<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / 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 Rule 14a-11(c) or Rule 14a-12
WELLSFORD REAL PROPERTIES, INC.
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
WELLSFORD REAL PROPERTIES, INC.
610 FIFTH AVENUE, 7TH FLOOR
NEW YORK, NY 10020
April 28, 1998
Dear Shareholder:
You are cordially invited to attend the 1998 annual meeting of shareholders
which will be held on Thursday, May 28, 1998, at 10:00 a.m. at the offices of
Robinson Silverman Pearce Aronsohn & Berman LLP, 1290 Avenue of the Americas,
31st floor, New York, NY 10104.
Information about the meeting and the various matters on which the
shareholders will act is included in the Notice of Annual Meeting of
Shareholders and Proxy Statement which follow. Also included is a Proxy Card and
postage paid return envelope.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. WHETHER OR
NOT YOU PLAN TO ATTEND, WE HOPE THAT YOU WILL COMPLETE AND RETURN YOUR PROXY
CARD IN THE ENCLOSED ENVELOPE AS PROMPTLY AS POSSIBLE.
Sincerely,
/s/ Jeffrey H. Lynford
----------------------
JEFFREY H. LYNFORD
Chairman of the Board
/s/ Edward Lowenthal
----------------------
EDWARD LOWENTHAL
President and Chief Executive Officer
<PAGE>
WELLSFORD REAL PROPERTIES, INC.
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 28, 1998
------------------------
The annual meeting of shareholders of Wellsford Real Properties, Inc. (the
'Company') will be held at the offices of Robinson Silverman Pearce Aronsohn &
Berman LLP, 1290 Avenue of the Americas, 31st floor, New York, NY 10104 on
Thursday, May 28, 1998 at 10:00 a.m. local time, for the following purposes:
1. To elect two directors to terms expiring at the 2001 annual meeting
of shareholders.
2. To ratify the appointment of Ernst & Young LLP as the Company's
independent public accountants for the fiscal year ending December
31, 1998.
3. To approve the Company's 1998 Management Incentive Plan.
4. To transact such other business as may properly come before the
meeting or any adjournment(s) or postponement(s) thereof.
The Board of Directors has fixed April 15, 1998 as the record date for
determining the shareholders entitled to receive notice of and to vote at the
meeting.
SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE URGED TO COMPLETE, SIGN, DATE
AND RETURN THE ACCOMPANYING PROXY CARD WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ JEFFREY H. LYNFORD
----------------------
JEFFREY H. LYNFORD
Secretary
April 28, 1998
New York, New York
<PAGE>
WELLSFORD REAL PROPERTIES, INC.
610 FIFTH AVENUE, 7TH FLOOR
NEW YORK, NY 10020
---------------------------
PROXY STATEMENT
---------------------------
MAY 28, 1998
ANNUAL MEETING OF SHAREHOLDERS
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (the 'Board') of Wellsford Real Properties, Inc., a
Maryland corporation (the 'Company'), of proxies from the holders (the
'Shareholders') of the Company's issued and outstanding shares of common stock,
$.01 par value per share (the 'Common Shares'), to be exercised at the annual
meeting of Shareholders to be held on Thursday, May 28, 1998, at the offices of
Robinson Silverman Pearce Aronsohn & Berman LLP, 1290 Avenue of the Americas,
31st floor, New York, NY 10104, at 10:00 a.m. local time, and at any
adjournment(s) or postponement(s) of such meeting (the 'Annual Meeting'), for
the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders.
This Proxy Statement and enclosed Proxy Card are being mailed to the
Shareholders on or about April 28, 1998.
At the Annual Meeting, the Shareholders will be asked to consider and vote
upon the following proposals (the 'Proposals'):
1. The election of two directors to terms expiring at the 2001 annual
meeting of Shareholders.
2. The ratification of the appointment of Ernst & Young LLP as the
Company's independent public accountants for the fiscal year ending
December 31, 1998.
3. The approval of the Company's 1998 Management Incentive Plan.
4. Such other business as may properly come before the Annual Meeting.
Only the holders of record of the Common Shares and shares of Class A
common stock, $.01 par value per share (the 'Class A Common Shares') at the
close of business on April 15, 1998 (the 'Record Date') are entitled to notice
of and to vote at the Annual Meeting. Each Common Share and Class A Common Share
is entitled to one vote on all matters. As of the Record Date, 20,009,882 Common
Shares and 339,806 Class A Common Shares were outstanding.
A majority of all the votes entitled to be cast at the Annual Meeting shall
constitute a quorum for the transaction of business at the Annual Meeting. A
plurality of all the votes cast at the Annual Meeting is sufficient to elect a
director (Proposal 1). The affirmative vote of Shareholders owning a majority of
the shares voting is required to ratify the appointment of Ernst & Young LLP as
the Company's independent public accountants (Proposal 2) and approve the
Company's 1998 Management Incentive Plan (Proposal 3). Abstentions and broker
non-votes will not be counted as votes cast and will have no effect on the
result of the vote on such Proposals.
Each of the directors and executive officers of the Company has informed
the Company that he will vote all of his respective Common Shares in favor of
all of the Proposals.
