<PAGE>
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 (As Permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
TRAMMELL CROW COMPANY
- - --------------------------------------------------------------------------------
(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 ActRules 14a-6(i)(4)
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 Statement No.:
-----------------------------------------------------------------------
3) Filing party:
-----------------------------------------------------------------------
4) Date Filed:
-----------------------------------------------------------------------
<PAGE>
TRAMMELL CROW COMPANY
2001 ROSS AVENUE, SUITE 3400
DALLAS, TEXAS 75201
April 20, 1999
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Trammell Crow Company to be held on May 18, 1999, at 1:30 p.m., local time, at
the Dallas Museum of Art, 1717 Harwood Street, Dallas, Texas 75201. Please find
enclosed a notice to stockholders, a Proxy Statement describing the business to
be transacted at the meeting, a form of proxy for use in voting at the meeting
and an Annual Report for Trammell Crow Company.
At the Annual Meeting, you will be asked (i) to elect three directors of the
Company; (ii) to approve an amendment to the Company's Long-Term Incentive Plan
that (a) increases by 3,300,000 the number of shares of Common Stock that may be
subject to outstanding awards under the Long-Term Incentive Plan, (b) provides
that either the granting or vesting of awards under the Long-Term Incentive Plan
may be subject to certain performance standards in order that such awards may
continue to be fully deductible by the Company for federal income tax purposes,
and (c) revises the definition of Performance Period (as defined in the
Long-Term Incentive Plan) over which the Company's performance may be measured
for purposes of determining the payment value of a Performance Unit (as defined
in the Long-Term Incentive Plan); (iii) to ratify the selection of Ernst & Young
LLP as the independent accountants for the Company for the fiscal year ending
December 31, 1999; and (iv) to act upon such other business as may properly come
before the Annual Meeting or any adjournment thereof.
We hope that you will be able to attend the Annual Meeting, and we urge you
to read the enclosed Proxy Statement before you decide to vote. Even if you do
not plan to attend, please complete, sign, date and return the enclosed Proxy as
promptly as possible. It is important that your shares be represented at the
meeting.
Very truly yours,
George L. Lippe
PRESIDENT AND CHIEF EXECUTIVE OFFICER
YOUR VOTE IS IMPORTANT
All stockholders are cordially invited to attend the Annual Meeting in person.
However, to ensure your representation at the meeting, you are urged to
complete, sign, date and return the enclosed Proxy as promptly as possible in
the enclosed postage paid envelope. Returning your Proxy will help the Company
assure that a quorum will be present at the meeting and avoid the additional
expense of duplicate proxy solicitations. Any stockholder attending the
meeting may vote in person even if he or she has returned the Proxy.
<PAGE>
TRAMMELL CROW COMPANY
2001 ROSS AVENUE, SUITE 3400
DALLAS, TEXAS 75201
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 18, 1999
------------------------
PLEASE TAKE NOTICE THAT the 1999 Annual Meeting of Stockholders (the "Annual
Meeting") of Trammell Crow Company, a Delaware corporation (the "Company"), will
be held on May 18, 1999, at 1:30 p.m., local time, at the Dallas Museum of Art,
1717 Harwood Street, Dallas, Texas 75201, to consider and vote on the following
matters:
(1) Election of three directors of the Company to serve until the Annual
Meeting of the Company's stockholders in 2002 and until their respective
successors are elected and qualified or until their earlier death,
resignation or removal from office.
(2) Approval of an amendment to the Company's Long-Term Incentive Plan that
(a) increases by 3,300,000 the number of shares of Common Stock that may
be subject to outstanding awards under the Long-Term Incentive Plan, (b)
provides that either the granting or vesting of awards under the
Long-Term Incentive Plan may be subject to certain performance standards
in order that such awards may continue to be fully deductible by the
Company for federal income tax purposes, and (c) revises the definition
of Performance Period (as defined in the Long-Term Incentive Plan) over
which the Company's performance may be measured for purposes of
determining the payment value of a Performance Unit (as defined in the
Long-Term Incentive Plan).
(3) Ratification of the selection of Ernst & Young LLP as independent
accountants of the Company for the fiscal year ending December 31, 1999.
(4) Such other business as may properly come before the Annual Meeting or
any postponement or adjournment thereof.
The close of business on April 12, 1999, has been fixed as the record date
for the determination of stockholders entitled to receive notice of, and to vote
at, the Annual Meeting and any adjournment or postponement thereof. Only holders
of record of the Company's common stock, par value $0.01 per share, at the close
of business on the record date are entitled to notice of, and to vote at, the
Annual Meeting. A list of stockholders entitled to vote at the Annual Meeting
will be available for inspection by any stockholder for any purpose germane to
the Annual Meeting during ordinary business hours for the ten days preceding the
Annual Meeting at the Company's offices at the address on this notice and at the
Annual Meeting.
Whether or not you plan to attend the Annual Meeting, please complete, sign,
date and return the enclosed Proxy as promptly as possible. You may revoke your
Proxy at any time before the shares to which it relates are voted at the Annual
Meeting.
By Order of the Board of Directors,
Derek R. McClain
SECRETARY
Dallas, Texas
<PAGE>
TRAMMELL CROW COMPANY
2001 ROSS AVENUE, SUITE 3400
DALLAS, TEXAS 75201
(214) 863-3000
------------------------
PROXY STATEMENT
---------------------
SOLICITATION AND REVOCABILITY OF PROXIES
The Board of Directors of Trammell Crow Company requests your Proxy for use
at the Annual Meeting of Stockholders to be held on May 18, 1999, at 1:30 p.m.,
local time, at the Dallas Museum of Art, 1717 Harwood Street, Dallas, Texas
75201, and at any adjournment or postponement thereof. By signing and returning
the enclosed Proxy, you authorize the persons named on the Proxy to represent
you and to vote your shares at the Annual Meeting. This Proxy Statement and the
Form of Proxy were first mailed to stockholders of the Company on or about April
20, 1999.
This solicitation of proxies is made by the Board of Directors of the
Company and will be conducted primarily by mail. Officers, directors and
employees of the Company may solicit proxies personally or by telephone,
telegram or other forms of wire or facsimile communication. The Company may also
request banking institutions, brokerage firms, custodians, nominees and
fiduciaries to forward solicitation material to the beneficial owners of Common
Stock that those companies hold of record. The costs of the solicitation,
including reimbursement of such forwarding expenses, will be paid by the
Company.
If you attend the Annual Meeting, you may vote in person. If you are not
present at the Annual Meeting, your shares can be voted only if you have
returned a properly signed Proxy or are represented by another Proxy. You may
revoke the enclosed Proxy at any time before it is exercised at the Annual
Meeting by (a) signing and submitting a later-dated Proxy to the Secretary of
the Company, (b) delivering written notice of revocation of the Proxy to the
Secretary of the Company, or (c) voting in person at the Annual Meeting. In the
absence of such revocation, shares represented by the persons named on the
Proxies will be voted at the Annual Meeting.
VOTING AND QUORUM
The only outstanding voting securities of the Company are its shares of
common stock, par value $.01 per share ("Common Stock"). On April 12, 1999, the
record date for the Annual Meeting, there were 35,037,249 shares of Common Stock
outstanding and entitled to be voted at the Annual Meeting.
Each outstanding share of Common Stock is entitled to one vote. The
presence, in person or by proxy, of a majority of the shares of Common Stock
issued and outstanding and entitled to vote as of the record date shall
constitute a quorum at the Annual Meeting. The chairman of the meeting or the
holders of a majority of the Common Stock entitled to vote who are present or
represented by proxy at the Annual Meeting have the power to adjourn the Annual
Meeting from time to time without notice, other than an announcement at the
Annual Meeting of the time and place of the holding of the adjourned meeting,
until a quorum is present. At any such adjourned meeting at which a quorum is
present, any business may be transacted that may have been transacted at the
Annual Meeting had a quorum originally been present; provided, that if the
adjournment is for more than 30 days or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each stockholder of record entitled to vote at the adjourned
meeting. Proxies solicited by this Proxy Statement may be used to vote in favor
of any motion to adjourn the Annual Meeting. The persons named on the Proxies
intend to vote in favor of any motion to adjourn the Annual Meeting to a
subsequent day if, prior to the Annual
1
<PAGE>
Meeting, such persons have not received sufficient proxies to approve the
proposals described in this Proxy Statement. If such a motion is approved but
sufficient proxies are not received by the time set for the resumption of the
Annual Meeting, this process will be repeated until sufficient proxies to vote
in favor of the proposals to be presented to the stockholders at the Annual
Meeting have been received or it appears that sufficient proxies will not be
received. Abstentions and broker non-votes will count in determining if a quorum
is present at the Annual Meeting. A broker non-vote occurs if a broker or other
nominee does not have discretionary authority and has not received voting
instructions with respect to a particular item.
PROPOSAL ONE--ELECTION OF CLASS II DIRECTORS
The Board of Directors has designated Messrs. James R. Erwin, Harlan R. Crow
and Jeffrey M. Heller as nominees for election as Class II directors of the
Company at the Annual Meeting (each, a "Nominee"). Mr. Erwin currently serves as
a Class III director. If elected a Class II director, James R. Erwin will
immediately resign as a Class III director of the Company. James D. Carreker
currently serves as a Class II director of the Company. Mr. Carreker will not
stand for re-election as a director of the Company at the Annual Meeting. If
elected, each Nominee will serve until the expiration of his term at the Annual
Meeting of the Company's Stockholders in 2002 and until his successor is elected
and qualified or until his earlier death, resignation or removal from office.
For information about each Nominee, see "Directors."
The Board of Directors has no reason to believe that any of the Nominees
will be unable or unwilling to serve if elected. If a Nominee becomes unable or
unwilling to serve, your Proxy will be voted for the election of a substitute
nominee recommended by the current Board of Directors, or the number of the
Company's directors will be reduced.
REQUIRED VOTE AND RECOMMENDATION
The election of directors requires the affirmative vote of a plurality of
the shares of Common Stock present or represented by proxy and entitled to vote
at the Annual Meeting. Accordingly, under Delaware law and the Company's
Certificate of Incorporation and Bylaws, abstentions and broker non-votes will
not have any effect on the election of a particular director. Unless otherwise
instructed or unless authority to vote is withheld, the enclosed Proxy will be
voted for the election of each of the Nominees.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ELECTION OF EACH OF THE NOMINEES.
PROPOSAL TWO--AMENDMENT TO LONG-TERM INCENTIVE PLAN
GENERAL
A summary description of the Trammell Crow Company Long-Term Incentive Plan
(the "Long-Term Incentive Plan"), as proposed to be modified by the amendment
described below, is set forth in Appendix A. Currently, the maximum number of
shares of Common Stock that may be subject to outstanding awards under the
Long-Term Incentive Plan ("Plan Shares") is 5,334,878. As of March 31, 1999,
27,497 shares had been issued, 1,740,772 shares were available for future awards
and 3,566,609 shares were the subject of outstanding awards under the Long-Term
Incentive Plan. The 3,566,609 shares subject to outstanding awards under the
Long-Term Incentive Plan as of March 31, 1999, represent an aggregate of 92,680
shares of restricted stock and 3,473,929 shares that underlie outstanding
options. The exercise prices for such stock options range from $17.50 to $36.00.
DESCRIPTION OF THE PROPOSED AMENDMENT
The Board of Directors has determined that, in order to give the Company the
ability to continue to attract and retain the executive and key employee talent
necessary for the Company's continued growth
2
<PAGE>
and success, the number of Plan Shares should be increased by 3,300,000, and is
proposing an amendment to the Long-Term Incentive Plan to effect such increase.
The Board of Directors has further determined that the Long-Term Incentive
Plan should be amended to establish that the Compensation Committee (defined
below) may require the satisfaction of certain performance standards before
awards under the Long-Term Incentive Plan are either granted or before such
awards vest, and to provide a maximum amount of compensation that individuals
may receive with respect to such awards in a given year. If the amendment to the
Long-Term Incentive Plan is approved at the Annual Meeting, the performance
standards implemented by the Compensation Committee with respect to certain
awards under the Long-Term Incentive Plan will be based on one or more of the
following business criteria for the Company, on a consolidated basis, and/or for
specific subsidiaries, business or geographical units or customer groups of the
Company (except with respect to the total shareholder return and earnings per
share criteria): (i) earnings per share; (ii) revenue targets; (iii) cash flow
targets; (iv) cash flow return targets; (v) return on net assets, return on
assets, return on investment, return on capital, return on equity; (vi) an
economic value added formula; (vii) operating margin or contribution margin;
(viii) net income; pretax earnings; pretax earnings before interest,
depreciation and amortization; pretax operating earnings after interest expense
and before incentives, service fees, and extraordinary or special items;
operating income; pretax earnings before interest depreciation and/or
amortization; (ix) total shareholder return; (x) debt reduction; and (xi) any of
the above goals determined on an absolute or relative basis or as compared to
the performance of a published or special index deemed applicable by the
Compensation Committee including, but not limited to, the Standard & Poor's 500
Stock Index or a group of competitor companies, including the group selected by
the Company for purposes of the stock performance graph contained in this Proxy
Statement. Moreover, the Board of Directors has further determined that the
Long-Term Incentive Plan should be amended to provide that any performance
awards granted to any employee in any year in the form of stock options, stock
appreciation rights or restricted stock awards may not exceed 500,000 shares in
the aggregate, nor may any such performance awards result in more than
$5,000,000 of compensation for an employee in a given year if such awards are
granted as performance units.
In addition, the Board of Directors has determined that the eligibility
provisions already contained in the Long-Term Incentive Plan should be restated
in the proposed amendment, without modification. Specifically, the eligibility
provisions should continue to provide that individuals eligible to participate
in the Long-Term Incentive Plan include (1) employees of the Company, (2)
non-employee directors of the Company, and (3) any other person that the
Compensation Committee designates as eligible for an award (other than for
incentive stock options) because the person performs bona fide consulting or
advisory services for the Company or any of its subsidiaries (other than
services in connection with the offer or sale of securities in a capital-raising
transaction).
Finally, the Board of Directors has determined that the Long-Term Incentive
Plan should be revised such that awards granted in the form of performance units
may be subject to payment upon the satisfaction of performance goals during a
performance period of less than one fiscal year in duration. The Long-Term
Incentive Plan currently bases the payment of performance units on the
satisfaction of performance goals during a performance period of at least one
fiscal year in duration.
REASON FOR THE PROPOSED AMENDMENT
If the proposed amendment is approved, the 3,300,000 additional Plan Shares
will be immediately available for future awards and the maximum number of Plan
Shares will increase from 5,334,878 to 8,634,878. While the Board of Directors
is cognizant of the potential dilutive effect of compensatory stock awards, it
also recognizes the significant motivational and performance benefits that are
achieved from making such awards. In determining the number of additional Plan
Shares that should be authorized, the Compensation Committee examined the
potential dilutive effect of the additional Plan Shares and the potential
dilutive effect of management compensation plans at other companies.
3
<PAGE>
The full value of awards under the Long-Term Incentive Plan as it is
currently in effect is fully deductible by the Company for federal income tax
purposes. However, an increase in the maximum number of shares of Common Stock
that may be subject to outstanding awards under the Long-Term Incentive Plan
will potentially restrict the deductibility of awards made under the Long-Term
Incentive Plan unless the granting or vesting of awards provided under the
Long-Term Incentive Plan is subject to certain performance standards, and unless
the maximum amount of compensation that individuals may receive with respect to
such awards is limited. If the proposed amendment is approved, performance
standards for awards may be implemented and limitations on the maximum
compensation that individuals may receive with respect to such awards may be
imposed such that all awards under the Long-Term Incentive Plan may continue to
be fully deductible for federal income tax purposes.
The portion of the amendment restating the eligibility provisions without
modification has also been proposed in an effort to satisfy another requirement
for deductible compensation. Specifically, the group of individuals eligible to
receive awards under a plan designed to award fully deductible performance based
compensation must be approved by the shareholders of the Company.
Finally, the portion of the amendment that revises the duration of the
performance period for a performance unit has been proposed in order to assure
that performance units may be granted under terms that would result in
deductible compensation for federal income tax purposes. Specifically, in order
to comply with the requirements for deductible compensation, the performance
criteria for certain awards must be established no later than 90 days after the
start of the performance period to which the award relates or, if earlier, the
passage of 25% of the performance period. The proposed amendment will enable the
Compensation Committee to establish appropriate performance periods to assure
that the performance criteria for certain awards, including those to be granted
with respect to the 1999 performance period, are established in a timely manner.
VOTE NECESSARY TO APPROVE PROPOSAL
Approval of the proposed amendment to the Long-Term Incentive Plan requires
the affirmative vote of a majority of the shares of Common Stock present, in
person or by proxy, and entitled to vote at the Annual Meeting. Under Delaware
law and the Company's Certificate of Incorporation and Bylaws, an abstention
will have the same legal effect as a vote against the ratification of the
proposed amendment to the Long-Term Incentive Plan, and each broker non-vote
will reduce the absolute number, but not the percentage, of affirmative votes
necessary for approval of the amendment. Unless otherwise instructed on the
Proxy or unless authority to vote is withheld, the enclosed Proxy will be voted
for the approval of the proposed amendment to the Long-Term Incentive Plan.
If the proposed amendment to the Long-Term Incentive Plan is not approved by
stockholders at the Annual Meeting, Covered Employees (as defined in Appendix A
hereto) will not receive additional awards under the Long-Term Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE APPROVAL
OF THE PROPOSED AMENDMENT TO THE LONG-TERM INCENTIVE PLAN. BECAUSE THE PROPOSED
AMENDMENT TO THE LONG-TERM INCENTIVE PLAN WILL INCREASE THE NUMBER OF AWARDS
THAT MAY BE GRANTED TO ALL EXECUTIVE OFFICERS AND DIRECTORS, EACH OF THE
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY HAS AN INTEREST IN, AND MAY
BENEFIT FROM, THE ADOPTION OF THE PROPOSED AMENDMENT TO THE LONG-TERM INCENTIVE
PLAN.
PROPOSAL THREE--SELECTION OF INDEPENDENT ACCOUNTANTS
On March 30, 1999, the Board of Directors ratified the selection of Ernst &
Young LLP ("Ernst & Young") as the Company's independent accountants for the
fiscal year ending December 31, 1999. The Company expects that representatives
of Ernst & Young will be present at the Annual Meeting to respond to appropriate
questions and will have an opportunity to make a statement if they desire to do
so.
4
<PAGE>
If the appointment of Ernst & Young as the Company's independent accountants
is not ratified at the Annual Meeting, the Board of Directors will consider the
appointment of other independent accountants. The Board of Directors may
terminate the appointment of Ernst & Young as independent accountants without
the approval of the Company's stockholders whenever the Board of Directors deems
termination necessary or appropriate.
REQUIRED VOTE AND RECOMMENDATION
Ratification of Ernst & Young as the Company's independent accountants for
the fiscal year ending December 31, 1999, requires the affirmative vote of a
majority of the shares of Common Stock present, in person or by proxy, and
entitled to vote at the Annual Meeting. Under Delaware law and the Company's
Certificate of Incorporation and Bylaws, an abstention will have the same legal
effect as a vote against the ratification of Ernst & Young, and each broker
non-vote will reduce the absolute number, but not the percentage, of affirmative
votes necessary for approval of the ratification. Unless otherwise instructed on
the Proxy or unless authority to vote is withheld, the enclosed Proxy will be
voted for the ratification of Ernst & Young as the Company's independent
accountants.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1999.
DIRECTORS
The following tables set forth certain information regarding the Nominees
and the other Directors of the Company:
<TABLE>
<CAPTION>
DIRECTOR'S
NAME OF NOMINEE AGE TITLE TERM ENDING
- - -------------------------------------------------------------- --- ---------- ------------
<S> <C> <C> <C>
Harlan R. Crow................................................ 49 Director 1999
James R. Erwin................................................ 54 Director 2000
Jeffrey M. Heller............................................. 59 Director 1999
</TABLE>
HARLAN R. CROW has been a director of the Company since 1991. Mr. Crow is
the Chief Executive Officer of Trammell Crow Interests Company, d/b/a Crow
Family Holdings, a private investment company managing investments in a variety
of real estate-related and other businesses, a position he has held since 1986.
Mr. Crow currently serves as a Director of Patriot American Hospitality, Inc. In
any given year within the past five years, Mr. Crow has indirectly owned
interests in over 1,000 partnerships (or affiliates of partnerships) or
corporations. In the past five years, Mr. Crow was a general partner in 1, and
an officer or director in 56, partnerships or corporations, or affiliates of
such partnerships or corporations, that filed for protection under federal
bankruptcy laws. In addition, in the past five years, Mr. Crow was an executive
officer or director in 15 partnerships or corporations, or affiliates of such
partnerships or corporations, that were placed in receivership. Pursuant to a
Stockholders Agreement to which the Company is a party, Crow Family Partnership,
L.P. has been granted the right to nominate a member of the Board of Directors,
and certain executive officers of the Company have agreed to vote their shares
of Common Stock in favor of such nominee. Mr. Crow is the initial such nominee.
See "Certain Relationships and Related Transactions--Stockholders' Agreement."
JAMES R. ERWIN has been a director of the Company since December 1997. Mr.
Erwin has served as Vice Chairman--Texas and Senior Client Executive--Southwest
of BankAmerica Corporation since October 1998, was Vice Chairman for Texas and
Corporate Finance Executive--West of NationsBank Corp. from January 1994 to
October 1998, and was Executive Vice President, Manager of Operations and
Technology for NationsBank Corp. from October 1991 to January 1994. Mr. Erwin
currently serves as a
5
<PAGE>
Class III director of the Company. If elected a Class II director of the Company
at the Annual Meeting, Mr. Erwin will immediately resign as a Class III director
of the Company.
JEFFREY M. HELLER has been a director of the Company since December 1997.
Mr. Heller has served as President and Chief Operating Officer of Electronic
Data Systems Corporation ("EDS") since June 1996. From 1987 to June 1996, Mr.
Heller served as Senior Vice President of EDS with responsibilities for
Technical Operations and Asia-Pacific. Mr. Heller is a member of the Board of
Directors of Mutual of Omaha Insurance Company.
<TABLE>
<CAPTION>
DIRECTOR'S
NAME OF DIRECTOR AGE TITLE TERM ENDING
- - ------------------------------------------ --- ------------------------------------------------- ------------
<S> <C> <C> <C>
James D. Carreker......................... 51 Director 1999
William F. Concannon...................... 43 President and Chief Executive Officer of Trammell 2000
Crow Corporate Services, Inc. and Director
Henry J. Faison........................... 64 Executive Vice President and Director 2000
George L. Lippe........................... 44 Chief Executive Officer, President and Director 2001
Rowland T. Moriarty....................... 52 Director 2001
Robert E. Sulentic........................ 42 Executive Vice President, Chief Financial Officer 2001
and Director
J. McDonald Williams...................... 57 Chairman of the Board of Directors 2000
</TABLE>
JAMES D. CARREKER has been a director of the Company since December 1997.
Mr. Carreker has served as Chairman of the Board and Chief Executive Officer of
Wyndham International, Inc. and a director of Patriot American Hospitality, Inc.
since January 1998. Mr. Carreker assumed these positions in connection with the
merger with and into Patriot American Hospitality, Inc. of Wyndham Hotel
Corporation, for which he has served as President and Chief Executive Officer
since May 1988. As of March 1999, Mr. Carreker also assumed the position of
Chief Executive Officer of Patriot American Hospitality, Inc. He also served as
Chief Executive Officer of the Company from August 1994 to December 1995. Mr.
Carreker currently serves as a Class II director of the Company. Mr. Carreker
will not stand for re-election as a director of the Company at the Annual
Meeting.
WILLIAM F. CONCANNON has been a director of the Company since 1991 and has
served as the President and Chief Executive Officer of Trammell Crow Corporate
Services since July 1991. Mr. Concannon joined the Company as Vice President of
National Marketing in 1986 and in 1990 became Director and Partner in charge of
Trammell Crow Corporate Services.
HENRY J. FAISON has served as Executive Vice President and a director of the
Company since July 1998. From 1994 to 1998, Mr. Faison served as Chairman of
Faison Enterprises Inc. ("Faison Enterprises"). From 1988 to 1994, he served as
the Chief Executive Officer of Faison Enterprises.
GEORGE L. LIPPE has been a director of the Company since August 1997 and has
served as the Company's President and Chief Executive Officer since January
1996. From 1995 to 1996, Mr. Lippe served as the Company's Executive Vice
President of Operations. From 1990 to date, Mr. Lippe has served as President
and Chief Executive Officer of the Company's Midwest Region. Mr. Lippe has
served in various other capacities with the Company since 1978.
ROWLAND T. MORIARTY has been a director of the Company since December 1997.
Mr. Moriarty has served as Chairman and Chief Executive Officer of Cubex
Corporation, a consulting firm, since 1992. From 1981 to 1992, Mr. Moriarty
served as a professor at the Harvard Business School. Mr. Moriarty is a
6
<PAGE>
member of the Board of Directors of Staples Inc., an office supply retailer, and
Charles River Associates, an economic research firm based in Boston.
ROBERT E. SULENTIC has served as the Company's Executive Vice President and
Chief Financial Officer since September 1998 and has been a director of the
Company since December 1997. Mr. Sulentic served as the Company's Executive Vice
President and National Director of Development and Investment from December 1997
through August 1998. Mr. Sulentic has served as President of Trammell Crow NE,
Inc., since 1995 and has served as Chairman of the Company's Development
Committee since 1994. From 1991 to 1994, Mr. Sulentic served as Managing
Director in charge of Trammell Crow Company's Philadelphia Division. From 1987
to 1990, Mr. Sulentic served as the Partner in charge of the Company's New
Jersey Division. Mr. Sulentic served in Houston as a Marketing Director for the
Company in 1986 and 1987 and as a Leasing Agent in 1984 and 1985.
J. MCDONALD WILLIAMS has been the Chairman of the Board of Directors of the
Company since August 1994. Mr. Williams served as President and Chief Executive
Officer of the Company from 1991 to 1994. From 1977 to 1991, Mr. Williams served
as Managing Partner of the Company and from 1973 to 1977 Mr. Williams was
Managing Partner, International Projects for the Company. Mr. Williams is a
member of the Board of Directors of A.H. Belo Corporation and Blanks Color
Imaging, Inc. In any given year within the past five years, Mr. Williams has
indirectly owned interests in over 1,000 partnerships (or affiliates of
partnerships) or corporations. In the past five years, Mr. Williams was a
general partner in 54, and an officer or director in 16, partnerships or
corporations, or affiliates of such partnerships or corporations, that filed for
protection under federal bankruptcy laws. In addition, in the past five years,
Mr. Williams was a general partner in 14 partnerships or corporations, or
affiliates of such partnerships or corporations, that were placed in
receivership.
DIRECTOR COMPENSATION
The Company's employee directors do not receive compensation solely in their
capacity as directors of the Company. The Company's non-employee directors are
paid a retainer of $30,000 for their service on the Board of Directors. In
addition to the retainer, non-employee directors are eligible to receive annual
stock option grants under the Long-Term Incentive Plan. As of March 31, 1999,
each of the non-employee directors had received 8,619 stock option grants under
the Long-Term Incentive Plan. See "Executive Compensation--Long-Term Incentive
Plan." In addition, all directors are reimbursed for out-of-pocket expenses
incurred in connection with their attendance at Board of Directors and committee
meetings.
TERM OF OFFICE
The Company's Certificate of Incorporation provides that the Board of
Directors shall be divided into three classes, designated Class I, Class II and
Class III. Directors serve for staggered terms of three years each. Messrs.
Lippe, Moriarty and Sulentic currently serve as Class I directors, whose terms
expire at the Annual Meeting of Stockholders in 2001. Messrs. Carreker, Crow and
Heller currently serve as Class II directors whose terms expire at the Annual
Meeting, and Messrs. Williams, Erwin, Concannon and Faison currently serve as
Class III directors whose terms expire at the Company's Annual Meeting of
Stockholders in 2000. Mr. Carreker will not stand for re-election as a director
of the Company at the Annual Meeting. If elected a Class II director, Mr. Erwin
will immediately resign as a Class III director.
