Awards under Section
8(b), and the amount of any Annual Incentive Award pool or potential individual
Annual Incentive Awards and the amount of final Annual Incentive Awards under
Section 8(c), shall be made in writing in the case of any Award intended to
qualify under Code Section 162(m). The Committee may not delegate any
responsibility relating to such Performance Awards or Annual Incentive Awards if
and to the extent required to comply with Code Section 162(m).
(e) STATUS OF SECTION 8(B) AND SECTION 8(C) AWARDS UNDER CODE
SECTION 162(M). It is the intent of the Company that Performance Awards and
Annual Incentive Awards under Section 8(b) and 8(c) hereof granted to persons
who are designated by the Committee as likely to be Covered Employees within the
meaning of Code Section 162(m) and regulations thereunder shall, if so
designated by the Committee, constitute "qualified performance-based
compensation" within the meaning of Code Section 162(m) and regulations
thereunder. Accordingly, the terms of Sections 8(b), (c), (d) and (e), including
the definitions of Covered Employee and other terms used therein, shall be
interpreted in a manner consistent with Code Section 162(m) and regulations
thereunder. The foregoing notwithstanding, because the Committee cannot
determine with certainty whether a given Participant will be a Covered Employee
with respect to a fiscal year that has not yet been completed, the term Covered
Employee as used herein shall mean only a person designated by the Committee, at
the time of grant of Performance Awards or an Annual Incentive Award, as likely
to be a Covered Employee with respect to that fiscal year. If any provision of
the Plan or any agreement relating to such Performance Awards or Annual
Incentive Awards does not comply or is inconsistent with the requirements of
Code Section 162(m) or regulations thereunder, such provision shall be construed
or deemed amended to the extent necessary to conform to such requirements.
9. CHANGE IN CONTROL.
(a) EFFECT OF "CHANGE IN CONTROL." If and to the extent
provided in the Award, in the event of a "Change in Control," as defined in
Section 9(b):
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(i) The Committee may, within its discretion,
accelerate the vesting and exercisability of any Award
carrying a right to exercise that was not previously vested
and exercisable as of the time of the Change in Control,
subject to applicable restrictions set forth in Section 10(a)
hereof;
(ii) The Committee may, within its discretion,
accelerate the exercisability of any limited SARs (and other
SARs if so provided by their terms) and provide for the
settlement of such SARs for amounts, in cash, determined by
reference to the Change in Control Price;
(iii) The Committee may, within its discretion, lapse
the restrictions, deferral of settlement, and forfeiture
conditions applicable to any other Award granted under the
Plan and such Awards may be deemed fully vested as of the time
of the Change in Control, except to the extent of any waiver
by the Participant and subject to applicable restrictions set
forth in Section 10(a) hereof; and
(iv) With respect to any such outstanding Award
subject to achievement of performance goals and conditions
under the Plan, the Committee may, within its discretion, deem
such performance goals and other conditions as having been met
as of the date of the Change in Control.