The Common Shares and Class A Common Shares represented by all properly
executed Proxy Cards will be voted at the Annual Meeting as indicated or, if no
instruction is given, in favor of all of the Proposals. As to any other business
which may properly come before the Annual Meeting, all properly executed Proxy
Cards will be voted by the persons named therein in accordance with their best
judgement. The Company does not presently know of any other business which may
come before the Annual Meeting. Any person giving a proxy has the right to
revoke it at any time before it is exercised (a) by filing with the Secretary of
the Company a duly signed revocation or a Proxy Card bearing a later date or (b)
by electing to vote in person at the Annual Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
The directors are divided into three classes, consisting of two members
whose terms expire at the Annual Meeting, three members whose terms expire at
the 1999 annual meeting of Shareholders and two members whose
<PAGE>
terms expire at the 2000 annual meeting of Shareholders. At the Annual Meeting,
two directors will be elected to hold office until the 2001 annual meeting of
Shareholders and until their successors are elected and qualify. Edward
Lowenthal and Rodney F. Du Bois, each of whom is presently a director of the
Company, are nominees for election as directors for such term. The terms of
Jeffrey H. Lynford, Douglas Crocker II, and Mark S. Germain expire in 1999 and
the terms of Frank J. Hoenemeyer and Frank J. Sixt expire in 2000.
For information regarding the beneficial ownership of Common Shares and
Class A Common Shares by the current directors of the Company, see 'Security
Ownership of Certain Beneficial Owners and Management.'
NOMINEES FOR ELECTION AS DIRECTORS
The following individuals are nominees for election as directors at the
Annual Meeting:
Edward Lowenthal, age 53, has been the President, Chief Executive Officer
and a director of the Company since its formation in January 1997. Mr. Lowenthal
served as the President and Chief Executive Officer and as a trustee of
Wellsford Residential Property Trust (the 'Trust'), a Maryland real estate
investment trust ('REIT'), from its formation in July 1992 until consummation of
the merger of Equity Residential Properties Trust ('EQR'), a Maryland REIT, into
the Trust (the 'Merger') in May 1997. Mr. Lowenthal currently serves as a
director of United American Energy Corporation, a developer, owner and operator
of energy facilities, a director of Corporate Renaissance Group, Inc., a mutual
fund, a director of Omega Healthcare, Inc., a REIT, a director of Great Lakes
REIT, Inc., a REIT that owns and operates office buildings, and a trustee of
EQR. He is also a member of The Board of Governors of NAREIT.
Rodney F. Du Bois, age 62, has been a director of the Company since May
1997. Mr. Du Bois served as a trustee of the Trust from November 1992 until
consummation of the Merger in May 1997. Mr. Du Bois also has been President and
co-owner of Goshawk Corporation, which provides finance and general corporate
services, since 1982. Mr. Du Bois was a founder of Mountain Cable Company, a
cable TV multiple system operator, and its Chairman from 1985 until the
company's sale in 1988. Previously, Mr. Du Bois served as Executive Vice
President and a director of C. Brewer and Co., Chairman of Alexander and Baldwin
Agribusiness, Inc., a managing director of Warburg, Paribas, Becker, Inc. and a
Professor of Real Estate at the Amos Tuck School of Business Administration at
Dartmouth College.
---------------------------
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF EACH NOMINEE FOR
DIRECTOR.
---------------------------
OTHER DIRECTORS
Information concerning the other directors whose terms of office continue
after the Annual Meeting is set forth below:
Jeffrey H. Lynford, age 50, has been the Chairman of the Board, Secretary
and a director of the Company since its formation in January 1997. Mr. Lynford
served as the Chairman of the Board and Secretary of the Trust from its
formation in July 1992 until consummation of the Merger in May 1997 and was the
Chief Financial Officer of the Trust from July 1992 until December 1994. Mr.
Lynford currently serves as a trustee emeritus of the National Trust for
Historic Preservation and as a director of five mutual funds: Cohen & Steers
Total Return Realty Fund, Inc., Cohen & Steers Realty Shares, Inc., Cohen &
Steers Realty Income Fund, Inc., Cohen & Steers Special Equity Fund, Inc. and
Cohen & Steers Equity Income Fund, Inc. Mr. Lynford also serves as a trustee of
EQR. He is also a member of the New York bar.
Douglas Crocker II, age 57, has been a director of the Company since May
1997. Mr. Crocker has been President, Chief Executive Officer and a trustee of
EQR, the general partner of ERP Operating Limited Partnership, since March 1993.
He is also a director of Horizon Group Incorporated, an owner, developer and
operator of outlet retail properties. Mr. Crocker has been President and Chief
Executive Officer of First Capital Financial Corporation, a sponsor of public
limited real estate partnerships ('First Capital'), since December 1992 and a
director of First Capital since January 1993. He has been an executive vice
president of Equity Financial and Management Company, a subsidiary of Equity
Group Investments, Inc., an owner, manager and financier of real estate and
corporations ('EGI'), providing strategic direction and services for EGI's real
estate and corporate activities since November 1992.
2
<PAGE>
Mark S. Germain, age 47, has been a director of the Company since May 1997.
Mr. Germain served as a trustee of the Trust from November 1992 until
consummation of the Merger in May 1997. Currently he is employed by Olmsted
Group L.L.C., which is a consultant to biotechnology and other high technology
companies. Mr. Germain also serves as a board member of several privately held
biotechnology companies. Previously, from 1990 to 1994, Mr. Germain was employed
by D. Blech & Company, Incorporated, a merchant bank. From 1986 to 1989, he was
President and Chief Operating Officer of The Vista Organization, Ltd., and from
1989 to 1990, its President and Chief Executive Officer. Mr. Germain was a
partner in a New York law firm prior to 1986.