MEETINGS AND COMMITTEES OF DIRECTORS
The Company's Board of Directors had six meetings during the Company's
fiscal year ended December 31, 1998. The Board of Directors has four standing
committees: the Executive Committee, the Audit Committee, the Compensation
Committee, and the Governance Committee.
The Executive Committee may, to the maximum extent permitted by the Delaware
General Corporation Law, have and exercise all of the powers and authorities of
the Board in the management of the
7
<PAGE>
business and affairs of the Company; provided, however, that the Executive
Committee does not have the power or authority to amend the certificate of
incorporation of the Company, adopt an agreement of merger or consolidation,
recommend to the stockholders the sale, lease or exchange of all or
substantially all of the Company's property and assets, recommend to the
stockholders a dissolution of the Company or a revocation of a dissolution of
the Company, or amend, alter or repeal the bylaws or adopt new bylaws for the
Company, declare a dividend or authorize the issuance of stock. The current
members of the Executive Committee are Messrs. Williams, Lippe and Erwin.
Messrs. Williams, Lippe and Erwin will continue to serve on the Executive
Committee following the Annual Meeting. Messrs. Williams' and Lippe's terms on
the Board do not expire until the Company's Annual Meeting of Stockholders in
2000 and 2001, respectively. If elected a Class II director, Mr. Erwin's term on
the Board will expire at the Company's Annual Meeting of Stockholders in 2002.
If not elected a Class II director, Mr. Erwin's term on the Board will expire at
the Company's Annual Meeting of Stockholders in 2000. Mr. Williams will serve as
Chairman of the Executive Committee for the Company's fiscal year ending
December 31, 1999. The Executive Committee did not have any meetings during the
Company's fiscal year ended December 31, 1998.
The Audit Committee was established in December, 1997. The Audit Committee
reviews the results and scope of the annual audit and other services provided by
the Company's independent accountants. In addition, the Audit Committee reviews
certain related party transactions. The current members of the Audit Committee
are Messrs. Erwin, Heller and Moriarty. If elected a Class II director, Mr.
Heller will continue to serve as a member of the Audit Committee along with
Messrs. Erwin and Moriarty. Mr. Moriarty's term on the Board does not expire
until the Company's Annual Meeting of Stockholders in 2001. If elected a Class
II director, Mr. Erwin's term on the Board will expire at the Company's Annual
Meeting of Stockholders in 2002. If not elected a Class II director, Mr. Erwin's
term on the Board will expire at the Company's Annual Meeting of Stockholders in
2000. If elected a Class II director, Mr. Heller will serve as Chairman of the
Audit Committee for the Company's fiscal year ending December 31, 1999. The
Audit Committee had one meeting during the Company's fiscal year ended December
31, 1998.
The Compensation Committee reviews and approves the salaries and other
compensation that the Company pays its executive officers, and the Compensation
Committee administers the Company's Long-Term Incentive Plan. See "Executive
Compensation--Long-Term Incentive Plan." The current members of the Compensation
Committee are Messrs. Erwin, Heller and Moriarty. If elected a Class II
director, Mr. Heller will continue to serve as a member of the Compensation
Committee along with Messrs. Erwin and Moriarty. Mr. Moriarty's term on the
Board does not expire until the Company's Annual Meeting of Stockholders in
2001. If elected a Class II director, Mr. Erwin's term on the Board will expire
at the Company's Annual Meeting of Stockholders in 2002. If not elected a Class
II director, Mr. Erwin's term on the Board will expire at the Annual Meeting of
Stockholders in 2000. Mr. Erwin will serve as Chairman of the Compensation
Committee for the Company's fiscal year ending December 31, 1999. The
Compensation Committee had two meetings during the Company's fiscal year ended
December 31, 1998.
The Governance Committee was established in March of 1999. The Governance
Committee is charged with assessing director performance, recruiting new
directors, evaluating Board processes, staffing and rotation of Board committees
and studying management succession issues. The initial members of the Governance
Committee are Messrs. Williams, Lippe, Moriarty and, if elected a Class II
director, Mr. Crow. Messrs. Williams', Lippe's and Moriarty's terms on the Board
do not expire until the Company's Annual Meeting of Stockholders in 2000, 2001
and 2001, respectively. Mr. Moriarty will serve as Chairman of the Governance
Committee for the Company's fiscal year ending December 31, 1999.
8
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth information regarding the Executive Officers
of the Company and certain of its subsidiaries:
<TABLE>
<CAPTION>
NAME AGE TITLE
- - ------------------------------------------ --- ---------------------------------------------------------------
<S> <C> <C>
H. Pryor Blackwell........................ 38 Executive Vice President and Chief Operating Officer
William F. Concannon...................... 43 President and Chief Executive Officer of Trammell Crow
Corporate Services, Inc. and Director
Henry J. Faison........................... 64 Executive Vice President and Director
George L. Lippe........................... 44 Chief Executive Officer, President and Director
William C. Maddux......................... 44 Executive Vice President and President of Brokerage Operations
Asuka Nakahara............................ 43 Executive Vice President and Chief Knowledge Officer
Phillip Norwood........................... 51 Vice Chairman
William Rothacker......................... 48 President and Chief Executive Officer of Trammell Crow Retail
Services, Inc.
Robert E. Sulentic........................ 42 Executive Vice President, Chief Financial Officer and Director
</TABLE>
The Executive Officers named above were elected by the Board of Directors of
the Company, or, in the case of Messrs. Concannon and Rothacker, the Boards of
Directors of Trammell Crow Corporate Services, Inc. and Trammell Crow Retail
Services, Inc., respectively, to serve in such capacities until the next annual
meeting of such Boards of Directors, or until their respective successors have
been duly elected and have been qualified, or until their earlier death,
resignation or removal from office. Biographical information on Messrs.
Concannon, Faison, Lippe and Sulentic is set forth previously in this Proxy
Statement.
H. PRYOR BLACKWELL has served as Executive Vice President and Chief
Operating Officer of the Company since September 1998. Mr. Blackwell served as
Executive Vice President and Chief Operating Officer of the Company's Western
Operations from August 1997 through August 1998 and served as President and
Chief Executive Officer of TCDFW, Inc. from 1993 until September 1998. Mr.
Blackwell served on the Board of Directors of the Company from 1993 until 1997,
and as a member of the Board of Directors served on the Company's Investment
Committee and Audit Committee. From 1991 to 1993, Mr. Blackwell served as
President and Chief Executive Officer of Trammell Crow Central Office Group,
Inc. From 1987 to 1990, Mr. Blackwell served as the Partner in charge of the
Company's Downtown (Dallas) Office Division. Mr. Blackwell served the Company as
Marketing Principal from 1986 to 1987 and Leasing Agent from 1984 to 1986.
WILLIAM C. MADDUX has served the Company as Executive Vice President and
President of Brokerage Operations since September 1998. Mr. Maddux served as
Executive Vice President and Chief Operating Officer of the Company's Eastern
Operations from August 1997 through August 1998. Since 1992, Mr. Maddux has
served as the Executive Vice President of Trammell Crow MW, Inc., and has had
responsibility for overseeing the Company's operations in Illinois, Indiana,
Michigan and Wisconsin. Mr. Maddux served the Company in various other
capacities from 1985 to 1992, including as Partner in charge of the Company's
Carolina division from 1988 to 1992, Marketing Principal in charge of the
Company's Oklahoma City operations from 1987 to 1988 and Leasing Agent in the
Company's Oklahoma City office from 1985 to 1987.
9
<PAGE>
ASUKA NAKAHARA has served the Company as Executive Vice President and Chief
Knowledge Officer since September 1998. Mr. Nakahara served as Executive Vice
President and Chief Financial Officer of the Company from January 1996 through
August 1998. During 1995, Mr. Nakahara served as the Company's Executive Vice
President in charge of National Programs. Mr. Nakahara served as President and
Chief Executive Officer of Trammell Crow Northeast, Inc. from 1991 to 1995 and
as the Northeast Regional Partner for the Company from 1987 to 1991. Mr.
Nakahara served the Company in various other capacities from 1980 to 1987,
including as the Operating Partner in charge of the Company's Philadelphia
division from 1985 to 1987, Finance Associate and Partner in Houston from 1983
to 1984, and Leasing Agent in Houston from 1980 to 1983.
PHILIP W. NORWOOD has served as Vice Chairman of the Company since July
1998. From 1994 until July 1998, Mr. Norwood served as the President and Chief
Executive Officer of Faison Enterprises. From 1980 until 1993, Mr. Norwood held
various positions with affiliates of the Company, including chairman of Trammell
Crow Realty Advisors in 1993 and its president and Chief Executive Officer in
1992 and 1993.
WILLIAM ROTHACKER has been President and Chief Executive Officer of Trammell
Crow Retail Services since its formation in December 1996. Since 1994, Mr.
Rothacker has been President of Trammell Crow Denver and has had responsibility
for overseeing the Company's operations in New Mexico and Arizona. Mr. Rothacker
has served as Chairman of the Company's Retail Committee since 1994. Mr.
Rothacker served as Managing Director in charge of the Company's Denver
operations from 1991 to 1994. From 1987 to 1991, Mr. Rothacker served as Partner
in charge of the Denver Division. Mr. Rothacker served as Partner in charge of
the Denver Retail division from 1983 to 1986 and as Leasing Agent in Denver from
1980 to 1983.
10
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information for the fiscal years
ended December 31, 1996, 1997 and 1998, concerning the cash and non-cash
compensation earned by, or awarded to, the Chief Executive Officer of the
Company and each of the other six most highly compensated executive officers of
the Company whose aggregate remuneration for services rendered to the Company
during the year ended December 31, 1998 exceeded $100,000 (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------
AWARDS
-----------------
SHARES OF
ANNUAL COMPENSATION COMMON STOCK PAYOUTS
UNDERLYING ------------
NAME AND ------------------------ OPTIONS GRANTED LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) IN FISCAL YEAR PAYOUTS($)(1) COMPENSATION($)(2)
- - -------------------------------- --------- ----------- ----------- ----------------- ------------ -------------------
<S> <C> <C> <C> <C> <C> <C>
George L. Lippe................. 1998 363,462 700,000 -- 653,044 (653,044)
President and Chief Executive 1997 350,000 175,000 58,529 1,510,838 (112,810)
Officer, Trammell Crow Company 1996 350,000 175,000 -- 1,323,669 99,036
Asuka Nakahara.................. 1998 246,154 403,125 -- 914,140 (914,140)
Executive Vice President and 1997 250,000 125,000 58,529 637,778 930,647
Chief Knowledge Officer, 1996 250,000 125,000 -- 742,580 (11,787)
Trammell Crow Company
H. Pryor Blackwell.............. 1998 242,308 370,833 -- 368,700 (368,700)
Executive Vice President and 1997 210,000 180,000 58,529 749,043 8,627
Chief Operating Officer, 1996 210,000 99,750 -- 924,553 (182,503)
Trammell Crow Company
Robert E. Sulentic.............. 1998 242,308 370,833 -- 686,151 (686,151)
Executive Vice President and 1997 210,000 230,000 58,529 673,722 806,152
Chief Financial Officer, 1996 210,000 124,750 -- 435,825 (106,789)
Trammell Crow Company
William F. Concannon............ 1998 233,654 337,500 -- 2,868 (2,868)
President and Chief Executive 1997 210,000 180,000 88,342 1,007,526 (354,607)
Officer of Trammell Crow 1996 210,000 105,000 -- 673,597 42,224
Corporate Services, Inc.
William C. Maddux............... 1998 233,654 337,500 -- 272,309 (272,309)
Executive Vice President and 1997 200,000 175,000 58,529 293,685 (68,401)
President of Brokerage 1996 200,000 113,000 -- 441,904 (78,682)
Operations, Trammell Crow
Company
William Rothacker............... 1998 233,654 337,500 -- 134,499 (134,499)
President and Chief Executive 1997 190,000 95,000 58,529 705,061 (560,788)
Officer of Trammell Crow 1996 190,000 95,000 -- 409,401 17,134
Retail Services, Inc.
</TABLE>
- - ------------------------------
(1) Reflects distributions made from the 1995 Profit Sharing Plan (as
hereinafter defined) in the year indicated for amounts earned in the year
indicated and prior years.
(2) The amounts shown include the dollar amounts of increases (decreases) to the
Profit Sharing Account (as hereinafter defined) for each of the Named
Executive Officers under the 1995 Profit Sharing Plan for the years
indicated. Payouts of awards under the 1995 Profit Sharing Plan are subject
to certain restrictions.
11
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
No options or stock appreciation rights were granted to the Named Executive
Officers during the fiscal year ended December 31, 1998.
The following table sets forth, as of December 31, 1998, the number of
Common Stock options and the value of unexercised options held by the Named
Executive Officers. As of December 31, 1998, no Named Executive Officer had
exercised any options.
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1998 AT DECEMBER 31, 1998($)(1)
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - -------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
George L. Lippe....................... 19,509 39,020 204,845 409,710
Asuka Nakahara........................ 19,509 39,020 204,845 409,710
H. Pryor Blackwell.................... 19,509 39,020 204,845 409,710
Robert E. Sulentic.................... 19,509 39,020 204,845 409,710
William F. Concannon.................. 49,322 39,020 924,845 409,710
William C. Maddux..................... 19,509 39,020 204,845 409,710
William Rothacker..................... 19,509 39,020 204,845 409,710
</TABLE>
- - ------------------------
(1) The price per share of Common Stock for the last trade reported by the New
York Stock Exchange on December 31, 1998 was $28.00.
LONG-TERM INCENTIVE PLAN
The purpose of the Long-Term Incentive Plan is to provide an incentive for
employees, directors and certain consultants and advisors of the Company to
remain in the service of the Company, to extend to those persons the opportunity
to acquire a proprietary interest in the Company so that they will apply their
best efforts for the benefit of the Company and to aid the Company in attracting
able persons to enter the service of the Company. A summary description of the
Long-Term Incentive Plan, as proposed to be modified by the amendment described
in this Proxy Statement, is set forth in Appendix A.
ASSUMED OPTION PLAN
In connection with the Reincorporation Transactions (as hereinafter
defined), the Company agreed to assume the Trammell Crow Company 1997 Stock
Option Plan (the "Assumed Option Plan" or the "1997 Plan"), which had been
adopted by Trammell Crow Company, a Texas close corporation and the Company's
predecessor (the "Predecessor Company"). See "Certain Relationships and Related
Transactions--Reincorporation Transactions."
ADMINISTRATION. As permitted by the terms of the Assumed Option Plan, the
Board of Directors has delegated all of its duties under the Assumed Option Plan
to a committee of officers of the Company.
ELIGIBILITY. Each employee of the Company or a subsidiary of the Company is
eligible to participate in the Assumed Option Plan. Prior to the Consummation of
the Reincorporation Transactions, the Predecessor Company selected the persons
to be granted awards or options pursuant to the Assumed Option Plan (as used for
the Assumed Option Plan, the "Participants").
SHARE AUTHORIZATION. The maximum number of shares of the Predecessor
Company's common stock that could be subject to outstanding awards under the
Assumed Option Plan was 1,626. The Assumed Option Plan provides that this number
of shares and the number of shares subject to an award under the
12
<PAGE>
Assumed Option Plan will be adjusted for stock splits, stock dividends,
recapitalizations, mergers and other changes affecting the capital stock of the
Predecessor Company.
STOCK OPTIONS. Options granted under the Assumed Option Plan are
nonqualified stock options. A stock option entitles the Participant to purchase
shares of Common Stock from the Company at the exercise price. The exercise
price may be paid in cash, with shares of Common Stock or with a combination of
cash and Common Stock. The options will expire within ten years from the date of
grant.
AWARDS. On August 1, 1997, the Predecessor Company granted to certain of
its employees options to acquire an aggregate of 1,626 shares of its common
stock, which constitutes all shares authorized under the Assumed Option Plan. In
connection with the Reincorporation Transactions, the Company assumed the
Predecessor Company's obligations with respect to all such options, and the
Company became obligated to issue up to an aggregate of 2,423,769 shares of
Common Stock at a purchase price of $3.85 per share upon the exercise of such
options. All of such options vested upon the closing of the Company's initial
public offering in November 1997 (the "Initial Public Offering") and became
exercisable 30 days thereafter. As of March 31, 1999, 649,804 shares of Common
Stock had been issued upon the exercise of options pursuant to the Assumed
Option Plan and 1,773,965 shares were the subject of outstanding awards under
the Assumed Option Plan. No additional options will be granted under the Assumed
Option Plan.
PROFIT SHARING PLAN
In connection with the consummation of the Initial Public Offering, the
Company determined to no longer grant any future awards under its 1995 Profit
Sharing Plan (the "Profit Sharing Plan"). Set forth below is a general
discussion of the terms of the Profit Sharing Plan.
The basic accounting units for purposes of the Profit Sharing Plan are
Business Units and Projects. Business Units are designated based upon
recommendations by profit sharing unit leaders to the Chief Executive Officer
and are generally determined by geography or line-of-business. Similarly, a
Project represents a particular real estate project in which the Company owns an
equity interest. A Profit Sharing Unit generally consists of multiple Business
Units and Projects.
A profit sharing account ("Profit Sharing Account") is maintained for each
participant (for the purposes of this section, a "Participant") within a Profit
Sharing Unit. Each Participant's Profit Sharing Account is adjusted to reflect
the operational results of each constituent Business Unit in which the
Participant has been allocated a percentage economic interest (a "Business Unit
Percentage") and each constituent Project in which the Participant has been
allocated a percentage economic interest (a "Project Percentage"). The Profit
Sharing Accounts do not represent any current right to assets of the Company. In
a profitable year, each of a Participant's Profit Sharing Accounts is increased
by a fraction of the Earnings Before Profit Sharing ("EBPS") of the appropriate
Business Units and Projects. In an unprofitable year, the EBPS of a given
Business Unit or Project may be negative, in which case each Participant's
Profit Sharing Account will decrease. In addition, various adjustments to Profit
Sharing Accounts may be made to reflect the profits intended to be shared with
the Participant. Prior to retirement, a Participant may receive distributions
which are deducted from his Profit Sharing Account balances. Distributions will
generally be limited to a portion of the current year's EBPS. Payment of these
distributions may also be limited by liquidity concerns of the Company,
potential negative Profit Sharing Accounts for individuals, and obligations to
pay retired Participants or former stockholders.
DISTRIBUTIONS BEFORE RETIREMENT. Participants have generally received two
kinds of distributions: (i) for each Project, distributions in proportion to
their Project Percentages ("Project Distributions"); and (ii) for each Profit
Sharing Unit, distributions in proportion to their Profit Sharing Account
balances ("Current Distributions"). Current Distributions may not exceed the
available cash of a Profit Sharing Unit after certain priority payments have
been made. Thus, a Participant in a profitable Business Unit may have limited
Current Distributions if current earnings or available cash is reduced by the
results of an
13
<PAGE>
unprofitable Business Unit in the same Profit Sharing Unit. Similarly, Project
Distributions generally may not exceed a set percentage of the current earnings
of the Project. Current Distributions or Project Distributions will be made to a
Participant only to the extent that the Participant's Profit Sharing Account
balance is positive after aggregating all individual Business Units and
Projects. Thus, all distributions made from a positive Profit Sharing Unit will
be offset against any Profit Sharing Unit in which the Participant has a
negative account balance if the Participant does not have a positive net Profit
Sharing Account balance. Finally, both Current Distributions and Project
Distributions may be limited by other factors, including the overall solvency of
the applicable Profit Sharing Unit.
RETIRED PARTICIPANTS. Upon termination of employment, death or disability,
a Participant, subject to certain vesting requirements, is entitled to receive
the amounts, subject to the payment restrictions under the Profit Sharing Plan,
then held in such Participant's Profit Sharing Account, which account is
converted into a retirement account (a "Retirement Account"). If a Retirement
Account is established, following the last day of the profit sharing period in
which a Participant's retirement occurs, the Participant will no longer have any
interest in any Business Unit but will continue to have existing Project
interests. A retired Participant may, subject to limitations, receive two types
of payments from his/her Retirement Account, (i) Basic Distributions and (ii)
Project Distributions, if retired before January 1, 1995. The Profit Sharing
Plan vests over a graduated period such that if a Participant retires before the
fifth anniversary of the December 31st first following the date on which he
first becomes a Participant, his/her Retirement Account and Project Percentage
will be reduced as follows: to 1% if he/she retires before the first
anniversary, to 20% if he/she retires before the second anniversary, to 40% if
he/she retires before the third anniversary, to 60% if he/she retires before the
fourth anniversary; and to 80% if he/she retires before the fifth anniversary.
Retired Participants will receive Basic Distributions equal to (a) the
amount of such Basic Distribution partially accelerated to 10% of such
participant's Retirement Balance as of his/her Retirement Date or (b) the Basic
Distribution otherwise distributable to such participant by reason of a
distribution by the applicable Profit Sharing Unit, whichever is greater,
subject to certain limitations. For participants who retire on or after January
1, 1996 (a "Post '95 Retired Participant"), upon the occurrence of the fifth
anniversary of the Retirement Date, no distributions will be made to other
Participants, except Retired Participants, in that Profit Sharing Unit until
such Retired Participant's Retirement Account is reduced to zero. If more than
one Post '95 Retired Participant has reached the fifth anniversary of his/her
Retirement Date, all such Post '95 Retired Participants will share
proportionately based upon their respective Retirement Account balances. With
respect to any participant who retired prior to January 1, 1996 (a "Pre '96
Retired Participant"), upon the seventh anniversary of his/her Retirement Date,
no Post '95 Retired Participant will receive any Basic Distribution until the
Pre '96 Retired Participant has received his/her balance in full or until the
Post '95 Retired Participant has reached the seventh anniversary of his
Retirement Date (whereupon such Post '95 Retired Participant shall be treated
the same as a Pre '96 Retired Participant), whichever shall first occur.
The accelerated Basic Distributions will be limited to the Available Cash of
the applicable Profit Sharing Unit and other limitations contained in the Profit
Sharing Plan, including a limit on Basic Distributions to Retired Participants
of 24% of Available Cash of the applicable Profit Sharing Unit. In computing
Available Cash, the Chief Executive Officer may, in his sole discretion, adjust
the working capital reserves established by each Profit Sharing Unit in the
manner he deems appropriate.
TERMINATION OF FUTURE AWARDS. The Company will not grant any future awards
under the Profit Sharing Plan. All unpaid deferred and accrued earnings
associated with the Profit Sharing Units and Business Units under the Profit
Sharing Plan will be paid to the current Participants during 1999, and when all
such amounts have been paid, the Company will have no further obligation to
Participants. With respect to Retired Participants, the Company will continue to
make Project Distributions until the completion of the particular Project.
14
<PAGE>
EMPLOYEE STOCK PURCHASE PLAN
On December 22, 1997, the Company's Board of Directors adopted and approved
The Trammell Crow Company Employee Stock Purchase Plan (the "Stock Purchase
Plan"). The Stock Purchase Plan received stockholder approval at the Company's
1998 Annual Meeting of Stockholders. Set forth below is a general discussion of
the terms of the Stock Purchase Plan.
GENERAL. A total of 1,000,000 shares of Common Stock are reserved for
issuance under the Stock Purchase Plan. The purpose of the Stock Purchase Plan
is to provide employees with an opportunity to purchase Common Stock of the
Company through payroll deductions. The Stock Purchase Plan, and the right of
participants to make purchases thereunder, is intended to qualify under the
provisions of Sections 421 and 423 of the Internal Revenue Code of 1986, as
amended (the "Code").
ADMINISTRATION. The Stock Purchase Plan is administered by a committee of
the Company's executive officers (the "Benefits Committee") appointed by the
Company's Board of Directors. All questions of interpretation of the Stock
Purchase Plan will be determined by the Benefits Committee, whose decisions will
be final and binding upon all participants.
ELIGIBILITY. All employees of the Company (or any of its parent or
subsidiary corporations within the meaning of sections 424(e) and (f) of the
Code) who have been continually employed for at least ninety (90) days and who
are customarily employed at least 20 hours per week and at least 5 months per
year shall be eligible to participate in the Stock Purchase Plan, subject to
certain limitations imposed by Section 423(b) of the Code. The ninety day
eligibility requirement may be waived in the discretion of the Benefits
Committee. For the initial option period commencing March 1, 1998, an employee
need not have been employed for ninety (90) days to be eligible to participate,
provided the employee met the other eligibility requirements and was employed by
January 31, 1998. At March 31, 1999, approximately 4,979 employees of the
Company and its subsidiaries were eligible to participate in the Stock Purchase
Plan.
OFFERING DATES. Under the Stock Purchase Plan, the Company offers to all
eligible employees the option to purchase shares of Common Stock. Except as
otherwise determined by the Benefits Committee, these options are granted on the
first day of the first payroll period beginning on or after the first day of
January and July of each subsequent year (each of which dates is herein referred
to as a "date of grant"). The term of each option granted is for a period of
approximately six (6) months, ending on the last day of the last payroll period
ending on or immediately after June 30 or December 31, as the case may be (each
such six (6)-month period is herein referred to as an "option period"), which
will begin on a date of grant.
PURCHASE PRICE. The purchase price per share at which shares of Common
Stock will be sold under the Stock Purchase Plan will be an amount equal to the
lower of 85% of the market value of Common Stock on the date of exercise or the
date of grant. The market value of a share of Common Stock on a given date will
be the closing sales price of the Common Stock on the New York Stock Exchange on
such date.
The purchase price of the shares of Common Stock to be purchased under the
Stock Purchase Plan will be accumulated by payroll deductions during each
offering period. The deductions may not exceed: (i) 10% of the participant's
eligible compensation during the offering period (which is defined in the Stock
Purchase Plan to include all wages, salary, commissions, overtime and bonuses)
from which the deduction is made; or (ii) an amount which will result in
noncompliance with the limitations described below under "Purchase of Stock;
Exercise of Options." Such payroll deductions will be credited to a book entry
account for each participant. An employee may discontinue participation in the
Stock Purchase Plan, but may not otherwise increase or decrease the rate of
payroll deductions at any time during the option period.
PURCHASE OF STOCK; EXERCISE OF OPTIONS. The maximum number of shares placed
under option to a participant in the Stock Purchase Plan in any option period
will be the lesser of 700 or that number determined by dividing the amount of
the participant's total payroll deductions during the option period
15
<PAGE>
(and any carryover amounts from the preceding offering period) by the purchase
price per share under the Stock Purchase Plan. Unless a participant withdraws
from the Stock Purchase Plan, the participant's option for the purchase of
shares will be exercised automatically at the end of each offering period for
the maximum number of whole shares at the applicable price. As soon as
practicable following the end of each offering period, the Company will cause a
certificate to be issued in each participant's name representing the total
number of whole shares of Common Stock acquired by the participant through the
exercise of the option. Any balance remaining in a participant's account
following the exercise of the participant's option in an offering period will be
carried over to the next offering period.
Notwithstanding the foregoing, no Eligible Employee will be permitted to
subscribe for shares of Common Stock under the Stock Purchase Plan if,
immediately after the grant of the option, the employee would own five percent
or more of the voting power or value of all classes of stock of the Company or
its subsidiaries, nor will any Eligible Employee be granted an option which
would permit the employee to buy pursuant to the Stock Purchase Plan more than
$25,000 worth of stock (determined at the fair market value of the shares at the
time the option is granted) in any calendar year.
WITHDRAWAL. Any participant may withdraw in whole from the Stock Purchase
Plan at any time prior to thirty (30) days before the exercise date relating to
a particular option period. Partial withdrawals shall not be permitted. A
participant who wishes to withdraw from the Stock Purchase Plan must timely
deliver to the Company a notice of withdrawal on a form prepared by the Benefits
Committee. The Company, promptly following the time when the notice of
withdrawal is delivered, shall refund to the participant the amount of the cash
balance in his account under the Stock Purchase Plan; and thereupon,
automatically and without any further act on his part, his payroll deduction
authorization and his interest in unexercised options under the Stock Purchase
Plan shall terminate.