(b) DEFINITION OF "CHANGE IN CONTROL. A "Change in Control"
shall be deemed to have occurred upon:
(i) Approval by the stockholders of the Company of
(x) a reorganization, merger, consolidation or other form of
corporate transaction or series of transactions, in each case,
with respect to which persons who were the stockholders of the
Company immediately prior to such reorganization, merger or
consolidation or other transaction do not, immediately
thereafter, own more than 26% of the combined voting power
entitled to vote generally in the election of directors of the
reorganized, merged or consolidated company's then outstanding
voting securities, in substantially the same proportions as
their ownership immediately prior to such reorganization,
merger, consolidation or other transaction, or (y) a
liquidation or dissolution of the Company or (z) the sale of
all or substantially all of the assets of the Company (unless
such reorganization, merger, consolidation or other corporate
transaction, liquidation, dissolution or sale is subsequently
abandoned);
(ii) Individuals who, as of the Effective Date,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board,
provided (i) that any person becoming a director subsequent to
the Effective Date whose election, or nomination for election
by the Company's stockholders, was approved by a vote of at
least a majority of the directors then comprising the
Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection
with an actual or
17
threatened election contest relating to the election of the
Directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Securities
Exchange Act) or (ii) any individual appointed to the Board by
the Incumbent Board shall be, for purposes of this Agreement,
considered as though such person were a member of the
Incumbent Board; or
(iii) the acquisition (other than from the Company)
by any person, entity or "group", within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act,
of more than 35% of either the then outstanding shares of the
Company's Common Stock or the combined voting power of the
Company's then outstanding voting securities entitled to vote
generally in the election of directors (hereinafter referred
to as the ownership of a "Controlling Interest") excluding,
for this purpose, any acquisitions by (1) the Company or its
Subsidiaries, or (2) any person, entity or "group" that as of
the Effective Date owns beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Securities
Exchange Act) of a Controlling Interest or any affiliate of
such person, entity or "group."
(c) DEFINITION OF "CHANGE IN CONTROL PRICE." The "Change in
Control Price" means an amount in cash equal to the higher of (i) the amount of
cash and fair market value of property that is the highest price per share paid
(including extraordinary dividends) in any Corporate Transaction triggering the
Change in Control under Section 9(b)(i) hereof or any liquidation of shares
following a sale of substantially all of the assets of the Company, or (ii) the
highest Fair Market Value per share at any time during the 60-day period
preceding and the 60-day period following the Change in Control.
10. GENERAL PROVISIONS.
(a) COMPLIANCE WITH LEGAL AND OTHER REQUIREMENTS. The Company
may, to the extent deemed necessary or advisable by the Committee or the Board,
postpone the issuance or delivery of Stock or payment of other benefits under
any Award until completion of such registration or qualification of such Stock
or other required action under any federal or state law, rule or regulation,
listing or other required action with respect to any stock exchange or automated
quotation system upon which the Stock or other Company securities are listed or
quoted, or compliance with any other obligation of the Company, as the Committee
or the Board, may consider appropriate, and may require any Participant to make
such representations, furnish such information and comply with or be subject to
such other conditions as it may consider appropriate in connection with the
issuance or delivery of Stock or payment of other benefits in compliance with
applicable laws, rules, and regulations, listing requirements, or other
obligations. The foregoing notwithstanding, in connection with a Change in
Control, the Company shall take or cause to be taken no action, and shall
undertake or permit to arise no legal or contractual obligation, that results or
would result in any postponement of the issuance or delivery of Stock or payment
of benefits under any Award or the imposition of any other conditions on such
issuance, delivery or payment, to the extent that such postponement or other
condition would represent a greater burden on a Participant than existed on the
90th day preceding the Change in Control.
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(b) LIMITS ON TRANSFERABILITY; BENEFICIARIES. No Award or
other right or interest of a Participant under the Plan, including any Award or
right which constitutes a derivative security as generally defined in Rule
16a-1(c) under the Exchange Act, shall be pledged, hypothecated or otherwise
encumbered or subject to any lien, obligation or liability of such Participant
to any party (other than the Company or a Subsidiary), or assigned or
transferred by such Participant otherwise than by will or the laws of descent
and distribution or to a Beneficiary upon the death of a Participant, and such
Awards or rights that may be exercisable shall be exercised during the lifetime
of the Participant only by the Participant or his or her guardian or legal
representative, except that Awards and other rights (other than ISOs and SARs in
tandem therewith) may be transferred to one or more Beneficiaries or other
transferees during the lifetime of the Participant, and may be exercised by such
transferees in accordance with the terms of such Award, but only if and to the
extent such transfers and exercises are permitted by the Committee or the Board
pursuant to the express terms of an Award agreement (subject to any terms and
conditions which the Committee or the Board may impose thereon, and further
subject to any prohibitions or restrictions on such transfers pursuant to Rule
16b-3). A Beneficiary, transferee, or other person claiming any rights under the
Plan from or through any Participant shall be subject to all terms and
conditions of the Plan and any Award agreement applicable to such Participant,
except as otherwise determined by the Committee or the Board, and to any
additional terms and conditions deemed necessary or appropriate by the Committee
or the Board.