Frank J. Hoenemeyer, age 78, has been a director of the Company since May
1997. Mr. Hoenemeyer served as a trustee of the Trust from November 1992 until
consummation of the Merger in May 1997. Mr. Hoenemeyer also currently serves as
a director of American International Group, Inc., W.P. Carey Advisors, Inc. and
Carey Fiduciary Advisors, Inc. (subsidiaries of W.P. Carey & Co., Inc.) and as
Vice Chairman of the Investment Committee of W.P. Carey & Co., Inc. From 1947 to
1984, he was employed by The Prudential Insurance Company of America where he
served as Vice Chairman and Chief Investment Officer prior to his retirement.
Frank J. Sixt, age 46, has been a director of the Company since May 1997.
Mr. Sixt served as a trustee of the Trust from November 1992 until consummation
of the Merger in May 1997. Mr. Sixt currently serves as Group Finance Director
of Hutchison Whampoa Limited. He is an Executive Director of Cheung Kong
(Holdings) Limited, Cheung Kong Infrastructure Holdings Limited and Hong Kong
Electric Holdings Limited in Hong Kong; Orange PLC in the UK; and Husky Oil
Limited, BurCon Properties Limited and Gordon Capital Corporation in Canada.
Previously, from 1987 to 1990, Mr. Sixt was a partner in the law firm of
Stikeman Elliott.
EXECUTIVE OFFICERS
Each Executive Officer of the Company holds office at the pleasure of the
Board. The Executive Officers of the Company are as set forth below:
Jeffrey H. Lynford, Chairman of the Board and Secretary. Biographical
information regarding Mr. Lynford is set forth above under 'Other Directors'.
Edward Lowethal, President and Chief Executive Officer. Biographical
information regarding Mr. Lowenthal is set forth above under 'Nominees for
Election as Directors'.
Gregory F. Hughes, age 34, has been the Chief Financial Officer of the
Company since its formation in January 1997. Mr. Hughes served as a Vice
President--Chief Financial Officer of the Trust from December 1994 until
consummation of the Merger in May 1997. From March 1993 until December 1994 he
was a Vice President and Chief Accounting Officer of the Trust. During 1992, Mr.
Hughes was a controller with Jones Lang Wootton Realty Advisors, a firm that
provides real estate asset management and investment consultation services. From
1985 to 1991, Mr. Hughes was a manager with Kenneth Leventhal & Company, a
public accounting firm specializing in real estate and financial services. Mr.
Hughes is a certified public accountant.
David M. Strong, age 39, has been a Vice President for Development of the
Company since its formation in January 1997. Mr. Strong served as a Vice
President of the Trust from July 1995 until consummation of the Merger in May
1997. From July 1994 until July 1995 he was Acquisitions and Development
Associate of the Trust. From 1991 to 1994, Mr. Strong was President and owner of
LPI Management, Inc., a commercial real estate company providing management and
consulting services. From 1984 to 1991, he was a senior executive with the
London Pacific Investment Group, a real estate development, investment and
management firm active in Southern California and Western Canada. From 1979 to
1984, Mr. Strong was a manager with Arthur Young, a public accounting firm. Mr.
Strong is a member of the Canadian Institute of Chartered Accountants.
KEY EMPLOYEES
Richard R. Previdi, age 42, is the Chief Operating Officer of Wellsford
Commercial and has managed the acquisition and operation of the commercial
properties of the Company (and its predecessor) since September 1996. From May
1988 until May 1994, he was first a Partner and then a Managing Director with
Trammell Crow Company in the firm's Washington, D.C. area office. From October
1985 to May 1988, he was first a Project
3
<PAGE>
Manager and then a Principal with Trammell Crow Company in the same office. From
October 1982 until October 1985, Mr. Previdi was a manager with Arthur Young and
Company, a public accounting firm.
William H. Darrow II, age 50, has been a Managing Director of the Company
since August 1997. From 1993 to 1997, Mr. Darrow was a founder and partner of
Mansfield Partners, Inc., a real estate investment, management, and consulting
firm. From 1989 until 1993, Mr. Darrow was Senior Vice President and Manager of
the US Real Estate Group of Banque Indosuez, a French merchant bank. From 1987
until 1989, he was President of CRI Institutional Real Estate. From 1984 to
1987, Mr. Darrow was a managing director in the corporate finance group of
Prudential-Bache Securities. From 1983 to 1984, he was President of Dade Savings
and Loan Association. Prior to joining Dade Savings, Mr. Darrow was a Senior
Vice President with Chemical Bank, which he joined in 1969.