CAPITAL CHANGES. Whenever any change is made in the Common Stock, by reason
of a stock dividend or by reason of subdivision, stock split, reverse stock
split, recapitalization, reorganization, combination, reclassification of
shares, or other similar change, appropriate action will be taken by the
Benefits Committee to adjust accordingly the number of shares subject to the
Stock Purchase Plan, the maximum number of shares that may be subject to any
option, and the number and purchase price of shares subject to options
outstanding under the Stock Purchase Plan.
NONASSIGNABILITY. Each option will be assignable or transferable only by
will or by the laws of descent and distribution and will be exercisable during
the optionee's lifetime only by the optionee. The Company shall not recognize
and shall be under no duty to recognize any assignment or purported assignment
by an employee of his option or of any rights under his option, and any such
attempt may be treated by the Company as an election to withdraw from the Stock
Purchase Plan.
AMENDMENT AND TERMINATION OF THE STOCK PURCHASE PLAN. The Board of
Directors, in its discretion, may terminate the Stock Purchase Plan at any time
with respect to any shares for which options have not theretofore been granted.
The Benefits Committee shall have the right to alter or amend the Stock Purchase
Plan or any part thereof from time to time without the approval of the
stockholders of the Company; provided, that no change in any option theretofore
granted may be made which would impair the rights of the participant without the
consent of such participant; and provided, further, that the Benefits Committee
may not make any alteration or amendment which would increase the aggregate
number of shares which may be issued pursuant to the provisions of the Stock
Purchase Plan (other than as a result of the anti-dilution provisions of the
Stock Purchase Plan), change the class of individuals eligible to receive
options under the Stock Purchase Plan, or cause options issued under the Stock
Purchase Plan to fail to meet the requirements for employee stock purchase plans
as defined in Section 423 of the Code without the approval of the stockholders
of the Company.
AWARDS. As of March 31, 1999, 1,722 eligible employees of the Company and
its subsidiaries had elected to participate in the Stock Purchase Plan. As of
March 31, 1999, such participants had purchased
16
<PAGE>
an aggregate of 188,674 shares of Common Stock under the Stock Purchase Plan at
a weighted average purchase price of $24.76 per share.
401(k) PLAN
The Company sponsors a retirement plan called the Trammell Crow Company
Retirement Savings Plan (the "401(k) Plan"). As of December 31, 1998, the total
assets held by the 401(k) Plan were valued at approximately $90,128,969 million.
CG Trust Company is the trustee for the assets held under the Company's 401(k)
Plan (other than certain life insurance policies held under the trust for which
William P. Leiser and Asuka Nakahara are the trustees). Employees (including
members of management) are eligible to make voluntary contributions under the
401(k) Plan up to 15% of their annual compensation, subject to the applicable
limitations in the Internal Revenue Code of 1986. The Company is permitted to
make a discretionary contribution to the 401(k) Plan each fiscal quarter which
will be allocated among participants as a matching contribution based on their
contributions under the 401(k) Plan. The Company's policy is to match the lesser
of (i) 50% of all contributions up to 6% of an employee's contribution and (ii)
$5,000 per year. The 401(k) Plan permits employees to direct investments of
their accounts in Common Stock and among a selection of mutual funds. The 401(k)
Plan is intended to qualify as a profit sharing plan under 401(a) and 401(k) of
the Code.
17
<PAGE>
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
ROLE OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors (the "Committee") is
currently composed of Messrs. Erwin, Heller and Moriarty. Each of Messrs. Erwin,
Heller and Moriarty is a non-employee director of the Company. The Committee
determines annual salary, bonuses and long-term incentive awards for the
Company's Chairman of the Board, Chief Executive Officer and other executive
officers. The Committee also administers the Long-Term Incentive Plan and,
subject to the provisions of such plan, determines grants under it for all
employees and consultants, including executive officers. The Committee held two
meetings during the Company's fiscal year ended December 31, 1998. At those
meetings the Committee reviewed the Company's compensation practices and made
awards of stock options and restricted stock grants to certain key employees of
the Company.
PRINCIPLES OF EXECUTIVE COMPENSATION
The Company's executive compensation philosophy is designed to provide
competitive levels of compensation that integrate pay with the Company's annual
and long-term performance goals, reward above-average corporate performance,
recognize individual initiative and achievements, assist the Company in
attracting and retaining talented executives and aligning the interests of
executives with the long-term interests of the Company's stockholders. The
Company believes that the furtherance of these objectives is best accomplished
by providing senior and other executives of the Company with compensation
packages that consist of a combination of base salary, annual incentive bonus
and long-term stock option and restricted stock grants. The Company's base
salary component is designed to be comparable to median base salaries of real
estate services companies and other service companies comparable in size to the
Company. The Company emphasizes performance-related incentive compensation to
reward the Company's executives for the creation of long-term stockholder value.
The Company believes that this balance reflects each executive's position,
tenure and experience, while providing them with strong financial incentives to
achieve key business and individual performance objectives. The Company also
believes that the resulting compensation package rewards high levels of
performance in excess of other comparable organizations.
The Company takes into account various qualitative and quantitative
indicators of corporate and individual performance in determining the level of
compensation for the senior executives (such as growth in earnings, EBITDA and
the achievement of business unit growth) and may vary its quantitative measures
from employee to employee and from year to year. The Company also recognizes the
importance of individual achievements that may be difficult to quantify, and
accordingly recognizes qualitative factors, such as demonstrated leadership and
overall contributions to the Company.
The Company determines competitive levels of compensation for executive
positions based on information drawn from compensation surveys, proxy statements
for comparator organizations and compensation consultants. The compensation
surveys and proxy statements used are for real estate services companies and
other service companies comparable in size to the Company.
It should be noted that the value of any individual executive's compensation
package will vary significantly based on performance. While the expected value
of an executive's compensation package may be competitive, actual payments made
to executives in a given year may be higher or lower than competitive market
rates because of performance.
DESCRIPTION OF THE CURRENT EXECUTIVE COMPENSATION PROGRAM
This section describes each of the principle elements of the Company's
executive compensation program with specific reference to the objectives
discussed above.
18
<PAGE>
BASE SALARY PROGRAM
The Company believes that it is crucial to provide competitive salaries in
order to attract and retain talented executive officers. The objective of the
Company's base salary program is to provide executive officers salaries that, in
general, are at the market median. Base salaries for individual executives are
set at levels considered appropriate in light of their position, level of
revenue responsibility within the Company, tenure and performance. Base salaries
are reviewed annually by the Committee and adjusted based on evaluations of the
executive's past and projected contributions to the Company and changes in
competitive pay levels.
ANNUAL CASH BONUS PLAN
The Company's annual cash bonus plan assists the Company in rewarding and
motivating key employees and provides cash compensation opportunities to plan
participants. As a pay-for-performance plan, cash bonus awards are paid annually
based on the achievement of performance objectives established for the Company
and the executive's business unit. Cash bonus award ranges are targeted at
levels which, when combined with the executive's base salary, are at the 75th
percentile for cash compensation paid to executives at comparable companies.
Under the Company's annual cash bonus plan, a target bonus is established
for each level of the Company's officers that results in the payment of a
specified percentage of the officer's salary if his or her goals and objectives
are achieved for the relevant performance period. A minimum performance level
must be achieved by the Company, the officer and/or his or her business unit
before any bonus may be earned. Thereafter, an established progression rewards
higher levels of achievement with greater bonus payments, subject to a
predetermined maximum. For the Company's Chief Executive Officer and senior
executives, bonus targets are measured against each officer's achievement of the
goals and objectives outlined for such officer in the Company's business plan.
The Company's Chief Executive Officer is eligible to receive an annual bonus of
0% to 200% of his annual salary, depending upon his performance as determined by
the Committee and the Board of Directors. As a percentage of salary, bonuses for
senior executives (other than the Chief Executive Officer) range from 0% to
175%, depending upon performance, as evaluated by the Chief Executive Officer
and the Committee.
The specific objectives and standards under the annual cash bonus plan are
reviewed annually by the Company in order to ensure consistency with the
Company's business strategy and prevailing market conditions.
ANNUAL STOCK OPTION GRANTS
The Company believes that its key employees should have an ongoing stake in
the long-term success of the Company's business. The Company also believes that
the key employees should have a considerable portion of their total potential
compensation based upon the performance of the Company's stock, since stock
related compensation is directly tied to enhanced stockholder value.
The Long-Term Incentive Plan authorizes the granting of incentive and
nonqualified stock options and restricted stock awards to executives and other
key employees and consultants of the Company and its subsidiaries. To align the
interests of senior executives with the interests of stockholders, the
Committee's current policy regarding such awards is to grant non-qualified stock
options. However, the Committee has, in certain circumstances, granted
restricted stock awards to certain key employees as it deemed appropriate. In
connection with the Initial Public Offering, certain executive officers and
other key employees were granted non-qualified stock options intended to provide
long-term incentives to such officers and key employees during the period
between November 1997 through December 1998. Under the Company's annual stock
option grant program, the Company determines the levels of options to be granted
to each of its executives based upon such executive's position, level of revenue
responsibility within the Company, tenure and the achievement of performance
objectives established for the Company and the Executive's
19
<PAGE>
business unit. The annual stock option grants have had an exercise price equal
to the fair market value of a share of Common Stock at the time of the grant. To
encourage retention, the ability to exercise options granted under this plan is
generally subject to vesting restrictions. The estimated value of annual stock
option awards granted under the Long-Term Incentive Plan (currently computed
using a variation of the Black Scholes option pricing model) are generally
targeted at a level which is at the 75th percentile of the value of long-term
incentives granted to executives of comparable companies.
The compensation of executive officers is periodically reviewed to ensure an
appropriate mix of base salary, annual incentive and long-term incentive to
provide competitive total direct compensation opportunities consistent with the
pay philosophy articulated above.
ADDITIONAL LONG-TERM INCENTIVE PLAN AWARDS
In addition to options granted under the Company's annual stock option grant
program, executives may be eligible to receive additional stock option awards or
cash payments under performance unit awards if the performance thresholds
established for the executive are exceeded for a relevant performance period.
Executives, at their election, also have the opportunity to receive a grant of
stock options rather than a portion of their earned cash bonus. The terms of
these programs are subject to change annually.
CHIEF EXECUTIVE OFFICER PAY
The Committee reviews the compensation of the Chief Executive Officer, who
is responsible for the strategic and financial performance of the Company, and
the Committee's recommendation is subject to approval by the Board of Directors.
Based on information available to the Committee, the Committee believes that Mr.
Lippe's base salary and other compensation in 1998 was consistent with
compensation being paid to other chief executive officers of comparable
companies. Also, as noted before, the Chief Executive Officer is entitled to
receive an annual bonus of 0% to 200% of his annual salary depending on
achievement of goals and achievements set forth in the Company's business plan.
In 1998, the Committee and the Board of Directors measured the Chief Executive
Officer's performance against a national EBITDA target. The Company's
performance exceeded the national EBITDA target set by the Committee and the
Board of Directors for the fiscal year ended December 31, 1998, which entitled
Mr. Lippe to a cash bonus of $700,000.
$1 MILLION PAY DEDUCTIBILITY CAP
To the extent readily determinable, and as one of the factors in considering
compensation matters, the Committee considers the anticipated tax treatment to
the Company and to its executives of various payments and benefits. Some types
of compensation payments and their deductibility (e.g., the spread on exercise
of non-qualified options) depend upon the timing of an executive's vesting or
exercise of previously granted rights. Further, interpretations of and changes
in the tax laws and other factors beyond the Committee's control also affect the
deductibility of compensation. For these and other reasons, the Committee will
not necessarily limit executive compensation to that deductible under Section
162(m) of the Internal Revenue Code of 1986, as amended. Therefore the
Committee, subject to the factors provided above, has the discretion to grant
awards which result in deductible compensation. The Committee will consider
various alternatives to preserving the deductibility of compensation payments
and benefits to the extent reasonably practicable and consistent with the
Company's other compensation objectives.
The Compensation Committee of the Board of Directors is:
James R. Erwin--Chairman
Jeffrey M. Heller
Rowland T. Moriarty
20
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The Compensation Committee of the Company consists of Messrs. James R.
Erwin, Jeffrey M. Heller and Rowland T. Moriarty.
Mr. Erwin serves as Vice Chairman--Texas and Senior Client
Executive--Southwest of BankAmerica Corporation and was Vice-Chairman for Texas
and Corporate Finance Executive--West of NationsBank Corp., BankAmerica
Corporation's predecessor. The Company and an affiliate of NationsBank Corp. are
parties to certain transactions described under "Certain Relationships and
Related Transactions."
Certain other directors are parties to, or have interests in, transactions
with the Company, as described under the caption "Certain Relationships and
Related Transactions."
21
<PAGE>
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
REINCORPORATION TRANSACTIONS
The Company is a Delaware corporation that was formed in August 1997 to
become the successor to Trammell Crow Company, a Texas close corporation (the
"Predecessor Company"). In connection with the Initial Public Offering, the
Company and TCC Merger Sub, Inc., a wholly owned subsidiary of the Company
("Merger Sub"), entered into a series of transactions (the "Reincorporation
Transactions") to convert the legal form in which the Predecessor Company's
business and operations were held from a Texas close corporation to a Delaware
corporation. Pursuant to the Reincorporation Transactions, Merger Sub was merged
(the "Reincorporation Merger") with and into the Predecessor Company. As a
result of the Reincorporation Merger, the Predecessor Company's shareholders
immediately prior to the effective time of the Reincorporation Merger (the
"Effective Time") received, in the aggregate, 25,502,964 shares of Common Stock.
In addition, the Company issued 2,295,217 shares of Common Stock immediately
prior to the closing of the Initial Public Offering to CFH Trade-Names, L.P.
("CFH"), an affiliate of Crow Family Partnership, L.P. ("Crow Family"), in
exchange for the Trade Name License (described below). Therefore, following the
initial capitalization of the Company, the issuance of shares of Common Stock in
the Reincorporation Merger and the issuance of shares of Common Stock in
exchange for the Trade Name License, the Predecessor Company's shareholders
immediately prior to the Effective Time received, in the aggregate, 27,799,181
shares of Common Stock, constituting approximately 82.02% of the outstanding
Common Stock after giving effect to the Initial Public Offering.
On August 1, 1997, the Predecessor Company granted to certain of its
employees options to acquire an aggregate of 1,626 shares of its common stock,
which constitutes all shares authorized under the Assumed Option Plan. At the
Effective Time, the Company assumed the Predecessor Company's obligations with
respect to all such options, and became obligated to issue up to an aggregate of
2,423,769 shares of Common Stock at a purchase price of $3.85 per share upon the
exercise of such options. All of such options vested upon the closing of the
Initial Public Offering and became exercisable 30 days thereafter. Under the
Assumed Option Plan, the Predecessor Company granted an option to Mr. Concannon,
a Named Executive Officer, which represents the right to acquire 29,813 shares
of Common Stock. No additional options will be granted under the Assumed Option
Plan.
In connection with the Initial Public Offering, the Company granted options
under the Long-Term Incentive Plan to acquire an aggregate of 2,348,455 shares
of Common Stock to certain employees. The exercise price for such stock options
was $17.50 per share. The grants include grants to acquire 58,529 shares made to
each of the executive officers of the Company at the time of the Initial Public
Offering and a grant to Mr. Williams to acquire 40,965 shares. The options vest
ratably over a three-year period.
ROYALTY AGREEMENT AND LICENSE AGREEMENT
Pursuant to a Royalty Agreement entered into between Mr. Trammell Crow, as
an individual, and the Company on January 1, 1991, as ultimately assigned to
CFH, Mr. Trammell Crow granted to the Company the exclusive right and license to
use any of the Trammell Crow Company business or trade names, or any acronym or
abbreviation thereof, in any business developing, acquiring, managing,
financing, owning or investing in real estate for office, industrial or retail
use in the United States or Canada. In September 1997, prior to the assignment
of the Royalty Agreement to CFH, the Predecessor Company made a cash payment in
an aggregate amount of approximately $1,405,000 to Crow Family in partial
satisfaction of accrued royalty and consulting expenses. The Royalty Agreement
was terminated immediately prior to the closing of the Initial Public Offering.
On April 21, 1998, the Company paid $2,712,775 in the aggregate to CFH and Crow
Family in payment of all unpaid amounts owed by the Company to CFH and Crow
Family under the Royalty Agreement.
22
<PAGE>
The Company and CFH entered into a License Agreement immediately prior to
the closing of the Initial Public Offering and upon termination of the Royalty
Agreement. Pursuant to the terms of the License Agreement, and subject to
certain quality standards, the Company was granted the right to use the name
"Trammell Crow" in any business in any region around the world; provided, that
the Company agreed that it will not engage in the residential real estate
business under the name "Trammell Crow." The license granted pursuant to the
License Agreement (the "Trade Name License") is perpetual, subject to the
Company's continued use and compliance with certain quality standards and
termination as a result of certain bankruptcy events. The Company is not
obligated to pay any fees under the License Agreement. However, in exchange for
the grant of the Trade Name License, the Company issued 2,295,217 shares of
Common Stock to CFH immediately prior to the closing of the Initial Public
Offering.
Under the terms of the License Agreement, CFH has reserved the right to use
the names "Crow Family Holdings" and "Crow Investment Trust" (and one approved
substitute for either of such names) and derivations thereof in any business
except the real estate services business. CFH is not required to change the name
of certain of its existing affiliates which currently use names that would
otherwise be prohibited under the License Agreement. However, CFH has agreed to
use its reasonable efforts to prevent any entities from engaging in any new
business activities without the entity changing its name to a permitted name
under the License Agreement. CFH has also agreed not to use the name "Crow" in
combination with the word "Company" or in combination with any word that
connotes a real estate service business, including "Development," "Brokerage,"
"Management," "Property Management," "Services," "Corporate Services,"
"Infrastructure Management," "Leasing" or "Tenant Representation." In addition,
CFH will not use "Crow" in the name of any entity that has securities registered
under the Securities Act or the Securities Exchange Act of 1934; provided,
however, that the names "Trammell Crow Residential Company," "Trammell Crow
Residential" and "TCR" may be used for any public entity pursuant to the terms
of applicable agreements among Trammell Crow Residential Company, CFH or its
affiliates and, if applicable, the Company. CFH can use the name "Crow" in the
name of any privately held entity that is not engaged in the real estate
business if the name also includes a descriptive word (E.G., "Crow Publishing").
CFH has agreed to use its reasonable efforts to assure that other family members
of Mr. Trammell Crow will comply with the License Agreement as if they were
parties to the agreement.
CONSULTING ARRANGEMENTS
In January 1991, the Company entered into consulting arrangements (the
"Consulting Arrangements") with Mr. Williams and an affiliate of Mr. Harlan
Crow. Mr. Crow's interest was subsequently assigned to Crow Family. Pursuant to
the Consulting Arrangements, Mr. Williams and Crow Family received payments
computed by paying them a fixed percentage of earnings of each Project and
Business Unit. In connection with the termination of the Consulting
Arrangements, Mr. Williams received a payment of $1,555,918. On April 21, 1998,
the Company paid to Crow family $331,419 in satisfaction of all amounts owed to
Crow Family under the Consulting Arrangements. The Consulting Arrangements were
terminated as of the closing of the Initial Public Offering.
CROW HOLDINGS AND CERTAIN INVESTMENT FUNDS
Crow Realty Investors, L.P. d/b/a Crow Holdings is wholly owned by Crow
Family. Mr. Harlan Crow, a director of the Company, is the chief executive
officer of Crow Family's general partner. Since its inception in 1994, Crow
Holdings has co-invested with the Company and various of its subsidiaries in 16
projects in the areas of industrial development, build-to-suit arrangements,
land acquisitions and other real-estate related projects.
Beginning in 1995, the Company, directly and through its subsidiary Trammell
Crow Capital Company, and certain senior employees of the Company and its
affiliates, through Trammell Crow Investment Fund 1995 L.P., a Delaware limited
partnership ("Fund I"), have co-invested on a side-by-side basis with Crow
Holdings and Mr. Williams in six and four real-estate related projects,
respectively. Trammell Crow
23
<PAGE>
Investments, Inc., the general partner of Fund I, is a subsidiary of Trammell
Crow Capital Company. No contributions to these projects were made in 1998.
Through December 31, 1998, the Company received distributions from these
projects of approximately $3,720,080. The senior employees of the Company invest
in the projects indirectly as limited partners in Fund I. The following reflects
total investments and distributions related to Fund I through December 31, 1998,
for the Named Executive Officers: Mr. Lippe, $150,000 and $199,161; Mr.
Nakahara, $25,000 and $33,193; Mr. Maddux, $50,000 and $66,387; Mr. Sulentic,
$25,000 and $33,193; and Mr. Blackwell, $100,000 and $132,775; respectively. No
additional capital contributions were made to Fund I during 1998 by the
executive officers of the Company.
Beginning in February 1996, the Company, through its subsidiary Trammell
Crow Capital Company II, Inc., and certain directors and senior employees of the
Company and its affiliates have collectively invested in Trammell Crow
Investment Fund II, L.P., a Delaware limited partnership which makes investments
that emphasize real-estate related projects ("Fund II"). Trammell Crow
Investments II, Inc., the general partner of Fund II, is a subsidiary of
Trammell Crow Capital Company II, Inc. The senior employees of the Company
invest as limited partners through Trammell Crow Individual Investment Fund
1996, L.P. in Fund II. Through December 31, 1998, the Company made contributions
to Fund II of approximately $1,707,000 and received distributions from Fund II
of approximately $1,041,182. The following reflects total investments and
distributions related to Fund II through December 31, 1998, for the Named
Executive Officers: Mr. Lippe, $184,000 and $116,541; Mr. Nakahara, $92,000 and
$58,269; Mr. Maddux, $46,000 and $29,136; Mr. Concannon, $46,000 and $29,136;
Mr. Rothacker, $46,000 and $29,136; Mr. Sulentic, $23,000 and $14,567; and Mr.
Blackwell, $230,000 and $145,676, respectively. In addition, an affiliate of Mr.
Williams, a director of the Company, made investments in Fund II of $690,000 and
received distributions of $437,025 through December 31, 1998.
Fund II currently invests in several related limited partnerships that are
all affiliates of Crow Family and are collectively referred to as the "DFW
Fund." The aggregate amount invested in and distributions received from DFW Fund
by Fund II through December 31, 1998, is $491,983 and $244,056, respectively.
Through December 31, 1998, the Company (through direct investment outside of
Fund II) and Crow Holdings have invested an aggregate of approximately $491,983
and $3,345,491, respectively, in DFW Fund and have received distributions
totaling $244,056 and $1,659,578, respectively. As of December 31, 1998, an
affiliate of Mr. Williams has invested $479,964 in DFW Fund and received
distributions of $244,056. Through December 31, 1998, an affiliate of Mr.
Williams contributed approximately $1,450,158 to projects in which DFW Fund has
an interest and received distributions from those projects of approximately
$1,241,737. At December 31, 1998, the Company and Crow Holdings contributed
approximately $998,731 and $8,427,168, respectively, to projects in which DFW
Fund had an interest, and the Company received distributions of approximately
$1,012,151. Through December 31, 1998, the aggregate amount contributed by Fund
II to projects in which DFW Fund had an interest was $2,350,158 and the
aggregate amount distributed to Fund II from such projects was $1,241,737. The
Company has also agreed not to invest in certain investment opportunities in the
Dallas/Fort Worth metropolitan area without first offering the investment
opportunity to the DFW Fund.
Prior to January 1, 1998, Crow Holdings had a substantial ownership interest
in TCC Retail BTS Limited Partnership ("Retail BTS"), a Texas limited
partnership which has a wholly owned subsidiary of the Company as its general
partner. Retail BTS develops, owns and operates real estate projects leased to
national retail chains. Through December 31, 1997, Crow Holdings had invested an
aggregate of $374,000 in Retail BTS, and in 1997 Crow Holdings received
approximately $294,000 in payments in 1997. Effective January 1, 1998, Crow
Holdings sold its interest in Retail BTS to the Company in exchange for a cash
payment of $275,000.
CROW FAMILY
During 1998, the Company received 5.5% of its total revenue from a
commercial real estate asset base principally owned by parties related to the
partnerships, corporations and other entities or individuals
24
<PAGE>
doing business as Trammell Crow Company prior to 1991. Crow Family 1991 Limited
Partnership (an affiliate of Crow Family and Mr. Harlan Crow) and Mr. Williams,
a director of the Company, own significant interests in this commercial asset
base.
STOCKHOLDERS' AGREEMENT
Contemporaneously with the Reincorporation Transactions, the Company, Crow
Family, CFH and Mr. Williams entered into a Stockholders' Agreement, pursuant to
which the Company agreed, subject to certain limitations and under certain
circumstances, to register for sale shares of Common Stock that are held by
certain parties thereto (collectively, the "Registrable Securities"). Of the
shares of Common Stock issued in the Reincorporation Transactions, 9,369,035
were Registrable Securities. The Stockholders' Agreement provides that Crow
Family and Mr. Williams may, from and after the first anniversary of the Initial
Public Offering, require the Company upon written notice to register for sale
such Registrable Securities (a "Demand Registration"), provided that the Company
has no obligation to effect more than six underwritten Demand Registrations and
shall only be obligated to effect the sixth underwritten Demand Registration if
all remaining Registrable Securities of Crow Family are to be registered and the
total amount of Registrable Securities to be included in any underwritten Demand
Registration has a market value of at least $25 million. The Company has no
obligation to (i) effect an underwritten Demand Registration within nine months
(or file such Registration Statement within seven months) after the effective
date of the immediately preceding Demand Registration or (ii) effect a shelf
Demand Registration within 12 months (or file such Registration Statement within
ten months) after such effective date. In addition, the Company is only required
to register a number of shares of Common Stock for sale pursuant to a shelf
Demand Registration that is less than or equal to five times the amount
limitation prescribed by Rule 144. The holders of Registrable Securities may
request an unlimited number of shelf Demand Registrations.
The Stockholders' Agreement also provides that, subject to certain
exceptions, in the event the Company proposes to file a registration statement
with respect to an offering of any class of equity securities, other than
certain types of registrations, the Company will offer the holders of
Registrable Securities the opportunity to register the number of Registrable
Securities they request to include (a "Piggyback Registration"), provided that
the amount of Registrable Securities requested to be registered may be limited
by the underwriters in an underwritten offering based on such underwriters'
determination that inclusion of the total amount of Registrable Securities
requested for registration exceeds the maximum amount that can be marketed at a
price reasonably related to the current market price of the Common Stock or
without materially and adversely affecting the offering. The Company will
generally be required to pay all of the expenses of Demand Registrations and
Piggyback Registrations, other than underwriting discounts and commissions;
provided, however, that only 50% of the expenses of underwritten Demand
Registrations will be borne by the Company after the first three such Demand
Registrations and all road show expenses in connection with any Demand
Registration will be borne by the holders of Registrable Securities.
Under the terms of the Stockholders' Agreement, the Company granted Crow
Family the right to nominate a member of the Board of Directors. Mr. Harlan Crow
is Crow Family's nominee. Certain executive officers of the Company have agreed
to vote their shares of Common Stock in favor of the nominee of Crow Family.
Crow Family's right to nominate a director will terminate on the first date Crow
Family's beneficial ownership of Common Stock represents the lesser of (i) less
than 12.5% of the then outstanding Common Stock or (ii) less than 50% of the
shares of Common Stock owned on the date of execution of the agreement;
provided, however, that in no event will the Company be obligated to nominate a
Crow Family designee beyond the first date on which the beneficial ownership of
shares of Common Stock held by Crow Family represents less than 5% of all then
outstanding shares of such class. For purposes of the Stockholders' Agreement,
Crow Family's beneficial ownership of Common Stock is defined as both shares of
Common Stock owned by Crow Family and those owned by CFH. In connection
25
<PAGE>
with any private sale of Common Stock by Crow Family, other than to an
affiliate, Crow Family will agree to give the Company 15 days notice prior to
effecting such sale.