(c) ADJUSTMENTS. In the event that any dividend or other
distribution (whether in the form of cash, Stock, or other property),
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange, liquidation,
dissolution or other similar corporate transaction or event affects the Stock
such that a substitution or adjustment is determined by the Committee or the
Board to be appropriate in order to prevent dilution or enlargement of the
rights of Participants under the Plan, then the Committee or the Board shall, in
such manner as it may deem equitable, substitute or adjust any or all of (i) the
number and kind of shares of Stock which may be delivered in connection with
Awards granted thereafter, (ii) the number and kind of shares of Stock by which
annual per-person Award limitations are measured under Section 5 hereof, (iii)
the number and kind of shares of Stock subject to or deliverable in respect of
outstanding Awards and (iv) the exercise price, grant price or purchase price
relating to any Award and/or make provision for payment of cash or other
property in respect of any outstanding Award. In addition, the Committee (and
the Board if and only to the extent such authority is not required to be
exercised by the Committee to comply with Code Section 162(m)) is authorized to
make adjustments in the terms and conditions of, and the criteria included in,
Awards (including Performance Awards and performance goals, and Annual Incentive
Awards and any Annual Incentive Award pool or performance goals relating
thereto) in recognition of unusual or nonrecurring events (including, without
limitation, events described in the preceding sentence, as well as acquisitions
and dispositions of businesses and assets) affecting the Company, any Subsidiary
or any business unit, or the financial statements of the Company or any
Subsidiary, or in response to changes in applicable laws, regulations,
accounting principles, tax rates and regulations or business conditions or in
view of the Committee's assessment of the business strategy of the Company, any
Subsidiary or business unit thereof, performance of comparable organizations,
economic and business conditions, personal performance of a Participant, and any
other circumstances deemed relevant; provided that no such adjustment shall be
authorized or made if and to the extent that
19
such authority or the making of such adjustment would cause Options, SARs,
Performance Awards granted under Section 8(b) hereof or Annual Incentive Awards
granted under Section 8(c) hereof to Participants designated by the Committee as
Covered Employees and intended to qualify as "performance-based compensation"
under Code Section 162(m) and the regulations thereunder to otherwise fail to
qualify as "performance-based compensation" under Code Section 162(m) and
regulations thereunder.
(d) TAXES. The Company and any Subsidiary is authorized to
withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Stock, or any payroll or other payment to
a Participant, amounts of withholding and other taxes due or potentially payable
in connection with any transaction involving an Award, and to take such other
action as the Committee or the Board may deem advisable to enable the Company
and Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Participant's tax obligations,
either on a mandatory or elective basis in the discretion of the Committee.
(e) CHANGES TO THE PLAN AND AWARDS. The Board may amend,
alter, suspend, discontinue or terminate the Plan, or the Committee's authority
to grant Awards under the Plan, without the consent of stockholders or
Participants, except that any amendment or alteration to the Plan shall be
subject to the approval of the Company's stockholders not later than the annual
meeting next following such Board action if such stockholder approval is
required by any federal or state law or regulation (including, without
limitation, Rule 16b-3 or Code Section 162(m)) or the rules of any stock
exchange or automated quotation system on which the Stock may then be listed or
quoted, and the Board may otherwise, in its discretion, determine to submit
other such changes to the Plan to stockholders for approval; provided that,
without the consent of an affected Participant, no such Board action may
materially and adversely affect the rights of such Participant under any
previously granted and outstanding Award. The Committee or the Board may waive
any conditions or rights under, or amend, alter, suspend, discontinue or
terminate any Award theretofore granted and any Award agreement relating
thereto, except as otherwise provided in the Plan; provided that, without the
consent of an affected Participant, no such Committee or the Board action may
materially and adversely affect the rights of such Participant under such Award.