Paul I. McArthur, age 46, has been a Managing Director of the Company,
subsequent to the acquisition of Value Property Trust ('VLP'), a Maryland REIT,
since March 1998. From January 1996 to February 1998, Mr. McArthur was an
Executive Vice President of VLP. From 1995 to 1996, he served as Vice President
of Corporate Real Estate Services for Bushman Jackson-Cross. From 1985 to 1994,
Mr. McArthur served DKM Properties Corp., a privately held real estate
management and development firm, in various capacities including as Vice
President of Development and Senior Vice President of Operations.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of Common Shares and Class A Common Shares (collectively, the
'Shares') by each person known by the Company to be the beneficial owner of more
than five percent of the Company's outstanding Common Shares, by each director
of the Company, by each officer of the Company named in the Summary Compensation
Table below, and by all directors and officers of the Company as a group. Each
person named in the table has sole voting and investment power with respect to
all shares shown as beneficially owned by such person, except as otherwise set
forth in the notes to the table.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER (1) (2) BENEFICIAL OWNERSHIP PERCENTAGE OF CLASS (3)
- -------------------------------------------------------------------- -------------------- -----------------------
<S> <C> <C>
Jeffrey H. Lynford (4).............................................. 1,256,507 5.84%
Edward Lowenthal (5)................................................ 1,258,546 5.85%
Gregory F. Hughes (6)............................................... 416,359 2.00%
David M. Strong (7)................................................. 130,487 *
Douglas Crocker II (8)
c/o Equity Residential Properties Trust
Two North Riverside Plaza
Chicago, Illinois 60606........................................... 27,117 *
Rodney F. Du Bois (9)
32 Rip Road
Hanover, New Hampshire 03755...................................... 50,242 *
Mark S. Germain (10)
6 Olmsted Road
Scarsdale, New York 10583......................................... 117,108 *
Frank J. Hoenemeyer (11)
7 Harwood Drive
Madison, New Jersey 07940......................................... 1,675 *
Frank J. Sixt (12)
c/o Cheung Kung (Holdings), Ltd.
China Building, 18-22 Floors
29 Queen's Road Central
Hong Kong......................................................... 87,007 *
All directors and executive officers
as a group (9 persons) (13)....................................... 3,345,048 14.30%
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER (1) (2) BENEFICIAL OWNERSHIP PERCENTAGE OF CLASS (3)
- -------------------------------------------------------------------- -------------------- -----------------------
<S> <C> <C>
Mutual Qualified Fund (14)
51 John F. Kennedy Parkway
Short Hills, NJ 07078............................................. 2,277,184 11.19%
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, NY 10036................................................ 1,961,947 9.64%
Gotham Partners, L.P.
110 East 42nd Street
New York, NY 10017................................................ 1,597,050 7.85%
Mutual Beacon Fund (15)
51 John F. Kennedy Parkway
Short Hills, NJ 07078............................................. 1,453,221 7.14%
Yale University
230 Prospect Street
New Haven, CT 06511............................................... 1,191,832 5.85%
</TABLE>
- ------------------
* Less than 1.0%
(1) Unless otherwise indicated, the address of each person is c/o Wellsford
Real Properties, Inc., 610 Fifth Avenue, New York, New York 10020.
(2) WHWEL Real Estate Limited Partnership, a Delaware limited partnership
('Whitehall'), has the right to acquire Common Shares pursuant to warrants
and in exchange for certain membership units it receives in
Wellsford/Whitehall Properties, L.L.C., a Delaware limited liability
company ('Wellsford Commercial'); provided, however, that in either case at
the Company's election, Whitehall may receive cash based upon the market
value of the Common Shares. The Company has indicated that it does not
currently intend to issue, upon the exercise of any warrants or the
exchange right, Common Shares equal to 20% or more of its Common Shares
outstanding on the date of the issuance of the warrants or the exchange
right.
(3) Assumes the conversion of 339,806 Class A Common Shares issued to ERP
Operating Limited Partnership, an Illinois limited partnership, into
339,806 Common Shares.
(4) Includes 1,138,205 Common Shares issuable upon the exercise of options
(41,086 of which are exercisable on or before June 27, 1998). Options to
purchase 452,705 of these shares represent replacement options for Trust
share options which had exercise prices ranging from $18.94 to $26.375.
Also includes 33,334 Common Shares contributed to the Company's deferred
compensation plan with respect to which Mr. Lynford does not have voting
power or distribution rights. Also includes 7,790 Common Shares held by the
Lynford Family Charitable Trust, u/a dated December 16, 1984; Mr. Lynford
disclaims beneficial ownership of such shares.
(5) Includes 1,138,205 Common Shares issuable upon the exercise of options
(41,086 of which are exercisable on or before June 27, 1998). Options to
purchase 452,705 of these shares represent replacement options for Trust
share options which had exercise prices ranging from $18.94 to $26.375.
Also includes 33,334 Common Shares contributed to the Company's deferred
compensation plan with respect to which Mr. Lowenthal does not have voting
power or distribution rights. Also includes 291 Common Shares held by Ilene
Lowenthal, Mr. Lowenthal's wife, and 150 Common Shares held by Jared
Lowenthal, Mr. Lowenthal's son; Mr. Lowenthal disclaims beneficial
ownership of such shares.
(6) Includes 388,104 Common Shares issuable upon the exercise of options
(32,565 of which are exercisable on or before June 27, 1998). Options to
purchase 102,605 of these shares represent replacement options for Trust
share options which had exercise prices ranging from $18.94 to $29.375.
(Footnotes continued on next page)
5
<PAGE>
(Footnotes continued from previous page)
(7) Includes 126,126 Common Shares issuable upon the exercise of options
(38,709 of which are exercisable on or before June 27, 1998). Options to
purchase 40,626 of these shares represent replacement options for Trust
share options which had exercise prices ranging from $18.94 to $22.50.
(8) Includes 26,375 Common Shares issuable upon the exercise of options (12,125
of which are exercisable on or before June 27, 1998). Excludes 339,806
Class A Common Shares issued to ERP Operating Limited Partnership. Mr.
Crocker is President, Chief Executive Officer and a trustee of EQR, the
general partner of ERP Operating Limited Partnership, and disclaims
beneficial ownership of such shares.
(9) Includes 47,750 Common Shares issuable upon the exercise of options (19,250
of which are exercisable on or before June 27, 1998). Also includes 1,500
Common Shares held by Carol Du Bois, Mr. Du Bois' wife; Mr. Du Bois
disclaims beneficial ownership of such shares.