Each of Crow Family and the Company has agreed, prior to the fifth
anniversary of the date of the Stockholders' Agreement, not to solicit the
other's officer-level employees concerning potential employment without prior
notice to the other party. In addition, each of Crow Family and the Company has
agreed not to hire any employee that was improperly solicited until the earlier
of (i) the involuntary termination of such officer-level employee by his/her
employer and (ii) the first anniversary of the last incident of solicitation of
such employee in violation of the agreement.
THE KINETIC GROUP
On January 1, 1997, the Company invested in The Kinetic Group Limited
Partnership (the "Kinetic Group"), a Texas limited partnership in which senior
executives of Wyndham International, Inc. and affiliates of Crow Family
(collectively, the "Wyndham Investors") own a substantial interest. The Kinetic
Group operates as an independent third-party contractor to provide certain
management information services, telecommunications, and computer hardware and
software management and maintenance services. The Wyndham Investors and the
Company share equally in all profit distributions of the Kinetic Group. Each of
the Company and a subsidiary of Wyndham International, Inc., has entered into a
management information system agreement for an initial term of five years with
the Kinetic Group to provide these services. The Company paid service fees to
the Kinetic Group of approximately $4,135,000 and $4,468,000 for the years ended
December 31, 1997 and 1998, respectively.
FAISON ACQUISITIONS
In July, 1998, the Company acquired a portion of the businesses of Faison &
Associates ("Faison") and Faison Enterprises, which are engaged in the
development, leasing and management of office and retail properties located
primarily in the Midatlantic and Southeast regions of the United States (the
"Faison Acquisition"). In exchange for the acquired businesses, the Company paid
$36.1 million in cash and delivered a $2.0 million promissory note that bears
interest at an annual rate of 6.0%. The note matures on April 30, 2000 and is
payable in eight equal quarterly installments. As of March 31, 1999, the
outstanding principal balance of this note was $1,250,000. In connection with
the Faison Acquisition, Mr. Henry Faison and Faison Enterprises purchased an
aggregate of 127,828 shares of Common Stock for $4.0 million (at a price of
$31.29 per share). At the closing, Mr. Faison was elected to serve as a Class
III Director on the Company's Board of Directors with a term expiring at the
Company's annual meeting of stockholders in 2000.
In connection with the Faison Acquisition, the Company entered into
employment agreements with four key employees, including Mr. Faison, and in
connection with such employment agreements the Company paid an aggregate of $1.0
million in exchange for certain covenants not to compete. The Company granted to
employees of the acquired businesses who were retained after the closing options
to purchase an aggregate of 36,504 shares of Common Stock at an exercise price
of $32.875 per share and options to purchase an aggregate of 34,920 shares of
Common Stock at an exercise price of $31.50 per share (the fair market value of
the Common Stock on the respective dates of grant). In addition, in August 1998,
the Company authorized the grant of an aggregate of 63,490 restricted shares of
its Common Stock to certain employees of the acquired businesses who were
retained after the closing. An aggregate of 60,315 shares were issued on October
7, 1998 to grantees employed by the Company at that date and will vest on July
2, 2000 if the grantee has been continuously employed by the Company from the
date of closing. The remaining 3,175 restricted shares were forfeited prior to
issuance due to the grantees terminating their employment with the Company.
In connection with the Faison Acquisition, the Company, Faison Enterprises
and another affiliate of Faison Enterprises entered into a Merchant Build/Right
of First Refusal Agreement pursuant to which
26
<PAGE>
Faison Enterprises has acquired a right of first refusal to invest in, and
provide the financing for, certain new retail real estate projects that are
initiated by the Company out of certain offices formerly operated by Faison
Enterprises or with the assistance of certain former Faison employees prior to
January 1, 2001. If Faison Enterprises elects to exercise its right of first
refusal with respect to such a retail project, the Company is obligated to
transfer its rights with respect to such project to Faison Enterprises. Faison
Enterprises will be obligated to use reasonable commercial efforts to develop,
and arrange for the financing of the development of, such retail project.
Subject to the right of Faison Enterprises to withhold amounts to provide for
the payment of operating deficits incurred on other retail projects, the Company
will be entitled to receive 40% of the distributions that Faison Enterprises or
its affiliates receive from each retail project developed pursuant to the
Merchant Build/First Refusal Agreement after Faison Enterprises has recovered
the initial capital it invests in the project and received a specified rate of
return on such investment. If the Company receives any such interests in 1999,
it is required to award 50% of such interests to certain key Faison employees
other than Mr. Faison. Certain matters that are to be determined under the
Merchant Build/First Refusal Agreement, such as whether a particular expense is
to be considered capital that would be the responsibility of Faison Enterprises
or an operating expense shared by the Company and the amounts that are to be
withheld from distributions, may involve an inherent conflict between the
interests of the Company and the interests of Faison Enterprises. The Company is
obligated to pay Faison Enterprises an additional $1.0 million if retail
development construction starts funded through this development program exceed
certain levels in 1999 and 2000.
The Company and Faison Enterprises have also entered into a Real Estate
Services Agreement, which contemplates that the retail projects developed
pursuant to the Merchant Build/Right of First Refusal Agreement, as well as
certain other properties controlled by Faison Enterprises, will be managed by
the Company. In exchange for such management services, the Company will be
entitled to receive a fee that was determined as the result of arms length
negotiations. The term of the Real Estate Services Agreement is five years, but
the agreement may be terminated earlier upon the occurrence of certain events of
default.
During 1998, the Company received 1.9% of its total revenues from the
management of properties owned or controlled by Mr. Faison or Faison
Enterprises, including but not limited to all revenues received pursuant to the
Merchant Build/Right of First Refusal Agreement and the Real Estate Services
Agreement.
On January 15, 1999, the Company acquired Faison (Chile) S.A. ("Faison
Chile") from Faison Enterprises. Faison Chile is a commercial real estate
services firm operating in Santiago, Chile. In exchange for all of the business
of Faison Chile, the Company paid Faison Enterprises $2.0 million in cash and
agreed to deliver Faison Enterprises up to $2.0 million in additional contingent
payments. These contingent payments are to be paid from 75% of the acquired
business' 1999, 2000 and 2001 EBITDA in excess of certain specified thresholds.
RELATIONSHIP WITH DIRECTOR NOMINEE
On December 1, 1997, the Company obtained a $150 million line of credit
arranged by NationsBank of Texas, N.A. as administrative agent (the "NationsBank
Facility"). The Company has borrowed and expects to borrow under the NationsBank
Facility to finance acquisitions, to fund its co-investment activities and to
provide the Company with an additional source of working capital. James R. Erwin
serves as Vice Chairman-Texas and Senior Client Executive-Southwest of
BankAmerica Corporation and was Vice Chairman of Texas and Corporate Finance
Executive-West for NationsBank Corp., a predecessor of BankAmerica Corporation.
During 1997 and 1998 the Company paid NationsBank Corp. interest and fees
totaling approximately $1,130,211 and $4,171,812, respectively.
BankAmerica Corporation is also a customer in the ordinary course of the
Company's infrastructure management services business. NationsBank Corp., a
predecessor of BankAmerica Corporation, was the Company's second largest
infrastructure management services customer (in terms of revenue generated)
27
<PAGE>
during the fiscal year ended December 31, 1998. The Company recorded revenues of
approximately $10,655,000 and $15,648,000 in 1997 and 1998, respectively, from
services provided to BankAmerica Corporation, representing 3% of the Company's
total revenues in 1997 and 1998.
POLICY WITH RESPECT TO RELATED PARTY TRANSACTIONS
The Company has implemented a policy requiring that any material transaction
(or series of related transactions) between the Company and related parties be
approved by a majority of the disinterested directors, upon such Directors'
determination that the terms of the transaction are no less favorable to the
Company than those that could have been obtained from unrelated third parties.
The policy defines a material related party transaction (or series of related
transactions) as one involving a purchase, sale, lease or exchange of property
or assets or the making of any investment with a value to the Company in excess
of $1.0 million or a service agreement (or series of related agreements) with a
value in excess of $1.0 million in any fiscal year. There can be no assurance
that this policy will insure that all transactions between the Company and
related parties are on terms that are no less favorable to the Company than
those that could have been obtained from unrelated third parties.
28
<PAGE>
PERFORMANCE GRAPH
The Performance Graph shown below was prepared by the Company for use in
this Proxy Statement. Note that historic stock price performance is not
necessarily indicative of future stock performance. The graph was prepared based
upon the following assumptions:
1. $100 was invested in the Company's Common Stock, the NYSE Market Index
and the Company's Peer Group (as defined below) on November 25, 1997 (the date
the Company's Common Stock was first traded on the New York Stock Exchange).
2. Peer Group investment is weighted based on the market capitalization of
each individual company within the Peer Group at the beginning of the comparison
period.
3. Dividends are reinvested on the ex-dividend dates.
The companies that comprise the Company's Peer Group for purposes of
stockholder return comparisons are as follows: CB Richard Ellis Services, Inc.,
Grubb & Ellis Company, Jones Lang LaSalle Incorporated and Insignia/ESG
Holdings, Inc. The companies that comprised the Company's Peer Group in the
Company's 1998 Proxy Statement for purposes of stockholder return comparisons
were as follows: CB Commercial Real Estate Services Group, Inc., Grubb & Ellis
Company, LaSalle Partners Inc. and Insignia Financial Group, Inc. The Company's
Peer Group changed due to the merger of LaSalle Partners Inc. and Jones Lang
Wootton (which created Jones Lang LaSalle Incorporated), the merger of CB
Commercial Real Estate Services Group, Inc. and REI Limited (which created CB
Richard Ellis Services, Inc.) and the corporate restructuring of Insignia
Financial Group, Inc. (which created Insignia/ ESG Holdings, Inc).
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TRAMMELL CROW COMPANY PEER GROUP NYSE MARKET INDEX
<S> <C> <C> <C>
11/25/97 $100.00 $100.00 $100.00
12/31/97 $118.39 $100.16 $102.52
12/31/98 $128.74 $65.52 $122.00
</TABLE>
29
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership as of March 31, 1999, of the Company's Common Stock by (i)
each person known to the Company to be the beneficial owner of 5% or more of the
shares of Common Stock outstanding; (ii) each director; (iii) each Named
Executive Officer; and (iv) directors and executive officers of the Company as a
group. Unless otherwise indicated, to the Company's knowledge, each person has
sole voting (subject to the terms of the Stockholders' Agreement) and
dispositive power over the shares indicated as owned by such person. Unless
otherwise indicated, all stockholders set forth below have the same principal
business address as the Company.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF SHARES
NAME SHARES OWNED BENEFICIALLY OWNED(1)
- - -------------------------------------------------- ------------------- ---------------------
<S> <C> <C>
Crow Family Partnership, L.P...................... 4,236,829 12.1%
3200 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
CFH Trade-Names, L.P.............................. 855,137 2.4%
CFH Capital Resources, L.P........................ 1,327,489 3.8
J. McDonald Williams.............................. 1,524,789(2) 4.4%
George L. Lippe................................... 702,759(3)(4) 2.0%
H. Pryor Blackwell................................ 509,519(4) 1.5%
William Concannon................................. 325,448(4)(5) *
William C. Maddux................................. 287,412(4) *
Asuka Nakahara.................................... 374,145(4) 1.1%
Robert E. Sulentic................................ 229,614(4)(6) *
William R. Rothacker.............................. 490,585(4)(7) 1.4%
Phillip W. Norwood................................ 12,698(8) *
Harlan R. Crow.................................... 6,428,074(9)(10) 18.3%
3200 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
James D. Carreker................................. 136,457(10) *
James R. Erwin.................................... 12,619(10) *
Henry J. Faison................................... 127,828(11) *
Rowland T. Moriarty............................... 18,619(10)(12) *
Jeffrey M. Heller................................. 8,619(10) *
Directors, director nominees and executive
officers as a group (15 persons)................ 11,189,185(13) 32%
</TABLE>
- - ------------------------
(1) Based on 35,037,249 shares of Common Stock outstanding on March 31, 1999.
(2) Includes 13,655 shares that may be acquired upon the exercise of options,
951 shares held indirectly through the Company's 401(k) Plan and 684 shares
acquired under the Company's Employee Stock Purchase Plan.
(3) Includes 2,252 shares held in trust for the benefit of George L. Lippe's
minor children. Mr. Lippe is the trustee of the trust. Also includes 957
shares acquired under the Company's Employee Stock Purchase Plan.
(4) Includes 19,509 shares that may be acquired upon the exercise of options.
(5) Includes 29,813 shares that may be acquired upon the exercise of options.
(6) Includes 23,000 shares owned by Mr. Sulentic's wife.
(7) Includes 384 shares acquired under the Company's Employee Stock Purchase
Plan.
(8) Consists of 12,698 shares that may be acquired upon the exercise of
options.
(9) Consists of all shares held by Crow Family Partnership, L.P., all shares
held by CFH Trade-Names, L.P., and all shares held by CFH Capital
Resources, L.P. Crow Family, Inc. is an affiliate of all such partnerships.
Mr. Crow is a director of Crow Family, Inc. and trustee of certain family
trusts which hold a significant equity interest in each such partnership.
Mr. Crow disclaims beneficial ownership of all such shares held by such
partnerships.
(10) Includes 8,619 shares that may be acquired upon the exercise of options.
(11) Includes 63,914 shares held of record by Faison Enterprises, a non-profit
corporation of which Mr. Faison is the sole member. Although Mr. Faison
currently has the right to designate all of the members of the board of
directors of Faison Enterprises, he has no pecuniary interest in such
shares of Common Stock. Mr. Faison disclaims ownership of all shares of
Common Stock held by Faison Enterprises.
(12) Includes 2,000 shares held indirectly through a non-issuer profit sharing
plan.
(13) Includes 219,099 shares that may be acquired upon the exercise of options
within the next 60 days.
30
<PAGE>
SECTION 16 BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
holders of more than 10% of its shares of Common Stock to file with the
Securities and Exchange Commission and the New York Stock Exchange initial
reports of ownership of shares of Common Stock and reports of changes in such
ownership. The Commission's rules require such persons to furnish the Company
with copies of all Section 16(a) reports that they file. Based on a review of
these reports and on written representations from the reporting persons that no
other reports were required, the Company believes that the applicable Section
16(a) reporting requirements were complied with for all transactions which
occurred in 1998, with the exception of a Form 4 filed on behalf of Crow Family
Partnership, L.P. in October of 1998 disclosing the transfer of 717,589 shares
of Common Stock by Crow Family Partnership, L.P. to CFH Capital Resources, L.P.
on February 2, 1998.
ADDITIONAL INFORMATION
STOCKHOLDER PROPOSALS
Because of a recent change to Rule 14a-4(c)(1) promulgated under the
Securities Exchange Act of 1934, as amended, the Company's management will have
discretionary authority to vote on any matter of which the Company does not
receive notice by March 6, 2000, with respect to proxies submitted to the 2000
Annual Meeting of the Company's Stockholders. This rule change does not affect
the deadline set forth in Rule 14a-8 promulgated under the Exchange Act for
including a stockholder proposal in the Board of Directors' solicitation of
proxies. Therefore, in order to be included in the Board of Directors'
solicitation of proxies relating to the 2000 Annual Meeting of the Company's
Stockholders, a stockholder proposal must be received by the Secretary of the
Company at 2001 Ross Avenue, Suite 3400, Dallas, Texas 75201, no later than
December 21, 1999. Pursuant to the Company's Certificate of Incorporation, in
order to nominate persons for election to the Board of Directors at the 2000
Annual Meeting of the Company's Stockholders, a stockholder must deliver notice,
in the form specified in the Company's Certificate of Incorporation, to the
principal executive offices of the Company not less than 60 days nor more than
90 days prior to the scheduled date of the 2000 Annual Meeting of the Company's
Stockholders, which has not yet been determined.
ANNUAL REPORT
The Company's Annual Report to stockholders for the fiscal year ended
December 31, 1998, including financial statements, is being mailed herewith to
all stockholders entitled to vote at the Annual Meeting. The Annual Report does
not constitute a part of the proxy solicitation material.
By Order of the Board of Directors,
Derek R. McClain
SECRETARY
31
<PAGE>
APPENDIX A
SUMMARY DESCRIPTION OF THE LONG-TERM INCENTIVE PLAN
GENERAL
The purpose of the Trammell Crow Company Long-Term Incentive Plan (the
"Long-Term Incentive Plan") is to provide an incentive for employees, directors
and certain consultants and advisors of the Company or its subsidiaries to
remain in the service of the Company or its subsidiaries, to extend to them the
opportunity to acquire a proprietary interest in the Company so that they will
apply their best efforts for the benefit of the Company and to aid the Company
in attracting able persons to enter the service of the Company or its
subsidiaries. To accomplish this purpose, the Long-Term Incentive Plan offers a
proprietary interest in the Company through the distribution of awards
("AWARDS") including (i) incentive stock options qualified as such under U.S.
federal income tax laws ("INCENTIVE OPTIONS"), (ii) stock options that do not
qualify as incentive stock options ("NONSTATUTORY OPTIONS"), (iii) stock
appreciation rights ("SARS"), (iv) restricted stock awards ("RESTRICTED STOCK
AWARDS"), and (v) performance units ("PERFORMANCE UNITS"). See "--Shares and
Other Awards."
No awards may be made under the Long-Term Incentive Plan after the date that
is ten years from the date of stockholder approval of the last amendment to the
Long-Term Incentive Plan which involved an increase in authorized shares of
Common Stock subject to the Long-Term Incentive Plan.
The Long-Term Incentive Plan, in part, is intended to qualify under the
provisions of Sections 422 of the Internal Revenue Code of 1986, as amended (the
"CODE"). See "Federal Income Tax Consequences." The Long-Term Incentive Plan is
not subject to the provisions of the Employee Retirement Income Security Act of
1974, as amended ("ERISA").
ADMINISTRATION OF THE LONG-TERM INCENTIVE PLAN
The Board of Directors has appointed the Compensation Committee (the
"Committee") to administer the Long-Term Incentive Plan. The Committee has broad
discretion to administer the Long-Term Incentive Plan, interpret its provisions,
and adopt policies for implementing the Long-Term Incentive Plan. This
discretion includes the ability to select the recipient of an award, determine
the type and amount of each Award, establish the terms of each Award, accelerate
vesting or exercisability of an award, extend the exercise period for an Award,
determine whether performance conditions have been satisfied, waive conditions
and provisions of an Award, permit the transfer of an Award to family trusts and
other persons and otherwise modify or amend any Award under the Long-Term
Incentive Plan.
PERSONS WHO MAY PARTICIPATE IN THE PLAN
Any person (a "PARTICIPANT") is eligible to participate in the Long-Term
Incentive Plan if that person is (a) an employee of the Company or any of its
subsidiaries, including officers and directors of the Company who are also
employees of the Company or of any of its subsidiaries, (b) a non-employee
director of the Company, or (c) any other person that the Committee designates
as eligible for an Award (other than Incentive Options) because the person
performs bona fide consulting or advisory services for the Company or any of its
subsidiaries (other than services in connection with the offer and sale of
securities in a capital-raising transaction). These eligibility standards have
been restated, without modification, in the proposed amendment to the Long-Term
Incentive Plan. The eligibility provisions have been restated in the proposed
amendment merely because the group of individuals eligible to receive awards
under a plan designed to award fully deductible performance based compensation
must be approved by the shareholders of the Company. The Company currently has 6
non-employee directors, 9 officers and approximately 5,000 other employees who
are eligible to participate in the Long-Term Incentive Plan.
A-1
<PAGE>
A Participant under the Long-Term Incentive Plan will be eligible to receive
Nonstatutory Options, SARs, Restricted Stock Awards and Performance Units. A
Participant may also be eligible to receive an Incentive Option if the
Participant (a) is an employee of the Company or one of its corporate
subsidiaries and (b) immediately before the time the Incentive Option is
granted, the Participant does not own stock possessing more than ten percent of
the total combined voting power or value of all classes of stock of the Company
or a subsidiary unless, at the time the Incentive Option is granted, the
exercise price of the Incentive Option is at least 110% of the fair market value
of the Common Stock underlying the Incentive Option and the Incentive Option is
not, by its terms, exercisable after the fifth anniversary of the date of grant.
SHARES AND OTHER AWARDS
SHARES SUBJECT TO THE LONG-TERM INCENTIVE PLAN. The maximum aggregate
number of shares of Common Stock in respect of which awards may be granted for
all purposes under the Long-Term Incentive Plan is currently 5,334,878. If the
amendment proposed by the Board of Directors at the Annual Meeting is adopted,
the maximum aggregate number of shares of Common Stock in respect of which
awards may be granted for all purposes under the Long-Term Incentive Plan will
increase by 3,300,000 to 8,634,878. If Common Stock subject to any Award is not
issued or transferred, or ceases to be issuable or transferable for any reason,
including (but not exclusively) because an Award is forfeited, terminated,
expires unexercised, is settled in cash in lieu of Common Stock or is exchanged
for other Awards, the shares of Common Stock that were subject to that Award
shall again be available for issue, transfer or exercise pursuant to Awards
under the Long-Term Incentive Plan to the extent of such forfeiture,
termination, expiration, settlement or exchange. The Common Stock sold pursuant
to the Long-Term Incentive Plan may be shares originally issued by the Company,
shares held by the Company in treasury, shares which have been reacquired by the
Company or shares which have been bought on the market for the purposes of the
Long-Term Incentive Plan. There are no fees, commissions or other charges
applicable to a purchase of Common Stock under the Long-Term Incentive Plan.
OUTSTANDING AWARDS. As of March 31, 1999, the Company had granted 92,680
shares of restricted stock under the Long-Term Incentive Plan. As of March 31,
1999, options to acquire an aggregate of 3,473,929 shares of Common Stock under
the Long-Term Incentive Plan were outstanding. The exercise prices for such
stock options range from $17.50 to $36.00.
STOCK OPTIONS. The Company may grant to Participants (i) Incentive Options
(only to eligible Participants) and (ii) Nonstatutory Options (collectively,
"Options"). The Committee determines the exercise price of each option granted
under the Long-Term Incentive Plan. The exercise price for an Incentive Option
must not be less than the fair market value of the Common Stock on the date of
grant, and the exercise price of Nonstatutory Options must not be less than 85%
of the fair market value of the Common Stock on the date of grant. Stock options
may be exercised as the Committee determines, but not later than ten years from
the date of grant in the case of Incentive Options. At the discretion of the
Committee, holders may use shares of Common Stock to pay the exercise price,
including shares issuable upon exercise of the option.
SARs. A SAR may be awarded in connection with or separate from a stock
option. A SAR is the right to receive an amount in cash or stock equal to the
excess of the fair market value of a share of the Common Stock on the date of
exercise over the exercise price specified in the agreement governing the SAR
(for SARs not granted in connection with a stock option) or the exercise price
of the related stock option (for SARs granted in connection with a stock
option). A SAR granted in connection with a stock option will entitle the
holder, upon exercise, to surrender the related stock option or portion thereof
relating to the number of shares for which the SAR is exercised. The surrendered
stock option or portion will then cease to be exercisable. Such a SAR is
exercisable or transferable only to the extent that the related stock option is
exercisable or transferable. A SAR granted independently of a stock option will
be
A-2
<PAGE>
exercisable as the Committee determines. The Committee may limit the amount
payable upon exercise of any SAR. SARs may be paid in cash, stock or a
combination of cash and stock, as the Committee provides in the agreement
governing the SAR.
RESTRICTED STOCK. A Restricted Stock Award is a grant of shares of Common
Stock that are nontransferable or subject to risk of forfeiture until specific
conditions are met. The restrictions will lapse in accordance with a schedule or
other conditions as the Committee determines. During the restriction period, the
holder of a Restricted Stock Award may, in the Committee's discretion, have
certain rights as a stockholder, including the right to vote the stock subject
to the award or receive dividends on that stock. Restricted stock may also be
issued upon exercise or settlement of options, SARs or Performance Units.
PERFORMANCE UNITS. Performance Units are performance-based awards payable
in cash, stock or a combination of both. The Committee may select any
performance measure or combination of measures as conditions for cash payments
or stock issuances under the Long-Term Incentive Plan. The proposed amendment
revises the Long-Term Incentive Plan such that Awards granted in the form of
Performance Units may be subject to payment upon the satisfaction of performance
goals during any period of up to 10 fiscal years in duration. Currently, the
Long-Term Incentive Plan bases the payment of Performance Units on the
satisfaction of performance goals during a period of at least one fiscal year
and not more than 10 fiscal years. This portion of the amendment has been
designed to assure that Performance Units may be granted under terms that would
result in deductible compensation for federal income tax purposes. Specifically,
in order to comply with the requirements for deductible compensation, the
performance criteria for certain awards must be established no later than 90
days after the start of the performance period to which the Award relates, or if
earlier the passage of 25% of the performance period. The proposed amendment
will revise the definition of performance period in order to assure that the
performance criteria for certain awards, including those to be granted with
respect to the 1999 performance period, are established in a timely manner.
PERFORMANCE AWARDS. The Committee may designate that certain Awards granted
under the Long-Term Incentive Plan constitute "performance" Awards. A
performance Award is any Award the grant, exercise or settlement of which is
subject to one or more performance standards. Additionally, performance Award
also means an Award granted to the chief executive officer or any person
designated by the Committee, at the time of grant of the performance Award, as
likely to be one of the next four highest paid officers of the Company (a
"Covered Employee") which is an Option or an SAR if the exercise price equals or
exceeds the fair market value of the associated Common Stock. In each calendar
year during any part of which the Long-Term Incentive Plan is in effect, a
Participant may not be granted performance Awards in the form of Options, SARs
or Restricted Stock Awards relating to more than 500,000 shares of Common Stock
in the aggregate. In addition, the maximum compensation that may be earned under
any Awards granted as Performance Units by any one individual in any calendar
year shall be $5 million. One or more of the following business criteria for the
Company, on a consolidated basis, and/or for specified subsidiaries, business or
geographical units or customer groups of the Company (except with respect to the
total shareholder return and earnings per share criteria), shall be used by the
Committee in establishing performance goals for such Performance Awards: (i)
earnings per share; (ii) revenue targets; (iii) cash flow targets; (iv) cash
flow return targets; (v) return on net assets, return on assets, return on
investment, return on capital, return on equity; (vi) economic value added
formula; (vii) operating margin or contribution margin; (viii) net income;
pretax earnings; pretax earnings before interest, depreciation and amortization;
pretax operating earnings after interest expense and before incentives, service
fees, and extraordinary or special items; operating income; pretax earnings
before interest, depreciation and/or amortization; (ix) total shareholder
return; (x) debt reduction; and (xi) any of the above goals determined on an
absolute or relative basis or as compared to the performance of a published or
special index deemed applicable by the Committee including, but not limited to,
the Standard & Poor's 500 Stock Index or a group of comparator companies,
including the group selected by the Company for purposes of the stock
performance graph contained in this Proxy Statement. The concept of a
performance Award, the share and
A-3
<PAGE>
compensation limitations applicable to such Awards and the business criteria
that may be utilized in connection with the granting or vesting of such Awards
has been added to the Long-Term Incentive Plan by the proposed amendment. The
addition of such performance Award concepts is intended to ensure that all
Awards granted under the Long-Term Incentive Plan may continue to be fully
deductible for federal income tax purposes.
OTHER PROVISIONS
TAX WITHHOLDING. At the Committee's discretion and subject to conditions
that the Committee may impose, a participant's tax withholding with respect to
an award may be satisfied by the withholding of shares of Common Stock issuable
pursuant to the award or the delivery of previously owned shares of Common
Stock, in either case based on the fair market value of the shares.