Notwithstanding anything in the Plan to the contrary, if any right under this
Plan would cause a transaction to be ineligible for pooling of interest
accounting that would, but for the right hereunder, be eligible for such
accounting treatment, the Committee or the Board may modify or adjust the right
so that pooling of interest accounting shall be available, including the
substitution of Stock having a Fair Market Value equal to the cash otherwise
payable hereunder for the right which caused the transaction to be ineligible
for pooling of interest accounting.
(f) LIMITATION ON RIGHTS CONFERRED UNDER PLAN. Neither the
Plan nor any action taken hereunder shall be construed as (i) giving any
Eligible Person or Participant the right to continue as an Eligible Person or
Participant or in the employ of the Company or a Subsidiary; (ii) interfering in
any way with the right of the Company or a Subsidiary to terminate any Eligible
Person's or Participant's employment at any time, (iii) giving an Eligible
Person or
20
Participant any claim to be granted any Award under the Plan or to be treated
uniformly with other Participants and employees, or (iv) conferring on a
Participant any of the rights of a stockholder of the Company unless and until
the Participant is duly issued or transferred shares of Stock in accordance with
the terms of an Award.
(g) UNFUNDED STATUS OF AWARDS; CREATION OF TRUSTS. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant or
obligation to deliver Stock pursuant to an Award, nothing contained in the Plan
or any Award shall give any such Participant any rights that are greater than
those of a general creditor of the Company; provided that the Committee may
authorize the creation of trusts and deposit therein cash, Stock, other Awards
or other property, or make other arrangements to meet the Company's obligations
under the Plan. Such trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan unless the Committee otherwise determines with the
consent of each affected Participant. The trustee of such trusts may be
authorized to dispose of trust assets and reinvest the proceeds in alternative
investments, subject to such terms and conditions as the Committee or the Board
may specify and in accordance with applicable law.
(h) NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the
Plan by the Board nor its submission to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board or a committee thereof to adopt such other incentive arrangements as it
may deem desirable including incentive arrangements and awards which do not
qualify under Code Section 162(m).
(i) PAYMENTS IN THE EVENT OF FORFEITURES; FRACTIONAL SHARES.
Unless otherwise determined by the Committee or the Board, in the event of a
forfeiture of an Award with respect to which a Participant paid cash or other
consideration, the Participant shall be repaid the amount of such cash or other
consideration. No fractional shares of Stock shall be issued or delivered
pursuant to the Plan or any Award. The Committee or the Board shall determine
whether cash, other Awards or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.
(j) GOVERNING LAW. The validity, construction and effect of
the Plan, any rules and regulations under the Plan, and any Award agreement
shall be determined in accordance with the laws of the State of Maryland without
giving effect to principles of conflicts of laws, and applicable federal law.
(k) PLAN EFFECTIVE DATE AND STOCKHOLDER APPROVAL; TERMINATION
OF PLAN. The Plan shall become effective on the Effective Date, subject to
subsequent approval within 12 months of its adoption by the Board by
stockholders of the Company eligible to vote in the election of directors, by a
vote sufficient to meet the requirements of Code Sections 162(m) (if applicable)
and 422, Rule 16b-3 under the Exchange Act (if applicable), applicable New York
Stock Exchange requirements, and other laws, regulations, and obligations of the
Company applicable to the Plan. Awards may be granted subject to stockholder
approval, but may not be exercised or otherwise settled in the event stockholder
approval is not obtained. The Plan shall
21
terminate at such time as no shares of Common Stock remain available for
issuance under the Plan and the Company has no further rights or obligations
with respect to outstanding Awards under the Plan.
22