(10) Includes 86,265 Common Shares issuable upon the exercise of options (57,765
of which are exercisable on or before June 27, 1998). Options to purchase
38,515 of these shares represent replacement options for Trust share
options which had exercise prices ranging from $18.94 to $26.375. Also
includes 30,101 Common Shares held by Margery Germain, Mr. Germain's wife;
Mr. Germain disclaims beneficial ownership of such shares.
(11) Includes 933 Common Shares held by the Frank J. Hoenemeyer Individual
Retirement Account. Does not include 86,265 Common Shares issuable upon the
exercise of options which were transferred in accordance with the terms of
the applicable Share Option Agreements.
(12) Includes 86,265 Common Shares issuable upon the exercise of options (57,765
of which are exercisable on or before June 27, 1998). Options to purchase
38,515 of these shares represent replacement options for Trust share
options which had exercise prices ranging form $18.94 to $26.375.
(13) Includes the Common Shares referred to in footnotes (4) through (12) above.
(14) Mutual Qualified Fund has granted to an unaffiliated third party an
irrevocable proxy to vote 836,500 of the Common Shares that it owns. An
additional 614,747 Common Shares that it owns are subject to a voting
trust, the trustee of which is an unaffiliated third party.
Mutual Qualified Fund is one of the series comprising Franklin Mutual
Series Fund Inc., a publicly held open-end investment company registered
with the Securities and Exchange Commission (the 'Commission') under the
Investment Company Act of 1940, as amended. Its investment advisor is
Franklin Mutual Advisers, Inc. ('FMAI'), an investment adviser registered
with the Commission under the Investment Advisers Act of 1940, as amended.
Pursuant to an investment advisory agreement with Mutual Qualified Fund,
FMAI has sole investment discretion and voting authority with respect to
the shares owned by Mutual Qualified Fund. FMAI has no interest in
dividends or proceeds from the sale of such securities and disclaims
beneficial ownership of all the securities owned by Mutual Qualified Fund.
(15) Mutual Beacon Fund is one of the series comprising Franklin Mutual Series
Fund Inc., a publicly held open-end investment company registered with the
Commission under the Investment Company Act of 1940, as amended. Its
investment advisor is FMAI. Pursuant to an investment advisory agreement
with Mutual Beacon Fund, FMAI has sole investment discretion and voting
authority with respect to the shares owned by Mutual Beacon Fund. FMAI has
no interest in dividends or proceeds from the sale of such securities and
disclaims beneficial ownership of all the securities owned by Mutual Beacon
Fund.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation of the Chief Executive Officer and each of the other Executive
Officers of the Company whose cash compensation from the Company exceeded
$100,000 on an annualized basis for the period from the spin-off (the
'Spin-off') of the Company by the Trust in May 1997 immediately preceding the
Merger through December 31, 1997.
6
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------------ ------------------------------------------
PAYOUTS AWARDS
--------------------------------- -------
SECURITIES
UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL OTHER ANNUAL RESTRICTED STOCK OPTIONS/SARS PAYOUTS COMPENSATION
POSITION YEAR SALARY(A) BONUS COMPENSATION(B) AWARDS(S)(C) (D) (E) (F)
- -------------------------- ---- --------- -------- --------------- ---------------- --------------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Edward Lowenthal
President and Chief
Executive Officer....... 1997 $ 275,000 $525,000(G) -- $225,000 485,500 -- $ 16,095
Jeffrey H. Lynford
Chairman of the Board
and Secretary........... 1997 $ 275,000 $525,000(G) -- $225,000 485,500 -- $ 16,084
Gregory F. Hughes
Chief Financial
Officer................. 1997 $ 200,000 $225,000 -- $225,000 285,500 -- $ 1,500
David M. Strong
Vice President-
Development............. 1997 $ 125,000 $ 75,000 -- -- 85,500 -- $ 1,500
</TABLE>
- ------------------
(A) Amounts shown for 1997 are annualized.
(B) No named Executive Officer received perquisites or other personal benefits
aggregating more than the lesser of 10% of his total annual salary and bonus
or $50,000.
(C) Messrs. Lowenthal, Lynford and Hughes each received a grant of 14,286
restricted Common Shares. Twenty percent (20%) of each Executive Officer's
restricted Common Shares vest on each anniversary date of the grant
(December 5, 1997) over a 5-year period provided that the Executive Officer
is still employed by the Company (otherwise, any unvested restricted Common
Shares will be redeemed by the Company at $.01 per share). Unless and until
the Company redeems such Common Shares, each named Executive Officer has
sole voting power and the right to receive all dividends (if any) with
respect to such Common Shares. Notwithstanding the foregoing, the shares
pertaining to Messrs. Lynford and Lowenthal were contributed to the
Company's deferred compensation plan and, therefore, Messrs. Lynford and
Lowenthal do not have voting power or distribution rights with respect to
such Common Shares. Based upon the market price on the date immediately
preceding the date of grant of $15.75 per Common Share, the restricted
Common Shares granted to each of Messrs. Lowenthal, Lynford and Hughes had a
market value of $225,000. The value of each such grant, based on the closing
price of the Company's Common Shares on December 31, 1997 ($15.625 per
share), was $223,219.
(D) See 'Management Incentive Plans' regarding certain other options issued by
the Company.
(E) 'LTIP Payouts' refers to long-term incentive plan payouts.