MERGER, RECAPITALIZATION OR CHANGE OF CONTROL. If any change is made to the
Company's capitalization, such as a stock split, stock combination, stock
dividend, exchange of shares or other recapitalization, merger or otherwise,
which results in an increase or decrease in the number of outstanding shares of
Common Stock, appropriate adjustments will be made by the Committee in the
shares subject to an Award under the Long-Term Incentive Plan. The Committee has
discretion to determine whether an Award under the Long-Term Incentive Plan will
have change-of-control features. The Committee also has discretion to vary the
change-of-control features as its deems appropriate.
AMENDMENT. Without stockholder approval, the Board of Directors may at any
time and from time to time with respect to any shares which, at the time, are
not subject to Awards, suspend, discontinue, revise or amend the Long-Term
Incentive Plan in any respect whatsoever, and may amend any provision of the
Long-Term Incentive Plan or any Award Agreement to make the Long-Term Incentive
Plan or the Award Agreement, or both, comply with Section 16(b) of the Exchange
Act of 1934 and the exemptions therefrom, the Code, ERISA or any other law, rule
or regulation that may affect the Long-Term Incentive Plan. The Board of
Directors may also amend, modify, suspend or terminate the Long-Term Incentive
Plan for the purpose of meeting or addressing any changes in other legal
requirements applicable to the Company or the Long-Term Incentive Plan or for
any other purpose permitted by law. Subject to certain limitations, the
Long-Term Incentive Plan may not be amended without stockholder approval to
increase materially the aggregate number of shares of Common Stock that may be
issued under the Long-Term Incentive Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is for general information only and is intended to
summarize briefly the U.S. federal income tax consequences to Participants
arising from participation in the Long-Term Incentive Plan. This description is
based on current law, which is subject to change (possibly retroactively). The
tax treatment of a Participant in the Long-Term Incentive Plan may vary
depending on his or her particular situation and may, therefore, be subject to
special rules not discussed below. No attempt has been made to discuss any
potential foreign, state, or local tax consequences or the effect, if any, of
gift, estate, or inheritance taxes.
NONSTATUTORY OPTIONS; SARS; INCENTIVE OPTIONS. Participants will not
realize taxable income upon the grant of a Nonstatutory Option or a SAR. Upon
the exercise of a Nonstatutory Option or SAR, a Participant will recognize
ordinary compensation income (subject to withholding by the Company) in an
amount equal to the excess of (i) the amount of cash and the fair market value
of the Common Stock received, over (ii) the exercise price (if any) paid
therefor. A Participant will generally have a tax basis in any shares of Common
Stock received pursuant to the exercise of a SAR, or pursuant to the cash
exercise of a Nonstatutory Option, that equals the fair market value of such
shares on the date of exercise. Subject to the discussion under "--Tax Code
Limitations on Deductibility" below, the Company (or a subsidiary)
A-4
<PAGE>
will be entitled to a deduction for federal income tax purposes that corresponds
as to timing and amount with the compensation income recognized by a Participant
under the foregoing rules.
Participants eligible to receive an Incentive Option will not recognize
taxable income on the grant of an Incentive Option. Upon the exercise of an
Incentive Option, a Participant will not recognize taxable income, although the
excess of the fair market value of the shares of Common Stock received upon
exercise of the Incentive Option ("ISO STOCK") over the exercise price will
increase the alternative minimum taxable income of the Participant, which may
cause such Participant to incur alternative minimum tax. The payment of any
alternative minimum tax attributable to the exercise of an Incentive Option
would be allowed as a credit against the Participant's regular tax liability in
a later year to the extent the Participant's regular tax liability is in excess
of the alternative minimum tax for that year.
Upon the disposition of ISO Stock that has been held for the requisite
holding period (generally, at least two years from the date of grant and one
year from the date of exercise of the Incentive Option), a Participant will
generally recognize capital gain (or loss) equal to the excess (or shortfall) of
the amount received in the disposition over the exercise price paid by the
Participant for the ISO Stock. However, if a Participant disposes of ISO Stock
that has not been held for the requisite holding period (a "DISQUALIFYING
DISPOSITION"), the Participant will recognize ordinary compensation income in
the year of the disqualifying disposition in an amount equal to the amount by
which the fair market value of the ISO Stock at the time of exercise of the
Incentive Option (or, if less, the amount realized in the case of an arm's
length disqualifying disposition to an unrelated party) exceeds the exercise
price paid by the Participant for such ISO Stock. A Participant would also
recognize capital gain to the extent the amount realized in the disqualifying
disposition exceeds the fair market value of the ISO Stock on the exercise date.
If the exercise price paid for the ISO Stock exceeds the amount realized (in the
case of an arm's-length disposition to an unrelated party), such excess would
ordinarily constitute a capital loss.
The Company and its subsidiaries will generally not be entitled to any
federal income tax deduction upon the grant or exercise of an Incentive Option,
unless a Participant makes a disqualifying disposition of the ISO Stock. If a
Participant makes a disqualifying disposition, the Company (or a subsidiary)
will then, subject to the discussion below under "--Tax Code Limitations on
Deductibility," be entitled to a tax deduction that corresponds as to timing and
amount with the compensation income recognized by a Participant under the rules
described in the preceding paragraph.
Under current rulings, if a Participant transfers previously held shares of
Common Stock (other than ISO Stock that has not been held for the requisite
holding period) in satisfaction of all or part of the exercise price of an
Nonstatutory Option or Incentive Option, no additional gain will be recognized
on the transfer of such previously held shares in satisfaction of the
Nonstatutory Option or Incentive Option exercise price (although a Participant
would still recognize ordinary compensation income upon exercise of an
Nonstatutory Option in the manner described above). Moreover, that number of
shares of Common Stock received upon exercise which equals the number of shares
of previously held Common Stock surrendered therefor in satisfaction of the
Nonstatutory Option or Incentive Option exercise price will have a tax basis
that equals, and a holding period that includes, the tax basis and holding
period of the previously held shares of Common Stock surrendered in satisfaction
of the Nonstatutory Option or Incentive Option exercise price. Any additional
shares of Common Stock received upon exercise will have a tax basis that equals
the amount of cash (if any) paid by the Participant, plus the amount of
compensation income recognized by the Participant under the rules described
above. If a reload option is issued in connection with a Participant's transfer
of previously held Common Stock in full or partial satisfaction of the exercise
price of an Incentive Option or Nonstatutory Option, the tax consequences of the
reload option will be as provided above for an Incentive Option or Nonstatutory
Option, depending on whether the reload option itself is an Incentive Option or
Nonstatutory Option.
PERFORMANCE UNITS; RESTRICTED STOCK AWARDS. A Participant will recognize
ordinary compensation income upon receipt of cash pursuant to a Performance Unit
or, if earlier, at the time the cash is otherwise
A-5
<PAGE>
made available for the Participant to draw upon. A Participant will not have
taxable income at the time of grant of a stock Award in the form of Performance
Units denominated in Common Stock ("STOCK UNIT AWARD"), but rather, will
generally recognize ordinary compensation income at the time he receives Common
Stock in satisfaction of the Stock Unit Award in an amount equal to the fair
market value of the Common Stock received. In general, a Participant will
recognize ordinary compensation income as a result of the receipt of Common
Stock pursuant to a Restricted Stock Award or Performance Unit in an amount
equal to the fair market value of the Common Stock when such stock is received;
PROVIDED, HOWEVER, that if the stock is not transferable and is subject to a
substantial risk of forfeiture when received, a Participant will recognize
ordinary compensation income in an amount equal to the fair market value of the
Common Stock (a) when the Common Stock first becomes transferable or is no
longer subject to a substantial risk of forfeiture in cases where a Participant
does not make an valid election under Section 83(b) of the Code or (b) when the
Common Stock is received in cases where a Participant makes a valid Section
83(b) election.
A Participant will be subject to withholding for federal, and generally for
state and local, income taxes at the time he recognizes income under the rules
described above with respect to Common Stock or cash received. Dividends that
are received by a Participant prior to the time that the Common Stock is taxed
to the Participant under the rules described in the preceding paragraph are
taxed as additional compensation, not as dividend income. The tax basis of a
Participant in the Common Stock received will equal the amount recognized by him
as compensation income under the rules described in the preceding paragraph, and
the Participant's holding period in those shares will commence on the date of
receipt of the shares.
Subject to the discussion immediately below, the Company (or a subsidiary)
will be entitled to a deduction for federal income tax purposes that corresponds
as to timing and amount with the compensation income recognized by a Participant
under the foregoing rules.
TAX CODE LIMITATIONS ON DEDUCTIBILITY. In order for the amounts described
above to be deductible by the Company (or a subsidiary), such amounts must
constitute reasonable compensation for services rendered or to be rendered and
must be ordinary and necessary business expenses. The ability of the Company (or
a subsidiary) to obtain a deduction for future payments under the Long-Term
Incentive Plan could also be limited by the golden parachute payment rules of
Section 280G of the Code, which prevent the deductibility of certain excess
parachute payments made in connection with a change of control of an
employer-corporation. Finally, the ability of the Company (or a subsidiary) to
obtain a deduction for amounts paid under the Long-Term Incentive Plan could be
limited by Section 162(m) of the Code, which limits the deductibility, for
federal income tax purposes, of compensation paid to certain executive officers
of a publicly traded corporation to $1 million with respect to any such officer
during any taxable year of the corporation. However, an exception applies to
this limitation in the case of certain plans which allow for awards, the grant,
exercise or settlement of which are dependent on the satisfaction of certain
performance standards. The Long-Term Incentive Plan is intended to satisfy the
requirements for such a performance based compensation plan. However, while the
Company intends to comply with the requirements of the Code with respect to
Awards under the Long-Term Incentive Plan so as to be eligible for the
performance based compensation exception, the Company may, in its sole
discretion, determine that it is in its best interests to not satisfy the
requirements for the performance based compensation exception.
A-6
<PAGE>
LONG-TERM INCENTIVE PLAN BENEFIT TABLE
The Awards, if any, that will be made to eligible participants under the
Long-Term Incentive Plan for the Company's 1999 fiscal year are subject to the
discretion of the Committee and, therefore, cannot be determined with certainty
at this time. The following table sets forth, for the Named Executive Officers
and certain groups, all Awards (net of forfeitures) received (i) during 1997 in
connection with the Initial Public Offering as performance incentive for 1998,
(ii) during 1998, and (iii) during the first quarter of 1999 as a result of the
Company's performance in 1998.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
NAME AND PRINCIPAL POSITION UNDERLYING AWARDS
- - --------------------------------------------------------------------------------- -------------------
<S> <C>
George L. Lippe ................................................................. 86,587(1)
President and Chief Executive Officer,
Trammell Crow Company
Asuka Nakahara .................................................................. 75,842(1)
Executive Vice President and Chief Knowledge Officer, Trammell Crow Company
H. Pryor Blackwell .............................................................. 80,170(1)
Executive Vice President and Chief Operating Officer,
Trammell Crow Company
William C. Maddux ............................................................... 75,842(1)
Executive Vice President and President of Brokerage Operations,
Trammell Crow Company
Robert E. Sulentic .............................................................. 80,170(1)
Executive Vice President and Chief Financial Officer,
Trammell Crow Company
William F. Concannon ............................................................ 82,717(1)
President and Chief Executive Officer of
Trammell Crow Corporate Services, Inc.
William Rothacker ............................................................... 75,842(1)
President and Chief Executive Officer of
Trammell Crow Retail Services, Inc.
Executive Officer Group(2) ...................................................... 569,868(3)
Non-Executive Director Group(4) ................................................. 95,264(5)
Non-Executive Officer Employee Group(6) ......................................... 2,853,726(7)
</TABLE>
- - ------------------------------
(1) Includes options to acquire 58,529 share of Common Stock at an exercise
price of $17.50 per share granted in November 1997. The options vest over a
three-year period, with one-third vesting on each of the three anniversaries
of the grant date, and expire 10 years from the date of the grant. The
remaining Awards represent options to acquire shares of Common Stock at an
exercise price of $18.06 per share granted in February 1999. The options
vest over a three-year period, with one-third vesting on each of the three
anniversaries of the grant date, and expire 10 years from the date of the
grant.
(2) Consists of all executive officers of the Company (9 persons).
(3) Includes options to acquire 409,703 shares of Common Stock at an exercise
price of $17.50 per share and options to acquire 147,467 shares of Common
Stock at an exercise price of $18.06 per share granted in November 1997 and
February 1999, respectively. These options vest over a three-year period,
with one-third vesting on each of the three anniversaries of the grant date,
and expire 10 years from the date of the grant. Also includes immediately
exercisable options to acquire 12,698 shares of Common Stock at an exercise
price of $31.50 per share.
(4) Consists of all members of the Board of Directors who are not executive
officers of the Company (6 persons).
(5) Includes options to acquire 10,548 shares of Common Stock at a price of
$28.50 per share, options to acquire 15,822 shares of Common Stock at a
price of $22.75 per share, and options to acquire 16,725 shares of Common
Stock at a price of $19.38 per share, all of which are immediately
exercisable. Also includes options to acquire 40,965 shares of Common Stock
at a price of $17.50 per share and options to acquire 11,204 shares of
Common Stock at an exercise price of $18.06 per share granted in November
1997 and February 1999, respectively. The options vest over a three-year
period, with one-third vesting on each of the three anniversaries of the
grant date, and expire 10 years from the date of the grant.
(6) Consists of all employees of the Company (other than the executive officers
and Mr. Williams) who received awards under the Long-Term Incentive Plan
during fiscal 1998.
(7) Includes options to acquire shares of Common Stock at prices ranging from
$17.50 per share to $36.00 per share. Predominantly, the options vest over a
three-year period, with one-third vesting on each of the three anniversaries
of the grant date, and expire 10 years form the date of the grant.
A-7
<PAGE>
APPENDIX B
- - -------------------------------------------------------------------------------
TRAMMELL CROW LONG-TERM INCENTIVE PLAN
- - -------------------------------------------------------------------------------
EFFECTIVE AS OF AUGUST 22, 1997
B-1
<PAGE>
TRAMMELL CROW COMPANY
LONG-TERM INCENTIVE PLAN
SCOPE AND PURPOSE OF PLAN
Trammell Crow Company, a Delaware corporation (the "CORPORATION"), has
adopted this Long-Term Incentive Plan (the "PLAN") to provide for the granting
of:
(a) Incentive Options to certain Employees;
(b) Nonstatutory Options to certain Employees, Non-employee Directors and
other persons;
(c) Performance Units to certain Employees and other persons;
(d) Restricted Stock Awards to certain Employees and other persons; and
(e) Stock Appreciation Rights to certain Employees and other persons.
The purpose of the Plan is to provide an incentive for Employees, directors
and certain consultants and advisors of the Corporation or its Subsidiaries to
remain in the service of the Corporation or its Subsidiaries, to extend to them
the opportunity to acquire a proprietary interest in the Corporation so that
they will apply their best efforts for the benefit of the Corporation, and to
aid the Corporation in attracting able persons to enter the service of the
Corporation and its Subsidiaries.
SECTION 1. DEFINITIONS
As used in this Plan, the following terms have the meanings set forth
below:
1.1 "Award" means the grant of any form of Option, Performance Unit,
Reload Option, Restricted Stock Award or Stock Appreciation Right under the
Plan, whether granted singly, in combination, or in tandem, to a Holder pursuant
to the terms, conditions, and limitations that the Committee may establish in
order to fulfill the objectives of the Plan.
1.2 "Award Agreement" means the written document or agreement delivered to
Holder evidencing the terms, conditions and limitations of an Award that the
Corporation granted to that Holder.
1.3 "Board of Directors" means the board of directors of the Corporation.
1.4 "Business Day" means any day other than a Saturday, a Sunday or a day
on which banking institutions in the State of Texas are authorized or obligated
by law or executive order to close.
1.5 "Cause," with respect to any Holder that is an Employee, means
termination of the Holder's employment by the Corporation because of : (a) the
Holder's conviction of, or plea of nolo contendere to, a felony or crime
involving moral turpitude; (b) the Holder's personal dishonesty, incompetence,
willful
B-2
<PAGE>
misconduct, willful violation of any law, rule or regulation (other than
minor traffic violations or similar offenses) or breach of fiduciary duty
which involves personal profit; (c) the Holder's commission of material
mismanagement in the conduct of his duties as assigned to him by the Board of
Directors or the Holder's supervising officer or officers of the Corporation
or any Subsidiary; (d) the Holder's willful failure to execute or comply with
the policy of the Company or any of its Subsidiaries or his stated duties as
established by the Board of Directors or the Holder's supervising officer or
officers of the Corporation or any Subsidiary or the Holder's intentional
failure to perform the Holder's stated duties; or (e) substance abuse or
addiction on the part of the Holder. Notwithstanding the foregoing, in the
case of any Holder who, subsequent to the effective date of this Plan, enters
into an employment agreement with the Corporation or any Subsidiary that
contains the definition of "cause" (or any similar definition), then during
the term of such employment agreement the definition contained in such
Employment Agreement shall be the applicable definition of "cause" under the
Plan as to such Holder if such Employment Agreement expressly so provides.
1.6 "Change in Control" means the occurrence of any of the following
events:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "PERSON") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 50% or more of either (x) the then outstanding shares of Common
Stock of the Corporation (the "OUTSTANDING CORPORATION COMMON STOCK") or (y) the
combined voting power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of directors (the
"OUTSTANDING CORPORATION VOTING SECURITIES"); PROVIDED, HOWEVER, that for
purposes of this subsection (i), the following acquisitions shall not constitute
a Change of Control: (A) any acquisition directly from the Corporation, (B) any
acquisition by the Corporation, (C) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Corporation or any corporation
controlled by the Corporation or (D) any acquisition by any corporation pursuant
to a transaction which complies with clauses (A), (B) and (C) of paragraph (iii)
below; or
(ii) Individuals who, as of the date of this Plan, constitute the
Board of Directors cease for any reason to constitute at least a majority of the
Incumbent Board; or
(iii) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Corporation or an acquisition of assets of another corporation (a "BUSINESS
COMBINATION"), in each case, unless, following such Business Combination,
(A) all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Corporation, or all
or substantially all of the Corporation's assets either directly or through one
or more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding Corporation
Common Stock and Outstanding Corporation Voting Securities, as the case may be,
(B) no Person (excluding any employee benefit plan (or related trust) of the
Corporation or the corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then
B-3
<PAGE>
outstanding voting securities of such corporation except to the extent that
such ownership of the Corporation existed prior to the Business Combination
and (C) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of
the action of the Board, providing for such Business Combination; or
(iv) Approval by the stockholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
1.7 "Code" means the Internal Revenue Code of 1986, as amended.
1.8 "Committee" means the committee or subcommittee appointed pursuant to
Section 3 by the Board of Directors to administer this Plan.
1.9 "Common Stock" means the authorized common stock, par value $.01 per
share, as described in the Corporation's Certificate of Incorporation.
1.10 "Common Stock Equivalent" means (without duplication with any other
Common Stock or Common Stock Equivalents) rights, warrants, options, convertible
securities, exchangeable securities or indebtedness, or other rights,
exercisable for or convertible or exchangeable into, directly or indirectly,
Common Stock or securities convertible or exchangeable into Common Stock,
whether at the time the number of shares of Common Stock Equivalents are
determined or within sixty days of that date and that are traded or are of the
same class as securities that are traded on a national securities exchange or
quoted on the NASDAQ National Market System, NASDAQ, or National Quotation
Bureau Incorporated. The number of shares of Common Stock Equivalents
outstanding shall equal the number of shares of Common Stock plus the number of
shares of Common Stock issuable upon exercise, conversion or exchange of all
other Common Stock Equivalents.
1.11 "Corporation" means Trammell Crow Company, a Delaware corporation.
1.12 "Date of Grant" has the meaning given it in Paragraph 4.3.
1.13 "Disability" has the meaning given it in Paragraph 10.5.
1.14 "Effective Date" means August 22, 1997.
1.15 "Eligible Individuals" means (a) Employees, (b) Non-employee
Directors and (c) any other Person that the Committee designates as eligible
for an Award (other than for Incentive Options) because the Person performs
bona fide consulting or advisory services for the Corporation or any of its
Subsidiaries (other than services in connection with the offer or sale of
securities in a capital-raising transaction).
1.16 "Employee" means any employee of the Corporation or of any of its
Subsidiaries, including officers and directors of the Corporation who are also
employees of the Corporation or of any of its Subsidiaries.
1.17 "Exchange Act" means the Securities Exchange Act of 1934.
B-4
<PAGE>
1.18 "Exercise Notice" has the meaning given it in Paragraph 5.5.
1.19 "Exercise Price" has the meaning given it in Paragraph 5.4.
1.20 "Fair Market Value" means, for a particular day:
(a) If shares of Stock of the same class are listed or admitted to
unlisted trading privileges on any national or regional securities exchange
at the date of determining the Fair Market Value, then the last reported
sale price, regular way, on the composite tape of that exchange on the last
Business Day before the date in question or, if no such sale takes place on
that Business Day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to unlisted
trading privileges on that securities exchange; or
(b) If shares of Stock of the same class are not listed or admitted
to unlisted trading privileges as provided in Subparagraph 1.19(a) and if
sales prices for shares of Stock of the same class in the over-the-counter
market are reported by the NASDAQ National Market System (or a similar
system then in use) at the date of determining the Fair Market Value, then
the last reported sales price so reported on the last Business Day before
the date in question or, if no such sale takes place on that Business Day,
the average of the high bid and low asked prices so reported; or
(c) If shares of Stock of the same class are not listed or admitted
to unlisted trading privileges as provided in Subparagraph 1.19(a) and
sales prices for shares of Stock of the same class are not reported by the
NASDAQ National Market System (or a similar system then in use) as provided
in Subparagraph 1.19(b), and if bid and asked prices for shares of Stock of
the same class in the over-the-counter market are reported by NASDAQ (or,
if not so reported, by the National Quotation Bureau Incorporated) at the
date of determining the Fair Market Value, then the average of the high bid
and low asked prices on the last Business Day before the date in question;
or
(d) If shares of Stock of the same class are not listed or admitted
to unlisted trading privileges as provided in Subparagraph 1.19(a) and
sales prices or bid and asked prices therefor are not reported by NASDAQ
(or the National Quotation Bureau Incorporated) as provided in Subparagraph
1.19(b) or Subparagraph 1.19(c) at the date of determining the Fair Market
Value, then the value determined in good faith by the Committee, which
determination shall be conclusive for all purposes; or
(e) If shares of Stock of the same class are listed or admitted to
unlisted trading privileges as provided in Subparagraph 1.19(a) or sales
prices or bid and asked prices therefor are reported by NASDAQ (or the
National Quotation Bureau Incorporated) as provided in Subparagraph
1.19(b), Subparagraph 1.19(c) or Subparagraph 1.19(d) at the date of
determining the Fair Market Value, but the volume of trading is so low that
the Board of Directors determines in good faith that such prices are not
indicative of the fair value of the Stock, then the value determined in
good faith by the Committee, which determination shall be conclusive for
all purposes notwithstanding the provisions of Subparagraphs 1.19(a), (b),
(c) or (d).
B-5
<PAGE>
For purposes of valuing Incentive Options, the Fair Market Value of Stock shall
be determined without regard to any restriction other than one that, by its
terms, will never lapse and will be determined on the date in question instead
of the last Business Day before the date in question. For purposes of the
redemption provided for in Subparagraph 9.3(e)(vi), Fair Market Value shall have
the meaning and shall be determined as provided above; PROVIDED, HOWEVER, that
the Committee, with respect to any such redemption, shall have the right to
determine that the Fair Market Value for purposes of the redemption should be an
amount measured by the value of the shares of stock, other securities, cash or
property otherwise being received by holders of shares of Stock in connection
with the Restructure, and upon that determination the Committee shall have the
power and authority to determine Fair Market Value for purposes of the
redemption based upon the value of such shares of stock, other securities, cash
or property. Any such determination by the Committee shall be conclusive for
all purposes.
1.21 "Holder" means an Eligible Individual to whom an Award has been
granted.
1.22 "Incentive Option" means an incentive stock option as defined under
Section 422 of the Code and regulations thereunder.
1.23 "Incumbent Board" means the individuals who, as of the Effective Date,
constitute the Board of Directors and any other individual who becomes a
director of the Corporation after that date and whose election or appointment by
the Board of Directors or nomination for election by the Corporation's
stockholders was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Incumbent Board.
1.24 "NASDAQ" means the National Association of Securities Dealers, Inc.
Automated Quotations, Inc.
1.25 "Non-employee Director" means a director of the Corporation who while
a director is not an Employee.
1.26 "Nonstatutory Option" means a stock option that does not satisfy the
requirements of Section 422 of the Code or that is designated at the Date of
Grant or in the applicable Option Agreement to be an option other than an
Incentive Option.
1.27 "Non-Surviving Event" means an event of Restructure as described in
either subparagraph (b) or (c) of Paragraph 1.37.
1.28 "Option Agreement" means an Award Agreement for an Incentive Option or
a Nonstatutory Option.
1.29 "Option" means either an Incentive Option or a Nonstatutory Option, or
both.
1.30 "Performance Period" means a period of one or more fiscal years of the
Corporation, beginning with the fiscal year for which Performance Units are
granted and over which performance is
B-6
<PAGE>
measured, for the purpose of determining the payment value of Performance
Units. A Performance Period shall not exceed ten years.
1.31 "Performance Unit" means a unit representing a contingent right to
receive a specified amount of cash or shares of Stock at the end of a
Performance Period.
1.32 "Person" means any person or entity of any nature whatsoever,
specifically including (but not limited to) an individual, a firm, a company, a
corporation, a limited liability company, a partnership, a trust or other
entity. A Person, together with that Person's affiliates and associates (as
those terms are defined in Rule 12b-2 under the Exchange Act for purposes of
this definition only), and any Persons acting as a partnership, limited
partnership, joint venture, association, syndicate or other group (whether or
not formally organized), or otherwise acting jointly or in concert or in a
coordinated or consciously parallel manner (whether or not pursuant to any
express agreement), for the purpose of acquiring, holding, voting or disposing
of securities of the Corporation with that Person, shall be deemed a single
"Person."
1.33 "Plan" means the Trammell Crow Company Long-Term Incentive Plan, as it
may be amended from time to time.
1.34 "Reload Option" has the meaning given it in Paragraph 5.9.
1.35 "Restricted Stock Award" means the grant or purchase, on the terms and
conditions that the Committee determines or on the terms and conditions of
Section 7, of Stock that is nontransferable or subject to substantial risk of
forfeiture until specific conditions are met.
1.36 "Restructure" means the occurrence of any one or more of the
following:
(a) The merger or consolidation of the Corporation with any Person,
whether effected as a single transaction or a series of related
transactions, with the Corporation remaining the continuing or surviving
entity of that merger or consolidation and the Stock remaining outstanding
and not changed into or exchanged for stock or other securities of any
other Person or of the Corporation, cash or other property;
(b) The merger or consolidation of the Corporation with any Person,
whether effected as a single transaction or a series of related
transactions, with (i) the Corporation not being the continuing or
surviving entity of that merger or consolidation or (ii) the Corporation
remaining the continuing or surviving entity of that merger or
consolidation but all or a part of the outstanding shares of Stock are
changed into or exchanged for stock or other securities of any other Person
or the Corporation, cash, or other property; or
(c) The transfer, directly or indirectly, of all or substantially all
of the assets of the Corporation (whether by sale, merger, consolidation,
liquidation or otherwise) to any Person whether effected as a single
transaction or a series of related transactions.
1.37 "Retirement" means the separation of the Holder from employment with
the Corporation and its Subsidiaries on account of retirement.
B-7
<PAGE>
1.38 "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the Exchange Act,
or any successor rule, as it may be amended from time to time.
1.39 "SAR Exercise Price" has the meaning given it in Paragraph 1.43.
1.40 "Section 162(m)" means Section 162(m) of the Code and the rules and
regulations adopted from time to time thereunder, or any successor law or rule
as it may be amended from time to time.
1.41 "Securities Act" means the Securities Act of 1933.
1.42 "Stock" means Common Stock, or any other securities that are
substituted for Stock as provided in Section 9.