(F) The amounts set forth include annual premiums of $14,595 and $14,584 in
1997 made by the Company related to split dollar life insurance plans for
the benefit of Messrs. Lowenthal and Lynford, respectively. The Company
expects to be reimbursed for these payments from the proceeds of this
insurance, if any.
The amounts set forth also include contributions to the Company's defined
contribution savings plan pursuant to Section 401 of the Internal Revenue
Code of 1986, as amended (the 'Code'). $1,500 of such contributions were
made by the Company on behalf of each of Messrs. Lowenthal, Lynford, Hughes,
and Strong relating to 1997.
(G) Includes 19,048 Common Shares valued at the closing price of the Company's
Common Shares on the date immediately preceding the date of grant ($15.75
per share) and contributed to the Company's deferred compensation plan.
The following table sets forth certain information concerning options
granted during the period from the Spin-off through December 31, 1997 to the
Executive Officers named in the Summary Compensation Table above. The Company
did not grant any share appreciation rights during this period. See 'Management
Incentive Plans' regarding certain other options issued by the Company.
7
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS/SARS EMPLOYEES IN OR BASE EXPIRATION PRESENT
NAME GRANTED(A) FISCAL YEAR PRICE DATE VALUE(B)
- ---------------------------------------------- ------------ ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Edward Lowenthal.............................. 485,500(C) 30% (D) 2007 $3,811,470
Jeffrey H. Lynford 485,500(C) 30% (D) 2007 $3,811,470
Gregory F. Hughes............................. 285,500(C) 18% (D) 2007 $2,125,470
David M. Strong............................... 85,500(C) 5% (D) 2007 $ 439,470
</TABLE>
- ------------------
(A) One third of the 85,500 options granted to each Executive Officer in the
fiscal year ended December 31, 1997 vest and become exercisable on each of
May 30, 1998, 1999, and 2000 provided such Executive Officer is employed by
the Company on each such date. One fifth of the additional 400,000, 400,000,
and 200,000 options granted to Messrs. Lowenthal, Lynford and Hughes,
respectively, in the fiscal year ended December 31, 1997, vest and become
exercisable on each of December 5, 1998, 1999, 2000, 2001, and 2002 provided
such Executive Officer is employed by the Company on each such date.
(B) Based upon the Black-Scholes option pricing model using (i) a 20% expected
volatility and (ii) a 6.24% risk-free rate of return for the 85,500 options
granted to each Executive Officer and using (i) a 27% expected volatility
and (ii) a 5.84% risk-free rate of return for the additional 400,000,
400,000, and 200,000 options granted to Messrs. Lowenthal, Lynford and
Hughes, respectively, based upon the data available on the date of grant.
(C) The right to receive reload options was given in connection with such
options. The reload options enable the Executive Officer to purchase a
number of Common Shares equal to the number of Common Shares delivered by
him to exercise the underlying option. The effective date of the grant of
the reload options will be the date the underlying option is exercised by
delivering Common Shares to the Company. The reload options have the same
expiration date as the underlying options and will have an exercise price
equal to the fair market value of the Common Shares on the effective date of
the grant of the reload options.
(D) 85,500 options have an exercise price of $10.30 per share, the balance have
an exercise price of $15.75 per share, in both cases equal to the fair
market value on the date of grant.
The following table sets forth certain information concerning the value of
unexercised options as of December 31, 1997 held by the Executive Officers named
in the Summary Compensation Table above. No options were exercised by the
Executive Officers during the period ended December 31, 1997.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF IN-THE-MONEY
UNEXERCISED OPTIONS/SARS AT FISCAL OPTIONS/SARS AT
YEAR-END (A) FISCAL YEAR-END (B)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------- --------------- ----------------- ----------- -------------
<S> <C> <C> <C> <C>
Edward Lowenthal............................. -- 938,205 $ -- $ 2,926,000
Jeffrey H. Lynford........................... -- 938,205 $ -- $ 2,926,000
Gregory F. Hughes............................ -- 388,105 $ -- $ 1,058,000
David M. Strong.............................. -- 126,126 $ -- $ 723,000
</TABLE>
- ------------------
Footnotes:
(A) The right to receive reload options was given in connection with such
options. The reload options enable the Executive Officer to purchase a
number of Common Shares equal to the number of Common Shares delivered by
him to exercise the underlying option. The effective date of the grant of
the reload options will be the date the underlying option is exercised by
delivering Common Shares to the Company. The reload options have the same
expiration date as the underlying options and will have an exercise price
equal to the fair market value of the Common Shares on the effective date of
the grant of the reload options.
(B) The fair market value on December 31, 1997 of the Common Shares underlying
the options was $15.625 per Common Share.
8
<PAGE>
BOARD OF DIRECTORS' MEETINGS
The Board held three regular quarterly meetings and two special meetings
during 1997. Management also confers frequently with the Board on an informal
basis to discuss Company affairs. Frank J. Sixt attended one of the five Board
meetings held during 1997 and also attended the Compensation Committee meeting
held during 1997.
BOARD COMMITTEES
The Board of Directors of the Company has established an Executive
Committee, a Compensation Committee and an Audit Committee. The Board does not
have a nominating committee or a committee performing the functions of a
nominating committee; the entire Board performs the usual functions of such
committee.
Executive Committee. The Executive Committee consists of Messrs. Lynford,
Lowenthal and Hoenemeyer. The Executive Committee has the authority to acquire,
dispose of and finance investments for the Company and execute contracts and
agreements, including those related to the borrowing of money by the Company,
and generally to exercise all other powers of the directors except for those
which require action by all directors or the independent directors under the
charter or bylaws of the Company or under applicable law.
Compensation Committee. The Compensation Committee consists of Messrs.
Crocker, Du Bois, Germain, Hoenemeyer and Sixt, none of whom are employees of
the Company. The Compensation Committee reviews the Company's compensation and
employee benefit plans, programs and policies, approves employment agreements
and monitors the performance and compensation of the executive officers and
other employees.
Audit Committee. The Audit Committee consists of Messrs. Du Bois, Germain,
Hoenemeyer and Sixt and makes recommendations concerning the engagement of
independent public accountants, reviews with the independent public accountants
the plans and results of the audit engagement, approves the professional
services provided by the independent public accountants, reviews the
independence of the independent public accountants, considers the range of audit
and non-audit fees, reviews the adequacy of the Company's internal accounting
controls and reviews related party transactions.
COMPENSATION OF DIRECTORS
The Company pays to each of its directors who are not employees of the
Company (i) an annual fee of $16,000, payable quarterly in Common Shares, and
(ii) a fee of $2,250 payable in cash for each regular quarterly Board of
Directors meeting at which such director is present in person or by telephone.
Each non-employee director also receives options to purchase 5,000 Common Shares
annually. Messrs. Du Bois, Germain, Hoenemeyer and Sixt also each received
options to purchase 47,750 Common Shares and Mr. Crocker received options to
purchase 26,375 Common Shares, all under the Company's 1997 Management Incentive
Plan. See 'Management Incentive Plans'. Directors who are employees of the
Company are not paid any directors' fees. In addition, the Company will
reimburse the directors for travel expenses incurred in connection with their
activities on behalf of the Company.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. Lynford and
Lowenthal (the 'Senior Executives'), pursuant to which Mr. Lynford serves as the
Chairman of the Board of the Company and Mr. Lowenthal serves as its President
and Chief Executive Officer. The Company has also entered into employment
agreements with Messrs. Hughes and Strong. The employment agreements with
Messrs. Lynford and Lowenthal will expire on December 31, 2002, and the
employment agreements with Messrs. Hughes and Strong will expire on May 29,
1999.
Each of the employment agreements is automatically extended for additional
one-year periods unless either the Executive Officer or the Company gives prior
notice not to extend the employment agreement, as specified in the agreement.
9
<PAGE>
Pursuant to the employment agreements, each of the Executive Officers is
also entitled to incentive compensation to be determined by the Compensation
Committee. Mr. Hughes is entitled to incentive compensation equal to at least
50% of his annual base salary.
In the event that either of the Senior Executives dies during the term of
his employment agreement, or if the Company elects to terminate his employment
agreement as a result of the Senior Executive's total disability, the Company is
required to pay additional compensation for the longer of 36 months after such
termination or for the remaining term of his agreement at the rate of his then
annual base salary.
If a Senior Executive's employment agreement is terminated by the Senior
Executive following a 'change in control' of the Company (as defined in the
agreements), then the Senior Executive shall be entitled to receive a lump sum
cash payment generally equal to the sum of (i) the amount of compensation that
he would have been entitled to had the agreement not been so terminated and (ii)
299% of his average annual compensation of every type and form includible in
gross income received during the three year period preceding the calendar year
in which employment is terminated. If a Senior Executive's employment agreement
is terminated by the Company other than for 'proper cause' (as defined in the
agreements) or death or disability, then the Senior Executive shall be entitled
to receive a lump sum cash payment generally equal to the greater of (i) the
amount of compensation that he would have been entitled to had the agreement not
been so terminated or (ii) 299% of his average annual compensation of every type
and form includible in gross income received during the three year period
preceding the calendar year in which employment is terminated.
The Senior Executives are also entitled to reimbursement of income taxes on
certain non-cash taxable income resulting from a change in control of the
Company, including taxable income resulting from accelerated loan forgiveness or
vesting of restricted shares or options. In addition, each Senior Executive is
entitled to receive an additional sum to cover certain resulting income and
excise tax liabilities that may be incurred on all of the foregoing.
If following a 'change in control' of the Company (as defined in the
agreements), the employment agreement of either Mr. Hughes or Mr. Strong is
terminated (a) by the Company, other than for 'Cause' (as defined in the
agreements) or (b) by Mr. Hughes or Mr. Strong, as the case may be, then Mr.
Hughes or Mr. Strong, as the case may be, shall be entitled to receive a lump
sum cash payment generally equal to the greater of (i) the amount of
compensation that he would have been entitled to had the agreement not been so
terminated and (ii) 200% of his average annual compensation of every type and
form includible in gross income received during the three year period preceding
the calendar year in which employment is terminated.
MANAGEMENT INCENTIVE PLANS
The Company has a 1997 Management Incentive Plan (the 'Management Incentive
Plan') and a Rollover Stock Option Plan (the 'Rollover Plan'; together with the
Management Incentive Plan, the 'Plans') for the purpose of aligning the
interests of the Company's directors, executive officers and employees with
those of the Shareholders and to enable the Company to attract, compensate and
retain directors, executive officers and employees and provide them with
appropriate incentives and rewards for their performance. The existence of the
Plans should enable the Company to compete more effectively for the services of
such individuals. The Rollover Plan was established for the purpose of granting
options and corresponding rights to purchase Common Shares in replacement of
former Trust share options. Each Plan provides for administration by a committee
of two or more non-employee directors established for such purpose.