1.43 "Stock Appreciation Right" means the right to receive an amount equal
to the excess of the Fair Market Value of a share of Stock (as determined on the
date of exercise) over, as appropriate, the Exercise Price of a related Option
or over a price specified in the related Award Agreement (the "SAR EXERCISE
PRICE") that is not less than eighty-five percent of the Fair Market Value of
the Stock on the Date of Grant of the Stock Appreciation Right.
1.44 "Subsidiary" means, with respect to any Person, any corporation,
limited partnership, limited liability company or other entity of which a
majority of the voting power of the voting equity securities or equity interest
is owned, directly or indirectly, by that Person.
1.45 "Total Shares" has the meaning given it in Paragraph 9.2.
1.46 "Voting Securities" means any securities that are entitled to vote
generally in the election of directors, in the admission of general partners, or
in the selection of any other similar governing body.
SECTION 2. SHARES OF STOCK SUBJECT TO THE PLAN
2.1 MAXIMUM NUMBER OF SHARES. Subject to the provisions of Section 9 of
the Plan, the maximum aggregate number of shares of Stock in respect of which
Awards may be granted for all purposes under the Plan shall be [INSERT NUMBER
EQUAL TO 15% OF THE POST-IPO SHARES OUTSTANDING (AS DEFINED IN THE MERGER
AGREEMENT)].
2.2 RESTORATION OF UNUSED AND SURRENDERED SHARES. If Stock subject to any
Award is not issued or transferred, or ceases to be issuable or transferable for
any reason, including (but not exclusively) because an Award is forfeited,
terminated, expires unexercised, is settled in cash in lieu of Stock, or is
exchanged for other Awards, the shares of Stock that were subject to that Award
shall again be available for issue, transfer, or exercise pursuant to Awards
under the Plan to the extent of such forfeiture, termination, expiration,
settlement or exchange.
2.3 DESCRIPTION OF SHARES. The shares to be delivered under the Plan
shall be made available from (a) authorized but unissued shares of Stock, (b)
Stock held in the treasury of the Corporation, or (c) previously issued shares
of Stock reacquired by the Corporation, including shares purchased on the open
B-8
<PAGE>
market, in each situation as the Board of Directors or the Committee may
determine from time to time at its sole option.
2.4 REGISTRATION AND LISTING OF SHARES. From time to time, the Board of
Directors and appropriate officers of the Corporation shall be, and are,
authorized to take whatever actions are necessary to file required documents
with governmental authorities, stock exchanges and other appropriate Persons to
make shares of Stock available for issuance pursuant to Awards.
SECTION 3. ADMINISTRATION OF THE PLAN
3.1 COMMITTEE. The Board of Directors shall administer the Plan with
respect to all Eligible Individuals or may delegate all or part of its duties
under this Plan to the Committee or to any officer or committee of officers
of the Corporation, subject in each case to such conditions and limitations
as the Board of Directors may establish and subject to the following
sentence. Unless a majority of the members of the Board of Directors
determines otherwise: (a) the Committee shall be constituted in a manner
that satisfies the requirements of Rule 16b-3, which Committee shall
administer the Plan with respect to all Eligible Individuals who are subject
to Section 16 of the Exchange Act in a manner that satisfies the requirements
of Rule 16b-3; and (b) the Committee shall be constituted in a manner that
satisfies the requirements of Section 162(m), which Committee shall
administer the Plan with respect to "performance-based compensation" for all
Eligible Individuals who are reasonably expected to be "covered employees" as
those terms are defined in Section 162(m). The number of persons that shall
constitute the Committee shall be determined from time to time by a majority
of all the members of the Board of Directors. Except for references in
Paragraphs 3.1, 3.2, and 3.3 and unless the context otherwise requires,
references herein to the Committee shall also refer to the Board of Directors
as administrator of the Plan for Eligible Individuals or to the appropriate
delegate of the Committee or the Board of Directors.
3.2 DURATION, REMOVAL, ETC. The members of the Committee shall serve at
the pleasure of the Board of Directors, which shall have the power, at any
time and from time to time, to remove members from or add members to the
Committee. Removal from the Committee may be with or without cause. Any
individual serving as a member of the Committee shall have the right to
resign from membership in the Committee by at least three days written notice
to the Board of Directors. The Board of Directors, and not the remaining
members of the Committee, shall have the power and authority to fill
vacancies on the Committee, however caused.
3.3 MEETINGS AND ACTIONS OF COMMITTEE. The Board of Directors shall
designate which of the Committee members shall be the chairman of the
Committee. If the Board of Directors fails to designate a Committee chairman,
the members of the Committee shall elect one of the Committee members as
chairman, who shall act as chairman until he ceases to be a member of the
Committee or until the Board of Directors elects a new chairman. The
Committee shall hold its meetings at those times and places as the chairman
of the Committee may determine. At all meetings of the Committee, a quorum
for the transaction of business shall be required, and a quorum shall be
deemed present if at least a majority of the members of the Committee are
present. At any meeting of the Committee, each member shall have one vote.
All decisions and determinations of the Committee shall be made by the
majority vote or majority decision of all of its members present at a meeting
at which a quorum is present; provided, however, that any decision or
determination reduced to writing and signed by all of the members of the
Committee shall be as fully
B-9
<PAGE>
effective as if it had been made at a meeting that was duly called and held.
The Committee may make any rules and regulations as it may deem advisable for
the conduct of its business that are not inconsistent with the provisions of
the Plan, the Certificate of Incorporation and the by-laws of the
Corporation, Rule 16b-3, so long as it is applicable, and Section 162(m), so
long as it is applicable.
3.4 COMMITTEE'S POWERS. Subject to the express provisions of the Plan and
any applicable law with which the Corporation intends the Plan to comply, the
Committee shall have the authority, in its sole and absolute discretion, (a) to
adopt, amend and rescind administrative and interpretive rules and regulations
relating to the Plan, including without limitation to adopt and observe such
procedures concerning the counting of Awards against the Plan and individual
maximums as it may deem appropriate from time to time; (b) to determine the
Eligible Individuals to whom, and the time or times at which, Awards shall be
granted; (c) to determine the amount of cash and the number of shares of Stock,
Stock Appreciation Rights, Restricted Stock Awards or Performance Units, or any
combination thereof, that shall be the subject of each Award; (d) to determine
the terms and provisions of each Award Agreement (which need not be identical),
including provisions defining or otherwise relating to (i) the term and the
period or periods and extent of exercisability of the Options, (ii) the extent
to which the transferability of shares of Stock issued or transferred pursuant
to any Award is restricted, (iii) the effect of termination of employment on the
Award, and (iv) the effect of approved leaves of absence (consistent with any
applicable regulations of the Internal Revenue Service); (e) to accelerate,
pursuant to Section 9, the time of exercisability of any Option that has been
granted or the time of vesting or settlement of any Restricted Stock Award or
Performance Unit; (f) to construe the respective Award Agreements and the Plan;
(g) to make determinations of the Fair Market Value of the Stock pursuant to the
Plan; (h) to delegate its duties under the Plan to such agents as it may appoint
from time to time, subject to the second sentence of Paragraph 3.1; and (i) to
make all other determinations, perform all other acts, and exercise all other
powers and authority necessary or advisable for administering the Plan,
including the delegation of those ministerial acts and responsibilities as the
Committee deems appropriate subject in all respects to the last two sentences of
Paragraph 5.12. The Committee may correct any defect, supply any omission or
reconcile any inconsistency in the Plan, in any Award, or in any Award Agreement
in the manner and to the extent it deems necessary or desirable to carry the
Plan into effect, and the Committee shall be the sole and final judge of that
necessity or desirability. The determinations of the Committee on the matters
referred to in this Paragraph 3.4 shall be final and conclusive. The Committee
shall not have the power to appoint members of the Committee or to terminate,
modify or amend the Plan. Those powers are vested in the Board of Directors.
3.5 TRANSFERABILITY OF AWARDS. Notwithstanding any limitation on a
Holder's right to transfer an Award, the Committee may (in its sole discretion)
permit a Holder to transfer an Award, or may cause the Corporation to grant an
Award that otherwise would be granted to an Eligible Individual, in any of the
following circumstances: (a) pursuant to a qualified domestic relations order,
(b) to a trust established for the benefit of the Eligible Individual or one or
more of the children, grandchildren or spouse of the Eligible Individual; (c) to
a limited partnership in which all the interests are held by the Eligible
Individual and that Person's children, grandchildren or spouse; or (d) to
another Person in circumstances that the Committee believes will result in the
Award continuing to provide an incentive for the Eligible Individual to remain
in the service of the Corporation or its Subsidiaries and apply his or her best
efforts for the benefit of the Corporation or its Subsidiaries. If the
Committee determines to allow such transfers or issuances of Awards, any Holder
or Eligible Individual desiring such transfers or issuances shall make
application therefor in the manner and time that the Committee specifies and
shall comply with such other requirements as the Committee may require to assure
compliance with all applicable laws, including securities laws, and to
B-10
<PAGE>
assure fulfillment of the purposes of this Plan. The Committee shall not
authorize any such transfer or issuance if it may not be made in compliance
with all applicable federal, state and foreign securities laws. The granting
of permission for such an issuance or transfer shall not obligate the
Corporation to register the shares of Stock to be issued under the applicable
Award.
SECTION 4. ELIGIBILITY AND PARTICIPATION
4.1 ELIGIBLE INDIVIDUALS. Awards may be granted pursuant to the Plan only
to persons who are Eligible Individuals at the time of the grant thereof or in
connection with the severance or retirement of Eligible Individuals.
4.2 GRANT OF AWARDS. Subject to the express provisions of the Plan, the
Committee shall determine which Eligible Individuals shall be granted Awards
from time to time. In making grants, the Committee shall take into
consideration the contribution the potential Holder has made or may make to the
success of the Corporation or its Subsidiaries and such other considerations as
the Board of Directors may from time to time specify. The Committee shall also
determine the number of shares or cash amounts subject to each of the Awards and
shall authorize and cause the Corporation to grant Awards in accordance with
those determinations.
4.3 DATE OF GRANT. The date on which an Award is granted (the "DATE OF
GRANT") shall be the date specified by the Committee as the effective date or
date of grant of an Award or, if the Committee does not so specify, shall be the
date as of which the Committee adopts the resolution approving the offer of an
Award to an individual, including the specification of the number (or method of
determining the number) of shares of Stock and the amount (or method of
determining the amount) of cash to be subject to the Award, even though certain
terms of the Award Agreement may not be determined at that time and even though
the Award Agreement may not be executed or delivered until a later time. In no
event shall a Holder gain any rights in addition to those specified by the
Committee in its grant, regardless of the time that may pass between the grant
of the Award and the actual execution or delivery of the Award Agreement by the
Corporation or the Holder. The Committee may invalidate an Award at any time
before the Award Agreement is signed by the Holder (if signature is required) or
is delivered to the Holder (if signature is not required), and such Award shall
be treated as never having been granted.
4.4 AWARD AGREEMENTS. Each Award granted under the Plan shall be
evidenced by an Award Agreement that incorporates those terms that the Committee
shall deem necessary or desirable. More than one Award may be granted under the
Plan to the same Eligible Individual and be outstanding concurrently. If an
Eligible Individual is granted both one or more Incentive Options and one or
more Nonstatutory Options, those grants shall be evidenced by separate Award
Agreements, one for each of the Incentive Option grants and one for each of the
Nonstatutory Option grants.
4.5 LIMITATION FOR INCENTIVE OPTIONS. Notwithstanding any provision
contained herein to the contrary, (a) a person shall not be eligible to receive
an Incentive Option unless he or she is an Employee of the Corporation or a
corporate Subsidiary (but not a partnership or other non-corporate Subsidiary),
and (b) a person shall not be eligible to receive an Incentive Option if,
immediately before the time the Incentive Option is granted, that person owns
(within the meaning of Sections 422 and 424 of the Code) stock possessing more
than ten percent of the total combined voting power or value of all classes of
stock of the
B-11
<PAGE>
Corporation or a Subsidiary. Nevertheless, this Subparagraph 4.5(b) shall
not apply if, at the time the Incentive Option is granted, the Exercise Price
of the Incentive Option is at least one hundred and ten percent of the Fair
Market Value of the Stock underlying the Incentive Option and the Incentive
Option is not, by its terms, exercisable after the expiration of five years
from the Date of Grant.
4.6 NO RIGHT TO AWARD. The adoption of the Plan shall not be deemed to
give any person a right to be granted an Award.
SECTION 5. TERMS AND CONDITIONS OF OPTIONS
All Options granted under the Plan shall comply with, and the related
Option Agreements shall be deemed to include and be subject to, the terms and
conditions set forth in this Section 5 (to the extent each term and condition
applies to the form of Option) and also to the terms and conditions set forth in
Paragraph 9.1 and Section 10; PROVIDED, HOWEVER, that the Committee may
authorize an Option Agreement that expressly contains terms and provisions that
differ from the terms and provisions of Section 10. The Committee may also
authorize an Option Agreement that contains any or all of the terms and
provisions of Paragraphs 9.2 and 9.3 or that contains terms and provisions
dealing with similar subject matter differently than do those Paragraphs;
nevertheless, no term or provision of Paragraph 9.2 or 9.3 (or any such
differing term or provision) shall apply to an Option Agreement unless the
Option Agreement expressly states that such term or provision applies.
5.1 NUMBER OF SHARES. Each Option Agreement shall state the total number
of shares of Stock to which it relates.
5.2 VESTING. Each Option Agreement shall state the time, periods or other
conditions on which the right to exercise the Option or a portion thereof shall
vest and the number (or method of determining the number) of shares of Stock for
which the right to exercise the Option shall vest at each such time, period or
satisfaction of condition.
5.3 EXPIRATION OF OPTIONS. Nonstatutory Options and Incentive Options may
be exercised during the term determined by the Committee and set forth in the
Option Agreement; PROVIDED that no Incentive Option shall be exercised after the
expiration of a period of ten years commencing on the Date of Grant of the
Incentive Option.
5.4 EXERCISE PRICE. Each Option Agreement shall state the exercise price
per share of Stock (the "EXERCISE PRICE"). The exercise price per share of
Stock subject to an Incentive Option shall not be less than the greater of
(a) the par value per share of the Stock or (b) 100% of the Fair Market Value
per share of the Stock on the Date of Grant of the Option. The exercise price
per share of Stock subject to a Nonstatutory Option shall not be less than the
greater of (a) the par value per share of the Stock or (b) eighty-five percent
of the Fair Market Value per share of the Stock on the Date of Grant of the
Option.
5.5 METHOD OF EXERCISE. Each Option shall be exercisable only by written,
recorded electronic or other notice of exercise in the manner specified by the
Committee from time to time (the "EXERCISE NOTICE") delivered to the Corporation
or to the Person designated by the Committee during the term of the Option,
which notice shall (a) state the number of shares of Stock with respect to which
the Option is being
B-12
<PAGE>
exercised, (b) be signed or otherwise given by the Holder of the Option or
by the person authorized to exercise the Option in the event of the Holder's
death or disability, (c) be accompanied by the Exercise Price for all shares
of Stock for which the Option is exercised, unless provision for the payment
of the Exercise Price has been made pursuant to Paragraph 5.7 or 5.8 or in
another manner permitted by law and approved in advance by the Committee, and
(d) include such other information, instruments, and documents as may be
required to satisfy any other condition to exercise contained in the Option
Agreement. The Option shall not be deemed to have been exercised unless all
of the requirements of the preceding provisions of this Paragraph 5.5 have
been satisfied.
5.6 INCENTIVE OPTION EXERCISES. During the Holder's lifetime, only the
Holder may exercise an Incentive Option. The Holder of an Incentive Option
shall immediately notify the Corporation in writing of any disposition of the
Stock acquired pursuant to the Incentive Option that would disqualify the
Incentive Option from the incentive option tax treatment afforded by Section 422
of the Code. The notice shall state the number of shares disposed of, the dates
of acquisition and disposition of the shares, and the consideration received
upon that disposition.
5.7 MEDIUM AND TIME OF PAYMENT. The Exercise Price of an Option shall be
payable in full upon the exercise of the Option (a) in cash or by an equivalent
means (such as that specified in Paragraph 5.8) acceptable to the Committee, (b)
on the Committee's prior consent, with shares of Stock owned by the Holder
(including shares received upon exercise of the Option or restricted shares
already held by the Holder) and having a Fair Market Value at least equal to the
aggregate Exercise Price payable in connection with such exercise, or (c) by any
combination of clauses (a) and (b). If the Committee chooses to accept shares
of Stock in payment of all or any portion of the Exercise Price, then (for
purposes of payment of the Exercise Price) those shares of Stock shall be deemed
to have a cash value equal to their aggregate Fair Market Value determined as of
the date of the delivery of the Exercise Notice. If the Committee elects to
accept shares of restricted Stock in payment of all or any portion of the
Exercise Price, then an equal number of shares issued pursuant to the exercise
shall be restricted on the same terms and for the restriction period remaining
on the shares used for payment.
5.8 PAYMENT WITH SALE PROCEEDS. In addition, at the request of the Holder
and to the extent permitted by applicable law, the Committee may (but shall not
be required to) approve arrangements with a brokerage firm under which that
brokerage firm, on behalf of the Holder, shall pay to the Corporation the
Exercise Price of the Option being exercised (either as a loan to the Holder or
from the proceeds of the sale of Stock issued pursuant to that exercise of the
Option), and the Corporation shall promptly cause the exercised shares to be
delivered to the brokerage firm. Such transactions shall be effected in
accordance with the procedures that the Committee may establish from time to
time.
5.9 RELOAD PROVISIONS. Options may contain a provision pursuant to which
a Holder who pays all or a portion of the Exercise Price of an Option or the tax
required to be withheld pursuant to the exercise of an Option by surrendering
shares of Stock shall automatically be granted an Option for the purchase of the
number of shares of Stock equal to the number of shares surrendered (a "RELOAD
OPTION"). The Date of Grant of the Reload Option shall be the date on which the
Holder surrenders the shares of Stock in respect of which the Reload Option is
granted. The Reload Option shall have an Exercise Price equal to the Fair
Market Value of a share of Stock on the Date of Grant of the Reload Option and
shall have a term that is no longer than the original term of the underlying
Option.
B-13
<PAGE>
5.10 LIMITATION ON AGGREGATE VALUE OF SHARES THAT MAY BECOME FIRST
EXERCISABLE DURING ANY CALENDAR YEAR UNDER AN INCENTIVE OPTION. Except as is
otherwise provided in subparagraph 9.2(b), with respect to any Incentive
Option granted under this Plan, the aggregate Fair Market Value of shares of
Stock subject to an Incentive Option and the aggregate Fair Market Value of
shares of Stock or stock of any Subsidiary (or a predecessor of the
Corporation or a Subsidiary) subject to any other incentive stock option
(within the meaning of Section 422 of the Code) of the Corporation or its
Subsidiaries (or a predecessor corporation of any such corporation) that
first become purchasable by a Holder in any calendar year may not (with
respect to that Holder) exceed $100,000, or such other amount as may be
prescribed under Section 422 of the Code or applicable regulations or rulings
from time to time. As used in the previous sentence, Fair Market Value shall
be determined as of the date the Incentive Option is granted. For purposes
of this Paragraph 5.10 "predecessor corporation" means (a) a corporation that
was a party to a transaction described in Section 424(a) of the Code (or
which would be so described if a substitution or assumption under that
Section had been effected) with the Corporation, (b) a corporation which, at
the time the new incentive stock option (within the meaning of Section 422 of
the Code) is granted, is a Subsidiary of the Corporation or a predecessor
corporation of any such corporations, or (c) a predecessor corporation of any
such corporations. Failure to comply with this provision shall not impair
the enforceability or exercisability of any Option, but shall cause the
excess amount of shares to be reclassified in accordance with the Code.
5.11 NO FRACTIONAL SHARES. The Corporation shall not in any case be
required to sell, issue, or deliver a fractional share with respect to any
Option. In lieu of the issuance of any fractional share of Stock, the
Corporation shall pay to the Holder an amount in cash equal to the same
fraction (as the fractional Stock) of the Fair Market Value of a share of
Stock determined as of the date of the applicable Exercise Notice.
5.12 MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to the
terms and conditions of and within the limitations of the Plan and any
applicable law, and any consent required by the last two sentences of this
Paragraph 5.12, the Committee may (a) modify, extend or renew outstanding
Options granted under the Plan, (b) accept the surrender of Options
outstanding hereunder (to the extent not previously exercised) and authorize
the granting of new Options in substitution for outstanding Options (to the
extent not previously exercised), and (c) amend the terms of an Incentive
Option at any time to include provisions that have the effect of changing the
Incentive Option to a Nonstatutory Option. Nevertheless, without the consent
of the Holder, the Committee may not modify any outstanding Options so as to
specify a higher Exercise Price or accept the surrender of outstanding
Incentive Options and authorize the granting of new Options in substitution
therefor specifying a higher Exercise Price. In addition, no modification of
an Option granted hereunder shall, without the consent of the Holder,
materially alter or impair any rights of the Holder or materially increase
the obligations of a Holder under any Option theretofore granted to that
Holder under the Plan except, with respect to Incentive Options, as may be
necessary to satisfy the requirements of Section 422 of the Code or as
permitted in clause (c) of this Paragraph 5.12.
5.13 OTHER AGREEMENT PROVISIONS. The Option Agreements authorized under
the Plan shall contain such provisions in addition to those required by the
Plan (including, without limitation, restrictions or the removal of
restrictions upon the exercise of the Option and the retention or transfer of
shares thereby acquired) as the Committee may deem advisable. Each Option
Agreement shall identify the Option evidenced thereby as an Incentive Option
or Nonstatutory Option, as the case may be, and no Option Agreement shall
cover both an Incentive Option and a Nonstatutory Option. Each Agreement
relating to an Incentive Option granted hereunder shall contain such
limitations and restrictions upon the exercise of the
B-14
<PAGE>
Incentive Option to which it relates as shall be necessary for the Incentive
Option to which such Agreement relates to constitute an incentive stock
option, as defined in Section 422 of the Code.
SECTION 6. STOCK APPRECIATION RIGHTS
All Stock Appreciation Rights granted under the Plan shall comply with,
and the related Award Agreements shall be deemed to include and be subject
to, the terms and conditions set forth in this Section 6 (to the extent each
term and condition applies to the form of Stock Appreciation Right) and also
to the terms and conditions set forth in Paragraph 9.1 and Section 10;
PROVIDED, HOWEVER, that the Committee may authorize an Award Agreement
relating to a Stock Appreciation Right that expressly contains terms and
provisions that differ from the terms and provisions of Section 10. The
Committee may also authorize an Award Agreement relating to a Stock
Appreciation Right that contains any or all of the terms and provisions of
Paragraphs 9.2 and 9.3 or that contains terms and provisions dealing with
similar subject matter differently than do those Paragraphs; nevertheless, no
term or provision of Paragraph 9.2 or 9.3 (or any such differing term or
provision) shall apply to an Award Agreement relating to a Stock Appreciation
Right unless the Award Agreement expressly states that such term or provision
applies.
6.1 FORM OF RIGHT. A Stock Appreciation Right may be granted to an
Eligible Individual (a) in connection with an Option, either at the time of
grant or at any time during the term of the Option, or (b) without relation
to an Option.
6.2 RIGHTS RELATED TO OPTIONS. A Stock Appreciation Right granted
pursuant to an Option shall entitle the Holder, upon exercise, to surrender
that Option or any portion thereof, to the extent unexercised, and to receive
payment of an amount computed pursuant to Subparagraph 6.2(b). That Option
shall then cease to be exercisable to the extent surrendered. Stock
Appreciation Rights granted in connection with an Option shall be subject to
the terms of the Award Agreement governing the Option, which shall comply
with the following provisions in addition to those applicable to Options:
(a) EXERCISE AND TRANSFER. Subject to Paragraph 10.10, a Stock
Appreciation Right granted in connection with an Option shall be
exercisable only at such time or times and only to the extent that the
related Option is exercisable and shall not be transferable except to the
extent that the related Option is transferable. To the extent that an
Option has been exercised, the Stock Appreciation Rights granted in
connection with that Option shall terminate.
(b) VALUE OF RIGHT. Upon the exercise of a Stock Appreciation Right
related to an Option, the Holder shall be entitled to receive payment from
the Corporation of an amount determined by multiplying:
(i) The difference obtained by subtracting the Exercise Price of
a share of Stock specified in the related Option from the Fair Market
Value of a share of Stock on the date of exercise of the Stock
Appreciation Right, by
(ii) The number of shares as to which that Stock Appreciation
Right has been exercised.
B-15
<PAGE>
6.3 RIGHT WITHOUT OPTION. A Stock Appreciation Right granted without
relationship to an Option shall be exercisable as determined by the Committee
and set forth in the Award Agreement governing the Stock Appreciation Right,
which Award Agreement shall comply with the following provisions:
(a) NUMBER OF SHARES. Each Award Agreement shall state the total
number of shares of Stock to which the Stock Appreciation Right relates.
(b) VESTING. Each Award Agreement shall state the time, periods or
other conditions on which the right to exercise the Stock Appreciation
Right or a portion thereof shall vest and the number of shares of Stock for
which the right to exercise the Stock Appreciation Right shall vest at each
such time, period or satisfaction of condition.
(c) EXPIRATION OF RIGHTS. Each Award Agreement shall state the date
at which the Stock Appreciation Rights shall expire if not previously
exercised.
(d) VALUE OF RIGHT. A Stock Appreciation Right granted without
relationship to an Option shall entitle the Holder, upon exercise of the
Stock Appreciation Right, to receive payment of an amount determined by
multiplying:
(i) The difference obtained by subtracting the SAR Exercise
Price from the Fair Market Value of a share of Stock on the date of
exercise of that Stock Appreciation Right, by
(ii) The number of rights as to which the Stock Appreciation
Right has been exercised.
6.4 LIMITATIONS ON RIGHTS. Notwithstanding Subparagraph 6.2(b) and
Subparagraph 6.3(d), the Committee may limit the amount payable upon exercise
of a Stock Appreciation Right. Any such limitation must be determined as of
the Date of Grant and be noted on the instrument evidencing the Stock
Appreciation Right.
6.5 PAYMENT OF RIGHTS. Payment of the amount determined under
Subparagraph 6.2(b) or Subparagraph 6.3(d) and Paragraph 6.4 may, in the sole
discretion of the Committee, be made solely in whole shares of Stock valued
at Fair Market Value on the date of exercise of the Stock Appreciation Right
or, in the sole discretion of the Committee, solely in cash or a combination
of cash and Stock. If the Committee decides to make full payment in shares
of Stock and the amount payable results in a fractional share, payment for
the fractional share shall be made in cash.
6.6 OTHER AGREEMENT PROVISIONS. The Award Agreements authorized
relating to Stock Appreciation Rights shall contain such provisions in
addition to those required by the Plan (including, without limitation,
restrictions or the removal of restrictions upon the exercise of the Stock
Appreciation Right and the retention or transfer of shares thereby acquired)
as the Committee may deem advisable.
B-16
<PAGE>
SECTION 7. RESTRICTED STOCK AWARDS
All Restricted Stock Awards granted under the Plan shall comply with, and
the related Award Agreements shall be deemed to include, and be subject to
the terms and conditions set forth in this Section 7 and also to the terms
and conditions set forth in Paragraph 9.1 and Section 10; PROVIDED, HOWEVER,
that the Committee may authorize an Award Agreement relating to a Restricted
Stock Award that expressly contains terms and provisions that differ from the
terms and provisions of Section 10. The Committee may also authorize an
Award Agreement relating to a Restricted Stock Award that contains any or all
of the terms and provisions of Paragraphs 9.2 and 9.3 or that contains terms
and provisions dealing with similar subject matter differently than do those
Paragraphs; nevertheless, no term or provision of Paragraph 9.2 or 9.3 (or
any such differing term or provision) shall apply to an Award Agreement
relating to a Restricted Stock Award unless the Award Agreement expressly
states that such term or provision applies.
7.1 RESTRICTIONS. All shares of Restricted Stock Awards granted or sold
pursuant to the Plan shall be subject to the following conditions:
(a) TRANSFERABILITY. The shares may not be sold, transferred or
otherwise alienated or hypothecated until the restrictions are removed or
expire.
(b) CONDITIONS TO REMOVAL OF RESTRICTIONS. Conditions to removal or
expiration of the restrictions may include, but are not required to be
limited to, continuing employment or service as a director, officer,
consultant or advisor or achievement of performance objectives described in
the Award Agreement.
(c) LEGEND. Each certificate representing Restricted Stock Awards
granted pursuant to the Plan shall bear a legend making appropriate
reference to the restrictions imposed.
(d) POSSESSION. At its sole discretion, the Committee may (i)
authorize issuance of a certificate for shares in the Holder's name only
upon lapse of the applicable restrictions, (ii) require the Corporation,
transfer agent or other custodian to retain physical custody of the
certificates representing Restricted Stock Awards during the restriction
period and may require the Holder of the Award to execute stock powers,
endorsed or in blank, for those certificates and deliver those stock
powers to the Corporation, transfer agent or custodian, or (iii) may
require the Holder to enter into an escrow agreement providing that the
certificates representing Restricted Stock Awards granted or sold pursuant
to the Plan shall remain in the physical custody of an escrow holder until
all restrictions are removed or expire. The Corporation may issue shares
subject to stop-transfer restrictions or may issue such shares subject only
to the restrictive legend described in subparagraph 7.1(c).
(e) OTHER CONDITIONS. The Committee may impose other conditions on
any shares granted or sold as Restricted Stock Awards pursuant to the Plan
as it may deem advisable, including, without limitation, (i) restrictions
under the Securities Act or Exchange Act, (ii) the requirements of any
securities exchange upon which the shares or shares of the same class are
then listed, and (iii) any state securities law applicable to the shares.
B-17
<PAGE>
7.2 EXPIRATION OF RESTRICTIONS. The restrictions imposed in Paragraph
7.1 on Restricted Stock Awards shall lapse as determined by the Committee and
set forth in the applicable Award Agreement, and the Corporation shall
promptly cause to be delivered to the Holder of the Restricted Stock Award a
certificate representing the number of shares for which restrictions have
lapsed, free of any restrictive legend relating to the lapsed restrictions.
Each Restricted Stock Award may have a different restriction period, in the
discretion of the Committee. The Committee may, in its discretion,
prospectively reduce the restriction period applicable to a particular
Restricted Stock Award. The foregoing notwithstanding, no restriction not
required by law shall remain in effect for more than ten years after the date
of the Award.
7.3 CHANGES IN ACCOUNTING RULES. Notwithstanding any other provision of
the Plan to the contrary, if, during the term of the Plan, any changes in the
financial or tax accounting rules applicable to Restricted Stock Awards shall
occur that, in the sole judgement of the Board of Directors, may have a
material adverse effect on the reported earnings, assets, or liabilities of
the Corporation, the Committee shall have the right and power to modify as
necessary any then outstanding Restricted Stock Awards as to which the
applicable restrictions have not been satisfied.
7.4 RIGHTS AS STOCKHOLDER. Subject to the provisions of Paragraphs 7.1
and 10.11, the Committee may, in its discretion, determine what rights, if
any, the Holder shall have with respect to the Restricted Stock Awards
granted or sold, including the right to vote the shares and receive all
dividends and other distributions paid or made with respect thereto.
7.5 OTHER AGREEMENT PROVISIONS. The Award Agreements relating to
Restricted Stock Awards shall contain such provisions in addition to those
required by the Plan as the Committee may deem advisable.
SECTION 8. PERFORMANCE UNITS
All Performance Units granted under the Plan shall comply with, and the
related Award Agreements shall be deemed to include and be subject to, the
terms and conditions set forth in this Section 8 (to the extent each term and
condition applies to the form of Performance Unit) and also to the terms and
conditions set forth in Paragraph 9.1 and Section 10; PROVIDED, HOWEVER, that
the Committee may authorize an Award Agreement related to a Performance Unit
that expressly contains terms and provisions that differ from the terms and
provisions of Section 10. The Committee may also authorize an Award
Agreement related to a Performance Unit that contains any or all of the terms
and provisions of Paragraphs 9.2 and 9.3 or that contains terms and
provisions dealing with similar subject matter differently than do those
Paragraphs; nevertheless, no term or provision of Paragraph 9.2 or 9.3 (or
any such differing term or provision) shall apply to an Award Agreement
related to a Performance Unit unless the Award Agreement expressly states
that such term or provision applies.
8.1 MULTIPLE GRANTS. The Committee may make grants of Performance Units
in such a manner that more than one Performance Period is in progress
simultaneously. At or before the beginning of each Performance Period, the
Committee will establish the contingent value of each Performance Unit, if
any, for that Performance Period, which may vary depending on the degree to
which performance objectives established by the Committee are met.
B-18
<PAGE>
8.2 PERFORMANCE STANDARDS. At or before the beginning of each
Performance Period, the Committee will (a) establish the beginning and ending
dates of the Performance Period, (b) establish for that Performance Period
specific performance objectives as the Committee (in its sole discretion)
believes are relevant to the Corporation's overall business objectives, (c)
determine the minimum and maximum value of a Performance Unit and the value
of a Performance Unit based on the degree to which performance objectives are
achieved, exceeded or not achieved, (d) determine a minimum performance level
below which Performance Units will be assigned a value of zero, and a maximum
performance level above which the value of Performance Units will not
increase, and (e) notify each Holder of a Performance Unit for that
Performance Period in writing of the established performance objectives and
minimum, target and maximum Performance Unit value for that Performance
Period.
8.3 MODIFICATION OF STANDARDS. If the Committee determines in its sole
discretion that the established performance measures or objectives are no
longer suitable to the Corporation's objectives because of a change in the
Corporation's business, operations, corporate structure, capital structure or
other conditions the Committee deems to be material, the Committee may modify
the performance measures and objectives as it considers appropriate and
equitable.
8.4 PAYMENT. The basis for payment of Performance Units for a given
Performance Period will be the achievement of those performance objectives
determined by the Committee at the beginning of the Performance Period. If
minimum performance is not achieved or exceeded for a Performance Period, no
payment will be made and all contingent rights will cease. If minimum
performance is achieved or exceeded, the value of a Performance Unit will be
based on the degree to which actual performance exceeded the pre-established
minimum performance standards. The amount of payment will be determined by
multiplying the number of Performance Units granted at the beginning of the
Performance Period by the final Performance Unit value. Payments will be
made in cash or Stock as soon as administratively possible following the
close of the applicable Performance Period.
8.5 OTHER AGREEMENT PROVISIONS. The Award Agreements, if any,
authorized relating to Performance Units shall contain such provisions in
addition to those required by the Plan (including, without limitation,
restrictions or the removal of restrictions upon the transfer of shares
thereby acquired) as the Committee may deem advisable.
SECTION 9. ADJUSTMENT PROVISIONS
The Committee may authorize an Award that contains any or all of the
terms and provisions of this Section 9 or, with respect to Paragraphs 9.2 and
9.3, that contains terms and provisions dealing with similar subject matter
differently than do those Paragraphs; nevertheless, no term or provision of
Paragraph 9.2 or 9.3 (or any such differing term or provision) shall apply to
an Award Agreement unless the Award Agreement expressly states that such term
or provision applies.
9.1 ADJUSTMENT OF AWARDS AND AUTHORIZED STOCK. The terms of an Award,
the number of shares of Stock authorized pursuant to Paragraph 2.1 for
issuance under the Plan, and the number shares of Stock that constitute the
individual limitations in Paragraph 2.6 shall be subject to adjustment, from
time to time, in accordance with the following provisions:
B-19
<PAGE>
(a) If at any time or from time to time, the Corporation shall
subdivide as a whole (by reclassification, by a Stock split, by the
issuance of a distribution on Stock payable in Stock or otherwise) the
number of shares of Stock then outstanding into a greater number of shares
of Stock, then (i) the maximum number of shares of Stock available for the
Plan and for any individual as provided in Paragraph 2.1 and Paragraph 2.6,
respectively, shall be increased proportionately, and the kind of shares or
other securities available for the Plan shall be appropriately adjusted,
(ii) the number of shares of Stock (or other kind of shares or securities)
that may be acquired under any Award shall be increased proportionately,
and (iii) the price (including Exercise Price) for each share of Stock (or
other kind of shares or unit of other securities) subject to then
outstanding Awards shall be reduced proportionately, without changing the
aggregate purchase price or value as to which outstanding Awards remain
exercisable or subject to restrictions.
(b) If at any time or from time to time the Corporation shall
consolidate as a whole (by reclassification, reverse Stock split, or
otherwise) the number of shares of Stock then outstanding into a lesser
number of shares of Stock, (i) the maximum number of shares of Stock
available for the Plan and for any individual as provided in Paragraph 2.1
and Paragraph 2.6, respectively shall be decreased proportionately, and the
kind of shares or other securities available for the Plan shall be
appropriately adjusted, (ii) the number of shares of Stock (or other kind
of shares or securities) that may be acquired under any Award shall be
decreased proportionately, and (iii) the price (including Exercise Price)
for each share of Stock (or other kind of shares or unit of other
securities) subject to then outstanding Awards shall be increased
proportionately, without changing the aggregate purchase price or value as
to which outstanding Awards remain exercisable or subject to restrictions.
(c) Whenever the number of shares of Stock subject to outstanding
Awards and the price for each share of Stock subject to outstanding Awards
are required to be adjusted as provided in this Paragraph 9.1, the
Committee shall promptly prepare a notice setting forth, in reasonable
detail, the event requiring adjustment, the amount of the adjustment, the
method by which such adjustment was calculated, and the change in price and
the number of shares of Stock, other securities, cash or property
purchasable subject to each Award after giving effect to the adjustments.
The Committee shall promptly give each Holder such a notice.
(d) Adjustments under Paragraph 9(a) and (b) shall be made by the
Committee, and its determination as to what adjustments shall be made and
the extent thereof shall be final, binding and conclusive. No fractional
interest shall be issued under the Plan on account of any such adjustments.
9.2 CHANGES IN CONTROL. Upon the occurrence of a Change in Control, but
only if approved by the Committee, for Awards held by Participants who are
employees or directors of the Corporation (and their permitted transferees
pursuant to Paragraph 3.5), (a) all outstanding Stock Appreciation Rights and
Options shall immediately become fully vested and exercisable in full,
including that portion of any Stock Appreciation Right or Option that
pursuant to the terms and provisions of the applicable Award Agreement had
not yet become exercisable (the total number of shares of Stock as to which a
Stock Appreciation Right or Option is exercisable upon the occurrence of a
Change in
B-20
<PAGE>
Control is referred to herein as the "TOTAL SHARES"); (b) the restriction
period of any Restricted Stock Award shall immediately be accelerated and the
restrictions shall expire; and (c) the target payout opportunity attainable
under the Performance Units will be deemed to have been fully earned for all
Performance Periods upon the occurrence of the Change in Control and the
Holder will be paid a pro rata portion of all associated targeted payout
opportunities (based on the number of complete and partial calendar months
elapsed as of the occurrence of the Change in Control) in cash within thirty
days following the Change in Control or in Stock effective as of the Change
in Control, for cash and stock-based Performance Units, respectively. If a
Change in Control involves a Restructure or occurs in connection with a
series of related transactions involving a Restructure and if such
Restructure is in the form of a Non-Surviving Event and as a part of such
Restructure shares of stock, other securities, cash or property shall be
issuable or deliverable in exchange for Stock, then the Holder of an Award
shall be entitled to purchase or receive (in lieu of the Total Shares that
the Holder would otherwise be entitled to purchase or receive), as
appropriate for the form of Award, the number of shares of stock, other
securities, cash or property to which that number of Total Shares would have
been entitled in connection with such Restructure (and, for Options, at an
aggregate exercise price equal to the Exercise Price that would have been
payable if that number of Total Shares had been purchased on the exercise of
the Option immediately before the consummation of the Restructure). Nothing
in this Paragraph 9.2 shall impose on a Holder the obligation to exercise any
Award immediately before or upon the Change of Control, and, unless otherwise
provided in the Award Agreement relating to the Award, no Holder shall
forfeit the right to exercise the Award during the remainder of the original
term of the Award because of a Change in Control or because the Holder's
employment is terminated for any reason following a Change in Control.
9.3 RESTRUCTURE AND NO CHANGE IN CONTROL. In the event a Restructure
should occur at any time while there is any outstanding Award hereunder and
that Restructure does not occur in connection with a Change in Control or in
connection with a series of related transactions involving a Change in
Control, then:
(a) no Holder of an Option shall automatically be granted
corresponding Stock Appreciation Rights;
(b) neither any outstanding Stock Appreciation Rights nor any
outstanding Options shall immediately become fully vested and exercisable
in full merely because of the occurrence of the Restructure;
(c) the restriction period of any Restricted Stock Award shall not
immediately be accelerated nor shall the restrictions expire merely because
of the occurrence of the Restructure; and
(d) the target payout opportunity attainable under the Performance
Units will not be deemed to have been fully earned for all Performance
Periods merely because of the occurrence of the Restructure.
The Corporation shall promptly notify each Holder of any election or action
taken by the Corporation under this Paragraph 9.3. In the event of any
election or action taken by the Corporation pursuant to this Paragraph 9.3
that requires the amendment or cancellation of any Award Agreement as may be
specified in any notice to the Holder thereof, that Holder shall promptly
deliver that Award Agreement to the Corporation in order for that amendment
or cancellation to be implemented by the Corporation and the Committee. The
failure of the Holder to deliver any such Award Agreement to the Corporation
as provided in the preceding sentence shall not in any manner affect the
validity or enforceability of any action taken by the Corporation and the
Committee under this Paragraph 9.3, including, without limitation, any
redemption of an Award as of the consummation of a Restructure. Any cash
payment to be made by the Corporation pursuant to this Paragraph 9.3 in
connection with the redemption of any outstanding Awards shall be paid to the
Holder thereof
B-21
<PAGE>
currently with the delivery to the Corporation of the Award Agreement
evidencing that Award; provided, however, that any such redemption shall be
effective upon the consummation of the Restructure notwithstanding that the
payment of the redemption price may occur subsequent to the consummation. If
all or any portion of an outstanding Award is to be exercised or accelerated
upon or after the consummation of a Restructure that is in the form of a
Non-Surviving Event and as a part of that Restructure shares of stock, other
securities, cash or property shall be issuable or deliverable in exchange for
Stock, then the Holder of the Award shall thereafter be entitled to purchase
or receive (in lieu of the number of shares of Stock that the Holder would
otherwise be entitled to purchase or receive) the number of shares of stock,
other securities, cash or property to which such number of shares of Stock
would have been entitled in connection with the Restructure (and, for
Options, at an aggregate exercise price equal to the Exercise Price that
would have been payable if that number of Total Shares had been purchased on
the exercise of the Option immediately before the consummation of the
Restructure).
9.4 NOTICE OF CHANGE IN CONTROL OR RESTRUCTURE. The Corporation shall
attempt to keep all Holders informed with respect to any Change in Control or
Restructure or of any potential Change in Control or Restructure to the same
extent that the Corporation's stockholders are informed by the Corporation of
any such event or potential event.
SECTION 10. ADDITIONAL PROVISIONS
10.1 TERMINATION OF EMPLOYMENT. Subject to the last sentence of
Paragraph 9.2, if a Holder is an Eligible Individual because the Holder is an
Employee and if that employment relationship is terminated for any reason
other than Retirement or that Holder's death or Disability, then the
following provisions shall apply to all Awards held by that Holder that were
granted because that Holder was an Employee:
(a) If the termination is by the Holder's employer, then the
following provisions shall apply: (i) if the termination is for Cause, then
that portion, if any, of any and all Awards held by that Holder that are
not yet exercisable (or for which restrictions have not lapsed) as of the
date of termination shall become null and void; provided, however, that the
portion, if any, of any and all Awards held by that Holder which are
exercisable (or for which restrictions have lapsed) as of the date of such
termination shall survive such termination and shall be exercisable by such
Holder for a period of the lesser of (A) the remainder of the term of the
Award or (B) three (3) days following the date of such termination or (ii)
if the termination is not for Cause, then that portion, if any, of any and
all Awards held by that Holder that are not yet exercisable (or for which
restrictions have not lapsed) as of the date of the termination shall
become null and void as of the date of the termination; provided, however,
that the portion, if any, of any and all Awards held by that Holder which
are exercisable (or for which restrictions have lapsed) as of the date of
such termination shall survive such termination and shall be exercisable by
such Holder for a period of the lesser of (A) the remainder of the term of
the Award or (B) 180 days following the date of such termination.
(b) If such termination is by the Holder, then, unless otherwise
agreed to by the Corporation, any and all Awards held by that Holder,
whether or not then exercisable and whether or not restrictions thereon
have lapsed (except in full), shall become null and void as of the date of
the termination.
B-22
<PAGE>
10.2 OTHER LOSS OF ELIGIBILITY. If a Holder is an Eligible Individual
because the Holder is serving in a capacity other than as an Employee and if
that capacity is terminated for any reason other than the Holder's death,
then that portion, if any, of any and all Awards held by the Holder that were
granted because of that capacity which are not yet exercisable (or for which
restrictions have not lapsed) as of the date of the termination shall become
null and void as of the date of the termination; provided, however, that the
portion, if any, of any and all of the Awards held by the Holder that are
exercisable (or for which restrictions have lapsed) as of the date of the
termination shall survive the termination and shall be exercisable by such
Holder for a period of the lesser of (a) the remainder of the term of the
Award or (b) 90 days following the date of such termination.
10.3 DEATH. Upon the death of a Holder, then any and all Awards held by
the Holder, including those portions of the Awards that pursuant to the terms
and provisions of the applicable Award Agreement had not yet become
exercisable, shall immediately become fully vested and exercisable in full by
the Holder, his guardians or his legal representatives, legatees or
distributees for a period of the lesser of (a) the remainder of the term of
the Award or (b) one year following the date of the Holder's death. Any
portion of an Award not exercised upon the expiration of the periods
specified in (a) or (b) shall be null and void. Except as expressly provided
in this Paragraph 10.3, all Awards held by a Holder shall not be exercisable
after the death of that Holder.
10.4 RETIREMENT. If a Holder is an Eligible Individual because the
Holder is an Employee and if that employment relationship is terminated by
reason of the Holder's Retirement, then the portion, if any, of any and all
Awards held by the Holder that are not yet exercisable (or for which
restrictions have not lapsed) as of the date of that retirement shall become
null and void as of the date of retirement; provided, however, that the
portion, if any, of any and all Awards held by the Holder that are
exercisable as of the date of that Retirement shall survive the Retirement
and shall be exercisable by such Holder for a period of the lesser of (a) the
remainder of the terms of the Award or (b) ninety days following the date of
retirement.
10.5 DISABILITY. If a Holder is an Eligible Individual because the
Holder is an Employee and if that employment relationship is terminated by
reason of the Holder's Disability, then any and all Awards held by the
Holder, including those portions of the Awards that pursuant to the terms and
provisions of the applicable Award Agreement had not yet become exercisable
(or for which restrictions had not lapsed), shall immediately become fully
vested and exercisable in full by the Holder, his guardians or his legal
representatives for a period of the lesser of (a) the remainder of the term
of the Award or (b) one year following the date on which the Holder's
employment is terminated due to such Holder's Disability. "Disability" shall
have the meaning given it in the employment agreement of the Holder;
provided, however, that if that Holder has no employment agreement,
"Disability" shall mean a physical or mental impairment of sufficient
severity that, in the opinion of the Corporation, either the Holder is unable
to continue performing the duties he performed before such impairment or the
Holder's condition entitles him to disability benefits under any insurance or
employee benefit plan of the Corporation or its Subsidiaries and that
impairment or condition is cited by the Corporation as the reason for
termination of the Holder's employment.
10.6 LEAVE OF ABSENCE. With respect to an Award, the Committee may, in
its sole discretion, determine that any Holder who is on leave of absence for
any reason will be considered to still be in the employ of the Corporation,
provided that rights to that Award during a leave of absence will be limited
to the extent to which those rights were earned or vested when the leave of
absence began.
B-23
<PAGE>
10.7 TRANSFERABILITY OF AWARDS. In addition to such other terms and
conditions as may be included in a particular Award Agreement, an Award
requiring exercise shall be exercisable during a Holder's lifetime only by
that Holder or by that Holder's guardian or legal representative. An Award
requiring exercise shall not be transferrable other than by will or the laws
of descent and distribution, except as permitted in accordance with Paragraph
3.5.
10.8 FORFEITURE AND RESTRICTIONS ON TRANSFER. Each Award Agreement
may contain or otherwise provide for conditions giving rise to the forfeiture
of the Stock acquired pursuant to an Award or otherwise and may also provide
for those restrictions on the transferability of shares of the Stock acquired
pursuant to an Award or otherwise that the Committee in its sole and absolute
discretion may deem proper or advisable. The conditions giving rise to
forfeiture may include, but need not be limited to, the requirement that the
Holder render substantial services to the Corporation or its Subsidiaries for
a specified period of time. The restrictions on transferability may include,
but need not be limited to, options and rights of first refusal in favor of
the Corporation and stockholders of the Corporation other than the Holder of
such shares of Stock who is a party to the particular Award Agreement or a
subsequent holder of the shares of Stock who is bound by that Award Agreement.
10.9 DELIVERY OF CERTIFICATES OF STOCK. Subject to Paragraph 10.10,
the Corporation shall promptly issue and deliver a certificate representing
the number of shares of Stock as to which (a) an Option has been exercised
after the Corporation receives an Exercise Notice and upon receipt by the
Corporation of the Exercise Price and any tax withholding as may be
requested; (b) a Stock Appreciation Right has been exercised and upon receipt
by the Corporation of any tax withholding as may be requested; (c)
restrictions have lapsed with respect to a Restricted Stock Award and upon
receipt by the Corporation of any tax withholding as may be requested; and
(d) performance objectives have been achieved during a Performance Period
relating to a Performance Unit for Stock. The value of the shares of Stock,
cash or notes transferable because of an Award under the Plan shall not bear
any interest owing to the passage of time, except as may be otherwise
provided in an Award Agreement. If a Holder is entitled to receive
certificates representing Stock received for more than one form of Award
under the Plan, separate Stock certificates shall be issued with respect to
each such Award and for Incentive Options and Nonstatutory Stock Options
separately.
10.10 CONDITIONS TO DELIVERY OF STOCK. Nothing herein or in any
Award granted hereunder or any Award Agreement shall require the Corporation
to issue any shares with respect to any Award if that issuance would, in the
opinion of counsel for the Corporation, constitute a violation of the
Securities Act or any similar or superseding statute or statutes, any other
applicable statute or regulation, or the rules of any applicable securities
exchange or securities association, as then in effect. At the time of any
exercise of an Option or Stock Appreciation Right, or at the time of any
grant of a Restricted Stock Award or Performance Unit, the Corporation may,
as a condition precedent to the exercise of such Option or Stock Appreciation
Right or vesting of any Restricted Stock Award or Performance Unit, require
from the Holder of the Award (or in the event of his death, his legal
representatives, heirs, legatees, or distributees) such written
representations, if any, concerning the Holder's intentions with regard to
the retention or disposition of the shares of Stock being acquired pursuant
to the Award and such written covenants and agreements, if any, as to the
manner of disposal of such shares as, in the opinion of counsel to the
Corporation, may be necessary to ensure that any disposition by that Holder
(or in the event of the Holder's death, his legal representatives, heirs,
legatees, or distributees) will not involve a violation of the Securities Act
or any similar or superseding statute or statutes, any other applicable state
or federal statute or regulation, or any rule of any applicable securities
exchange or securities association, as then in effect.
B-24
<PAGE>
10.11 CERTAIN DIRECTORS AND OFFICERS. With respect to Awards granted
to Holders who are directors or officers of the Corporation or any Subsidiary
and who are subject to Section 16(b) of the Exchange Act, Awards shall
contain such other terms and conditions as may be required by Rule 16b-3
unless the majority of the Board of Directors or the Holder has determined
not to have the Award comply with Rule 16b-3.
10.12 SECURITIES ACT LEGEND. Certificates for shares of Stock, when
issued, may have the following legend, or statements of other applicable
restrictions endorsed thereon and may not be immediately transferable:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES
LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED,
TRANSFERRED, OR OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF PROVIDES
EVIDENCE SATISFACTORY TO THE ISSUER (WHICH, IN THE DISCRETION OF THE
ISSUER, MAY INCLUDE AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER)
THAT SUCH OFFER, SALE, PLEDGE, TRANSFER, OR OTHER DISPOSITION WILL NOT
VIOLATE APPLICABLE FEDERAL OR STATE LAWS.
This legend shall not be required for shares of Stock issued pursuant to an
effective registration statement under the Securities Act.
10.13 LEGEND FOR RESTRICTIONS ON TRANSFER. Each certificate
representing shares issued to a Holder pursuant to an Award granted under the
Plan shall, if such shares are subject to any transfer restriction, including
a right of first refusal, provided for under this Plan or an Award Agreement,
bear a legend that complies with applicable law with respect to the
restrictions on transferability contained in this Paragraph 10.13, such as:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY IMPOSED BY THAT CERTAIN INSTRUMENT
ENTITLED "TRAMMELL CROW COMPANY LONG-TERM INCENTIVE PLAN" AS ADOPTED
BY TRAMMELL CROW COMPANY (THE "CORPORATION") ON AUGUST 22, 1997,
AND AN AGREEMENT THEREUNDER BETWEEN THE CORPORATION AND [HOLDER] DATED
______________________, ____, AND MAY NOT BE TRANSFERRED, SOLD, OR
OTHERWISE DISPOSED OF EXCEPT AS THEREIN PROVIDED. THE CORPORATION
WILL FURNISH A COPY OF SUCH INSTRUMENT AND AGREEMENT TO THE RECORD
HOLDER OF THIS CERTIFICATE WITHOUT CHARGE ON REQUEST TO THE
CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE.
10.14 RIGHTS AS A STOCKHOLDER. A Holder shall have no right as a
stockholder with respect to any shares covered by his Award until a
certificate representing those shares is issued in his name. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash or
other property) or distributions or other rights for which the record date is
before the date that certificate is issued, except as contemplated by Section
9. Nevertheless, dividends and dividend equivalent rights may be extended
to and made part of any Award denominated in Stock or units of Stock, subject
to such terms, conditions, and
B-25
<PAGE>
restrictions as the Committee may establish. The Committee may also
establish rules and procedures for the crediting of interest on deferred cash
payments and dividend equivalents for deferred payment denominated in Stock
or units of Stock.
10.15 FURNISH INFORMATION. Each Holder shall furnish to the
Corporation all information requested by the Corporation to enable it to
comply with any reporting or other requirement imposed upon the Corporation
by or under any applicable statute or regulation.
10.16 OBLIGATION TO EXERCISE. The granting of an Award hereunder
shall impose no obligation upon the Holder to exercise the same or any part
thereof.
10.17 ADJUSTMENTS TO AWARDS. Subject to the general limitations set
forth in Sections 5, 6 and 9, the Committee may make any adjustment in the
exercise price of, the number of shares subject to or the terms of a
Nonstatutory Option or Stock Appreciation Right by canceling an outstanding
Nonstatutory Option or Stock Appreciation Right and regranting a Nonstatutory
Option or Stock Appreciation Right. Such adjustment shall be made by
amending, substituting or regranting an outstanding Nonstatutory Option or
Stock Appreciation Right. Such amendment, substitution or regrant may result
in terms and conditions that differ from the terms and conditions of the
original Nonstatutory Option or Stock Appreciation Right. The Committee may
not, however, impair the rights of any Holder to previously granted
Nonstatutory Options or Stock Appreciation Rights without that Holder's
consent. If such action is effected by amendment, the effective date of such
amendment shall be the date of the original grant.
10.18 REMEDIES. The Corporation shall be entitled to recover from a
Holder reasonable attorneys' fees incurred in connection with the enforcement
of the terms and provisions of the Plan and any Award Agreement whether by an
action to enforce specific performance or for damages for its breach or
otherwise.
10.19 INFORMATION CONFIDENTIAL. As partial consideration for the
granting of each Award hereunder, the Holder shall agree with the Corporation
that he will keep confidential all information and knowledge that he has
relating to the manner and amount of his participation in the Plan; provided,
however, that such information may be disclosed as required by law and may be
given in confidence to the Holder's spouse, tax and financial advisors, or to
a financial institution to the extent that such information is necessary to
secure a loan. In the event any breach of this promise comes to the attention
of the Committee, it shall take into consideration that breach in determining
whether to recommend the grant of any future Award to that Holder, as a
factor militating against the advisability of granting any such future Award
to that individual.
10.20 CONSIDERATION. No Option or Stock Appreciation Right shall be
exercisable, no restriction on any Restricted Stock Award shall lapse, and no
Performance Unit shall be settled in Stock with respect to a Holder unless
and until the Holder shall have paid cash or property to, or performed
services for, the Corporation or any of its Subsidiaries that the Committee
believes is equal to or greater in value then the par value of the Stock
subject to such Award.
10.21 PAYMENT OF TAXES. The Committee may, in its discretion,
require a Holder to pay to the Corporation (or the Corporation's Subsidiary
if the Holder is an employee of a Subsidiary of the Corporation), at the time
of the exercise of an Award, the amount that the Committee deems necessary to
satisfy the Corporation's or its Subsidiary's current or future obligation to
withhold federal, state or local income or other taxes that the Holder incurs
by exercising an Award. Upon the exercise of an Award
B-26
<PAGE>
requiring tax withholding, a Holder may (a) direct the Corporation to
withhold from the shares of Stock to be issued to the Holder the number of
shares necessary to satisfy the Corporation's obligation to withhold taxes,
that determination to be based on the shares' Fair Market Value as of the
date of exercise; (b) deliver to the Corporation sufficient shares of Stock
(based upon the Fair Market Value at date of exercise) to satisfy the
Corporation's tax withholding obligations, based on the shares' Fair Market
Value as of the date of exercise; or (c) deliver sufficient cash to the
Corporation to satisfy its tax withholding obligations. Holders who elect to
use such a stock withholding feature must make the election at the time and
in the manner that the Committee prescribes. The Committee may, at its sole
option, deny any Holder's request to satisfy withholding obligations through
Stock instead of cash. In the event the Committee subsequently determines
that the aggregate Fair Market Value (as determined above) of any shares of
Stock withheld as payment of any tax withholding obligation is insufficient
to discharge that tax withholding obligation, then the Holder shall pay to
the Corporation, immediately upon the Committee's request, the amount of that
deficiency.
SECTION 11. DURATION AND AMENDMENT OF PLAN
11.1 DURATION. No Awards may be granted hereunder after the date that is
ten (10) years from the date the last amendment to this Plan involving an
increase in authorized shares is approved by the stockholders of the
Corporation.
11.2 AMENDMENT. The Board of Directors may, insofar as permitted by law,
with respect to any shares which, at the time, are not subject to Awards,
suspend or discontinue the Plan or revise or amend it in any respect
whatsoever, and may amend any provision of the Plan or any Award Agreement to
make the Plan or the Award Agreement, or both, comply with Section 16(b) of
the Exchange Act and the exemptions therefrom, the Code, the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), the regulations
promulgated under the Code or ERISA, or any other law, rule or regulation
that may affect the Plan. The Board of Directors may also amend, modify,
suspend or terminate the Plan for the purpose of meeting or addressing any
changes in other legal requirements applicable to the Corporation or the Plan
or for any other purpose permitted by law. The Plan may not be amended
without the consent of the holders of a majority of the shares of Stock then
outstanding to increase materially the aggregate number of shares of Stock
that may be issued under the Plan (except for adjustments pursuant to Section
9 of the Plan).
SECTION 12. GENERAL
12.1 APPLICATION OF FUNDS. The proceeds received by the Corporation
from the sale of shares pursuant to Awards shall be used for general
corporate purposes.
12.2 RIGHT OF THE CORPORATION AND SUBSIDIARIES TO TERMINATE
EMPLOYMENT. Nothing contained in the Plan or in any Award Agreement shall
confer upon any Holder the right to continue in the employ of the Corporation
or any Subsidiary, or interfere in any way with the rights of the Corporation
or any Subsidiary to terminate his or her employment at any time.
12.3 NO LIABILITY FOR GOOD FAITH DETERMINATIONS. Neither the members
of the Board of Directors nor any member of the Committee shall be liable for
any act, omission or determination taken or made in good faith with respect
to the Plan or any Award granted under it, and members of the Board of
Directors
B-27
<PAGE>
and the Committee shall be entitled to indemnification and reimbursement by
the Corporation in respect of any claim, loss, damage or expense (including
attorneys' fees, the costs of settling any suit, provided such settlement is
approved by independent legal counsel selected by the Corporation, and
amounts paid in satisfaction of a judgment, except a judgment based on a
finding of bad faith) arising therefrom to the full extent permitted by law
and under any directors and officers liability or similar insurance coverage
that may from time to time be in effect. This right to indemnification shall
be in addition to, and not a limitation on, any other indemnification rights
any member of the Board of Directors or the Committee may have.
12.4 OTHER BENEFITS. Participation in the Plan shall not preclude
the Holder from eligibility in any other stock or stock option plan of the
Corporation or any Subsidiary or any old age benefit, insurance, pension,
profit sharing, retirement, bonus or other extra compensation plans that the
Corporation or any Subsidiary has adopted or may, at any time, adopt for the
benefit of its Employees. Neither the adoption of the Plan by the Board of
Directors nor the submission of the Plan to the stockholders of the
Corporation for approval shall be construed as creating any limitations on
the power of the Board of Directors to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and the awarding of stock and cash otherwise than
under the Plan, and such arrangements may be either generally applicable or
applicable only in specific cases.
12.5 EXCLUSION FROM PENSION AND PROFIT-SHARING COMPENSATION. By
acceptance of an Award (whether in Stock or cash), as applicable, each Holder
shall be deemed to have agreed that the Award is special incentive
compensation that will not be taken into account in any manner as salary,
compensation or bonus in determining the amount of any payment under any
pension, retirement or other employee benefit plan of the Corporation or any
Subsidiary. In addition, each beneficiary of a deceased Holder shall be
deemed to have agreed that the Award will not affect the amount of any life
insurance coverage, if any, provided by the Corporation or a Subsidiary on
the life of the Holder that is payable to the beneficiary under any life
insurance plan covering employees of the Corporation or any Subsidiary.
12.6 EXECUTION OF RECEIPTS AND RELEASES. Any payment of cash or any
issuance or transfer of shares of Stock or other property to the Holder, or
to his legal representative, heir, legatee or distributee, in accordance with
the provisions hereof, shall, to the extent thereof, be in full satisfaction
of all claims of such persons hereunder. The Committee may require any
Holder, legal representative, heir, legatee or distributee, as a condition
precedent to such payment, to execute a release and receipt therefor in such
form as it shall determine.
12.7 UNFUNDED PLAN. Insofar as it provides for Awards of cash and
Stock, the Plan shall be unfunded. Although bookkeeping accounts may be
established with respect to Holders who are entitled to cash, Stock, other
property or rights thereto under the Plan, any such accounts shall be used
merely as a bookkeeping convenience. The Corporation shall not be required
to segregate any assets that may at any time be represented by cash, Stock,
other property or rights thereto, nor shall the Plan be construed as
providing for such segregation, nor shall the Corporation nor the Board of
Directors nor the Committee be deemed to be a trustee of any cash, Stock,
other property or rights thereto to be granted under the Plan. Any
liability of the Corporation to any Holder with respect to a grant of cash,
Stock, other property or rights thereto under the Plan shall be based solely
upon any contractual obligations that may be created by the Plan and any
Award Agreement; no such obligation of the Corporation shall be deemed to be
secured by any pledge or other encumbrance on any property of the
Corporation. Neither the Corporation nor the Board of
B-28
<PAGE>
Directors nor the Committee shall be required to give any security or bond
for the performance of any obligation that may be created by the Plan.
12.8 NO GUARANTEE OF INTERESTS. The Board of Directors, the
Committee and the Corporation do not guarantee the Stock of the Corporation
from loss or depreciation.
12.9 PAYMENT OF EXPENSES. All expenses incident to the
administration, termination or protection of the Plan, including, but not
limited to, legal and accounting fees, shall be paid by the Corporation or
its Subsidiaries; provided, however, the Corporation or a Subsidiary may
recover any and all damages, fees, expenses and costs arising out of any
actions taken by the Corporation to enforce its right to purchase Stock under
this Plan.
12.10 CORPORATION RECORDS. Records of the Corporation or its
Subsidiaries regarding the Holder's period of employment, termination of
employment and the reason therefor, leaves of absence, re-employment, and
other matters shall be conclusive for all purposes hereunder, unless
determined by the Committee to be incorrect.
12.11 INFORMATION. The Corporation and its Subsidiaries shall, upon
request or as may be specifically required hereunder, furnish or cause to be
furnished, all of the information or documentation which is necessary or
required by the Committee to perform its duties and functions under the Plan.
12.12 CORPORATION ACTION. Any action required of the Corporation
shall be by resolution of its Board of Directors or by a person authorized to
act by resolution of the Board of Directors.
12.13 SEVERABILITY. If any provision of this Plan is held to be
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining provisions hereof, but such provision shall be fully
severable and the Plan shall be construed and enforced as if the illegal or
invalid provision had never been included herein. If any of the terms or
provisions of this Plan conflict with the requirements of Rule 16b-3 (as
those terms or provisions are applied to Eligible Individuals who are subject
to Section 16(b) of the Exchange Act) or Section 422 of the Code (with
respect to Incentive Options), then those conflicting terms or provisions
shall be deemed inoperative to the extent they so conflict with the
requirements of Rule 16b-3 or Section 422 of the Code unless the Committee
has determined that the Plan should not comply with such requirements. With
respect to Incentive Options, if this Plan does not contain any provision
required to be included herein under Section 422 of the Code, that provision
shall be deemed to be incorporated herein with the same force and effect as
if that provision had been set out at length herein; provided, further, that,
to the extent any Option that is intended to qualify as an Incentive Option
cannot so qualify, that Option (to that extent) shall be deemed a
Nonstatutory Option for all purposes of the Plan.
12.14 NOTICES. Whenever any notice is required or permitted
hereunder other than any Exercise Notice or notice to exercise an Stock
Appreciation Right, such notice must be in writing and personally delivered
or sent by mail. Any such notice required or permitted to be delivered
hereunder shall be deemed to be delivered on the date on which it is
personally delivered, or, whether actually received or not, on the third
Business Day after it is deposited in the United States mail, certified or
registered, postage prepaid, addressed to the person who is to receive it at
the address which such person has theretofore specified by written notice
delivered in accordance herewith. The Corporation or a Holder may change, at
any time and from time to time, by written notice to the other, the address
which it or he had previously specified for
B-29
<PAGE>
receiving notices. Until changed in accordance herewith, the Corporation and
each Holder shall specify as its and his address for receiving notices the
address set forth in the Award Agreement pertaining to the shares to which
such notice relates. Any Exercise Notice or notice to exercise a Stock
Appreciation Right shall be valid only when it is in fact received by the
Corporation or the Person it designates in accordance with procedures that
the Committee may adopt from time to time.
12.15 WAIVER OF NOTICE. Any person entitled to notice hereunder may
waive such notice.
12.16 SUCCESSORS. The Plan shall be binding upon the Holder, his
legal representatives, heirs, legatees and distributees, upon the
Corporation, its successors and assigns, and upon the Committee and its
successors.
12.17 HEADINGS. The titles and headings of Sections and Paragraphs
are included for convenience of reference only and are not to be considered
in construction of the provisions hereof.
12.18 GOVERNING LAW. All questions arising with respect to the
provisions of the Plan shall be determined by application of the laws of the
State of Delaware except to the extent Delaware law is preempted by federal
law. Questions arising with respect to the provisions of an Award Agreement
that are matters of contract law shall be governed by the laws of the state
specified in the Award Agreement, except to the extent Delaware corporate law
conflicts with the contract law of such state, in which event Delaware
corporate law shall govern. The obligation of the Corporation to sell and
deliver Stock hereunder is subject to applicable laws and to the approval of
any governmental authority required in connection with the authorization,
issuance, sale, or delivery of such Stock.
12.19 WORD USAGE. Words used in the masculine shall apply to the
feminine where applicable, and wherever the context of this Plan dictates,
the plural shall be read as the singular and the singular as the plural.
IN WITNESS WHEREOF, Trammell Crow Company, acting by and through its
officer hereunto duly authorized, has executed this Trammell Crow Company
Long-term Incentive Plan this 22nd day of August, 1997.
TRAMMELL CROW COMPANY
By:
---------------------------------------
Name: George Lippe
Title: President and Chief Executive Officer
B-30
<PAGE>
APPENDIX C
FIRST AMENDMENT TO THE
TRAMMELL CROW COMPANY
LONG-TERM INCENTIVE PLAN
THIS FIRST AMENDMENT TO THE TRAMMELL CROW COMPANY LONG-TERM INCENTIVE PLAN
(this "Amendment") is made and adopted by Trammell Crow Company, a Delaware
corporation (the "Corporation"), effective as of __________ __, 1999.
PRELIMINARY STATEMENTS
A. On August 22, 1997, the stockholders of the Corporation approved, and
the Corporation adopted, the Trammell Crow Company Long-Term Incentive Plan
(the "Plan"). Capitalized terms used but not otherwise defined herein shall
have the meanings ascribed to them in the Plan.
B. The Board of Directors of the Corporation (the "Board") has approved
and recommended to the stockholders of the Corporation that this Amendment be
adopted to: (i) provide for an increase in the maximum aggregate number of
shares of the Stock in respect of which Awards may be granted under the Plan
by an additional 3,300,000 shares, such that the maximum aggregate number of
shares of Stock in respect of which Awards may be granted under the Plan
shall be 8,634,878, (ii) provide that either the granting or vesting of
awards provided under the Plan may be subject to performance standards in
order that such awards may be fully deductible by the Corporation for federal
income tax purposes; and (iii) revise the period over which the Corporation's
performance is measured for purposes of determining the payment value of
Performance Units.
C. On __________ __, 1999, the stockholders of the corporation approved
this Amendment.
AMENDMENT
NOW, THEREFORE, the Plan is hereby amended as follows:
1. Section 1.15 is hereby restated in its entirety, without modification, to
read as follows:
"1.15 "Eligible Individuals" means (a) Employees, (b) Non-employee
Directors and (c) any other Person that the Committee designates as eligible
for an Award (other than for Incentive Options) because the Person performs
bona fide consulting or advisory services for the Corporation or any of its
Subsidiaries (other than services in connection
C-1
<PAGE>
with the offer or sale of securities in a capital-raising transaction)."
2. Section 1.30 is hereby amended in its entirety to read as follows:
"1.30 "Performance Period" means a period of up to ten fiscal years of
the Corporation, as determined by the Committee with respect to any
Performance Unit, and over which performance is measured for the purpose
of determining the payment value of Performance Units."
3. Section 2.1 is amended and restated in its entirety to read as follows:
"2.1 MAXIMUM NUMBER OF SHARES. Subject to the provisions of Section 9
of the Plan, the maximum aggregate number of shares of Stock in respect
of which Awards may be granted for all purposes under the Plan shall be
8,634,878."
4. Section 4.1 is hereby restated in its entirety, without modification,
to read as follows:
"4.1 ELIGIBLE INDIVIDUALS. Awards may be granted pursuant to the Plan
only to persons who are Eligible Individuals at the time of the grant
thereof or in connection with the severance or retirement of Eligible
Individuals."
5. Section 4A is hereby added to the Plan to read as follows:
"Section 4A. Performance Awards
4A.1 COVERED EMPLOYEE. For purposes of this Section 4A "Covered
Employee" shall have the meaning given to such term under Section
162(m). The foregoing notwithstanding, because the Committee cannot
determine with certainty whether a given individual 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,
who is likely to be a Covered Employee with respect to that fiscal year.
4A.2 PERFORMANCE AWARD. For purposes of this Section 4A
"Performance Award" shall mean any Award the grant, exercise or
settlement of which is subject to one or more of the performance
standards set forth in this Section 4A. Additionally, Performance Award
shall mean any Option, Reload Option or Stock Appreciation Right granted
to a Covered Employee if the Exercise Price (with respect to such Option
or Reload Option) or SAR Exercise Price (with respect to such Stock
Appreciation Right) equals or exceeds Fair Market Value.
C-2
<PAGE>
4A.3 QUALIFIED MEMBER. For purposes of this Section 4A "Qualified
Member" means a member of the Committee who is an "outside" director
within the meaning of Section 162(m).
4A.4 MANNER OF EXERCISE OF COMMITTEE AUTHORITY. At any time that a
member of the Committee is not a Qualified Member, any action of the
Committee relating to an Award intended by the Committee to qualify as
"performance-based compensation" within the meaning of Section 162(m),
may be taken either (i) by a subcommittee, designated by the Committee,
composed solely of two or more Qualified Members, or (ii) by the
Committee but with each such member who is not a Qualified Member
abstaining or recusing himself or herself from such action; provided,
however, that, upon such abstention or recusal, the Committee remains
composed solely of two or more Qualified Members. Such action,
authorized by such a subcommittee or by the Committee upon the
abstention or recusal of such non-Qualified Member(s), shall be the
action of the Committee for purposes of the Plan. Any action of the
Committee shall be final, conclusive and binding on all persons,
including the Corporation, its subsidiaries, Eligible Individuals,
beneficiaries, transferees or other persons claiming rights from or
through an Eligible Individual, and shareholders.
Section 4A.5 INDIVIDUAL AWARD LIMITATIONS. In each calendar year
during any part of which the Plan is in effect, a Participant may not be
granted Performance Awards relating to more than 500,000 shares of
Common Stock, subject to adjustment in a manner consistent with any
adjustment made pursuant to Section 9, under each of Sections 5, 6 and 7
with a maximum limitation of 500,000 shares of Common Stock in the
aggregate. In addition, the maximum compensation that may be earned
under the Plan as Performance Awards by any one Participant, in any
calendar year, shall be $5,000,000 with respect to Awards provided under
Section 8. If an Option is canceled, the canceled Option continues to
be counted against the maximum number of shares for which Options may be
granted to the Participant under the Plan, as set forth in this Section
4A.5. If, after grant, the exercise price of an Option is reduced, the
transaction is treated as a cancellation of the Option and a grant of a
new Option for purposes of this Section 4A.5. In such a case, both the
Option that is deemed to be canceled and the Option that is deemed to be
granted reduce the maximum number of shares for which Options may be
granted to the Covered Employee under the Plan, as set forth in this
Section 4A.5. Such cancellation will likewise occur in the case of a
Stock Appreciation Right where, after the Award is made, the base amount
on which stock appreciation is calculated is reduced.
Section 4A.6 GENERAL. The Committee shall retain full power and
discretion to accelerate, waive or modify, at any time, any term or
condition of a Performance Award that is not mandatory under the Plan;
provided, however, that notwithstanding any other provision of the Plan
the Committee shall not have any discretion to accelerate, waive or
modify any term or condition of an Award that is intended to qualify as
"performance-
C-3
<PAGE>
based compensation" for purposes of Section 162(m) if such discretion
would cause the Performance Award not to so qualify.
Section 4A.7 PERFORMANCE CONDITIONS. The right of an Eligible
Individual 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. The Committee may use such business
criteria and other measures of performance as it may deem appropriate in
establishing any performance conditions.
Section 4A.8 PERFORMANCE AWARDS GRANTED TO DESIGNATED COVERED
EMPLOYEES. If the Committee determines that a Performance Award to be
granted to an Eligible Individual who is designated by the Committee as
likely to be a Covered Employee should qualify as "performance-based
compensation" for purposes of Section 162(m), the grant, 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 4A.8.
(a) 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 4A.8. Performance goals shall be objective and shall
otherwise meet the requirements of Section 162(m), 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 Eligible
Individual or to different Eligible Individuals.
(b) BUSINESS CRITERIA. One or more of the following business
criteria for the Corporation, on a consolidated basis, and/or for
specified subsidiaries or business or geographical units of the
Corporation (except with respect to the total shareholder return
and earnings per share criteria), shall be used by the Committee in
establishing performance goals for such Performance Awards: (i)
earnings per share; (ii) revenue targets; (iii) cash flow targets;
(iv) cash flow return targets; (v) return on net assets, return on
assets, return on investment, return on capital, return on equity;
(vi) an economic value added formula; (vii) operating margin or
contribution margin; (viii) net income; pretax earnings; pretax
earnings before interest, depreciation and amortization; pretax
operating earnings after interest expense and before incentives,
service fees, and extraordinary or special items; operating income;
pretax earnings before interest
C-4
<PAGE>
depreciation and/or amortization; (ix) total shareholder return;
(x) debt reduction; and (xi) any of the above goals determined on
an absolute or relative basis or as compared to the performance of
a published or special index deemed applicable by the Committee
including, but not limited to, the Standard & Poor's 500 Stock
Index or a group of competitor companies, including the group
selected by the Corporation for purposes of the stock performance
graph contained in the proxy statement for the Corporation's annual
meetings of stockholders.
(c) 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 Section 162(m).
(d) SETTLEMENT OF PERFORMANCE AWARDS; OTHER TERMS. After the
end of each performance period, the Committee shall determine the
amount, if any, of the Performance Award payable to each Covered
Employee. Settlement of such Performance Awards shall be in cash,
Common Stock, other Awards or other property, as determined in the
sole 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, but may not exercise
discretion to increase any such amount payable to a Covered
Employee in respect of a Performance Award.
Section 4A.9 WRITTEN DETERMINATIONS. All determinations by the
Committee as to the establishment of performance goals, the amount
of any potential individual Performance Awards, and the achievement
of performance goals relating to Performance Awards, shall be made
in writing in the case of any Award intended to qualify under
Section 162(m). The Committee may not delegate any responsibility
relating to such Performance Awards. The determination as to
whether any performance goal, with respect to any Award, has been
satisfied shall be made prior to the payment of any compensation
relating to an Award.
Section 4A.10 PERFORMANCE AWARDS UNDER CODE SECTION 162(m). It
is the intent of the Corporation that Performance Awards granted to
persons who are designated by the Committee as likely to be Covered
Employees within the meaning of Section 162(m) shall, if so
designated by the Committee, constitute "performance-based
compensation" within the meaning of Section 162(m). Accordingly,
the terms of this Section 4A, including the definitions of Covered
Employee and other terms used herein, shall be interpreted in a
manner consistent with Section 162(m). If any provision of the
Plan as in effect on the date of adoption or any agreements
relating to Performance Awards that
C-5
<PAGE>
are designated as intended to comply with Section 162(m) does not
comply or is inconsistent with the requirements of Section 162(m),
such provision shall be construed or deemed amended to the extent
necessary to conform to such requirements."
This Amendment, and the changes to the provisions of the Plan effected
hereby, shall be effective as of _______ ___, 1999. Except as expressly set
forth herein, the Plan shall remain in full force and effect without further
amendment or modification.
C-6
<PAGE>
IN WITNESS WHEREOF, the Corporation, acting by and through its officer
hereunto duly authorized, has executed this Amendment effective as of the
date first written above.
TRAMMELL CROW COMPANY
By:
--------------------------------
Name:
Title:
C-7
<PAGE>
TRAMMELL CROW COMPANY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
TRAMMELL CROW COMPANY FOR THE ANNUAL MEETING TO BE HELD MAY 18, 1999
The undersigned hereby constitutes and appoints each of George L. Lippe
and Derek R. McClain his or her true and lawful agents and proxies, with full
power of substitution in each, to represent the undersigned, with all the
powers which the undersigned would possess if personally present, and to vote
the Common Stock of Trammell Crow Company held of record by the undersigned on
the record date at the Annual Meeting of Stockholders of Trammell Crow
Company to be held at the Dallas Museum of Art, 1717 Harwood Street, Dallas,
Texas, on Tuesday, May 18, 1999 at 1:30 p.m., local time, and at any
adjournment or postponement thereof, on all matters coming before said
meeting.
YOU ARE ENCOURAGED TO SPECIFY YOUR VOTE BY MARKING THE APPROPRIATE BOX ON
THE REVERSE SIDE BUT YOU NEED NOT MARK ANY BOX IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS, WHICH ARE FOR THE
ELECTION OF THE NAMED NOMINEES AS DIRECTORS AND FOR PROPOSALS 2 AND 3. THE
PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD. THIS
PROXY MAY BE REVOKED IN WRITING AT ANY TIME PRIOR TO THE VOTING THEREOF.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN AND WILL AUTHORIZE THE PROXIES TO TAKE ACTION IN THEIR DISCRETION UPON
OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE
BOARD OF DIRECTORS. PROXIES ARE AUTHORIZED TO VOTE UPON MATTERS INCIDENT TO
THE CONDUCT OF THE MEETING SUCH AS APPROVAL OF ONE OR MORE ADJOURNMENTS OF
THE MEETING FOR THE PURPOSE OF OBTAINING ADDITIONAL STOCKHOLDERS VOTES.
-----------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
-----------
- - --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
- - -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES FOR
DIRECTOR AND FOR PROPOSALS 2 AND 3.
Please mark your votes as indicated in this sample /X/
1. ELECTION OF DIRECTORS: To elect each of James R. Erwin, Harlan R. Crow and
Jeffrey M. Heller to serve as Class II directors for a three year term
ending at the Annual Meeting of Stockholders in 2002 and until their
successors are duly elected and qualified or until their earlier death,
resignation or removal from office.
FOR ALL NOMINEES WITHHELD FROM
ALL NOMINEES
/ / / /
For the nominees except as noted above
2. To approve an amendment to the Company's Long-Term Incentive Plan that (a)
increases by 3,300,000 the number of shares of Common Stock that may be
subject to outstanding awards under the Long-Term Incentive Plan, (b)
provides that either the granting or vesting of awards under the Long-Term
Incentive Plan may be subject to certain performance standards in order
that such awards may continue to be fully deductible by the Company for
federal income tax purposes, and (c) revises the definition of Performance
Period (as defined in the Long-Term Incentive Plan) over which the
Company's performance may be measured for purposes of determining the
payment value of a Performance Unit (as defined in the Long-Term Incentive
Plan).
FOR AGAINST ABSTAIN
/ / / / / /
3. To ratify the selection of Ernst & Young L.L.P. as independent accountants
for the Company for the fiscal year ending December 31, 1999.
FOR AGAINST ABSTAIN
/ / / / / /
MARK HERE FOR
ADDRESS CHANGE
AND NOTE LEFT / /
SIGNATURE SIGNATURE DATE
------------------- ------------------- --------
Please sign this Proxy exactly as your name appears on this card. Joint
owners should each sign personally. If you are signing as a representative of
the named stockholder (e.g. as a trustee, corporate officer or other agent on
behalf of a trust, corporation or other entity) you should indicate your
title or the capacity in which you sign.
- - -------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
TRAMMELL CROW COMPANY
THIS IS YOUR PROXY
Dear Stockholder:
Your Proxy is being solicited by the Board of Directors of Trammell Crow
Company for the Annual Meeting of Stockholders to be held on May 18, 1999, at
1:30 p.m., local time, at the Dallas Museum of Art, 1717 Harwood Street,
Texas 75201.
Enclosed with this Proxy is a Proxy Statement containing important
information about the matters that you are being asked to approve.
Your vote is important. Whether or not you plan to attend the Annual Meeting,
you can be sure your shares are represented at the meeting by promptly
returning your completed Proxy card prior to the Annual meeting.
Please mark the boxes on the Proxy card above to indicate how your shares are
to be voted, then sign the card, detach it and return your Proxy card in the
enclosed envelope.
Thank you in advance for your prompt consideration of these matters.