Awards to directors, executive officers and other employees under the Plans
may take the form of stock options, including corresponding stock appreciation
rights and reload options. Under the Management Incentive Plan, the Company may
also provide restricted stock awards, stock purchase awards and stock purchase
loans to enable Management Incentive Plan participants to pay for stock purchase
awards. The maximum number of Common Shares that may be the subject of awards
under the Management Incentive Plan is 1,750,000 shares. Options to acquire
1,686,375 Common Shares have been granted under the Management Incentive Plan to
nineteen individuals, including directors, executive officers and employees of
the Company. Options to purchase 1,326,235 Common Shares were granted under the
Rollover Plan at the closing of the Merger principally to certain executive
officers and directors of the Company. Messrs. Lynford, Lowenthal, Hughes and
Strong each received options under the Rollover Plan to purchase 452,705,
452,705, 106,605 and 40,626 Common Shares,
10
<PAGE>
respectively, which options represent replacement options for Trust share
options which had exercise prices ranging from $18.94 to $29.375 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs.: Douglas Crocker II, Rodney
F. Du Bois, Mark S. Germain, Frank J. Hoenemeyer and Frank J. Sixt, none of whom
is, or has been, an officer or employee of the Company. Jeffrey H. Lynford, the
Company's Chairman of the Board, and Edward Lowenthal, the Company's President
and Chief Executive Officer, each serve on the board of trustees of EQR, of
which Douglas Crocker II is President, Chief Executive Officer and a trustee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee reviews and adopts compensation plans, programs
and policies and monitors the performance and compensation of Executive
Officers.
The key elements of the Company's executive compensation package are base
salary, annual bonus and long-term incentives. The policies with respect to each
of these elements are discussed below.
COMPENSATION PHILOSOPHY
The Compensation Committee seeks to enhance the profitability of the
Company, and thus Shareholder value, by aligning closely the financial interests
of the Company's Executive Officers with those of its Shareholders. The
Compensation Committee believes that the Company's compensation program should:
o Emphasize share ownership and, thereby, tie long-term compensation to
increases in Shareholder value.
o Enhance the Company's ability to attract and retain qualified Executive
Officers.
o Stress teamwork and overall Company results.
BASE SALARY
Base salaries for Executive Officers are determined by evaluating the
responsibilities of the position held and the experience and qualifications of
the individual, with reference to the competitive marketplace for Executive
Officers at certain other similar companies. The Company believes that the base
salaries for its Executive Officers are less than the average of the base
salaries for Executive Officers at such other similar companies.
ANNUAL BONUS
Pursuant to their employment agreements, each of the Executive Officers is
entitled to incentive compensation to be determined by the Compensation
Committee. Mr. Hughes is entitled to incentive compensation equal to at least
50% of his annual base salary.
The bonuses awarded in 1997 reflect the financial and strategic successes
which the Company achieved, including the Spin-off, the successful completion of
a private placement of 12,000,000 Common Shares in June 1997, the Whitehall
joint venture transaction, the negotiation of the merger of Wellsford Capital
Corporation, a Maryland corporation and wholly-owned subsidiary of the Company,
with and into VLP in February 1998, and the acquisition of over $100 million of
real estate-related debt securities, as well as each respective Executive
Officer's time and effort during the year.
LONG-TERM INCENTIVE
Long-term incentives are designed to align the interests of the Executive
Officers with those of the Shareholders. In awarding grants of restricted Common
Shares to Executive Officers and granting them options to purchase Common
Shares, consideration is given to the long-term incentives previously granted to
them.
Share options will generally be granted with an exercise price equal to the
fair market value of the Common Shares and vest and become exercisable over a
period of years based upon continued employment. This is intended to create
Shareholder value over the long term since the full benefit of the compensation
package cannot be realized unless share price appreciation occurs over a number
of years.
11
<PAGE>
Grants of restricted Common Shares also form a part of the Company's
long-term incentive package. Typically, some portion of such grants will vest
annually over a period of several years, subject to the Company achieving
certain performance goals and the Executive Officer remaining employed by the
Company. In making grants of restricted Common Shares, the Compensation
Committee will consider and give approximately equal weight to an individual's
scope of responsibilities, experience, past contributions to the Company and
anticipated contributions to the Company's long-term success.
Another component of the Company's long-term incentive package may include
making loans to Executive Officers for the purchase of Common Shares. These
loans typically will be secured by the Common Shares purchased and otherwise
will be non-recourse. The loans may be interest-free and may be forgiven in
whole or in part over time provided that the Executive Officer remains employed
by the Company. In making share loans, the Compensation Committee will consider
the same factors it considers in making grants of restricted Common Shares.
The Compensation Committee believes that share options, grants of
restricted shares and loans to purchase shares promote loyalty to the Company
and encourage recipients to coordinate their interests with those of the
Shareholders. The Compensation Committee may consider additional types of
long-term incentives in the future.
COMPENSATION OF CHIEF EXECUTIVE OFFICER AND OF CHAIRMAN OF THE BOARD
Mr. Lowenthal's and Mr. Lynford's compensation is determined pursuant to
the principles noted above and as set forth in their employment agreements.
Specific consideration has been given to their qualifications, responsibilities
and experience in the real estate industry, and the compensation package awarded
to the most senior executive officers of other comparable companies with similar
market capitalization. The Company believes that Mr. Lowenthal's and Mr.
Lynford's base salaries as set forth in their employment agreements are less
than the average base salaries for comparable senior officers of such other
similar companies.
For the long-term incentive component of Mr. Lowenthal's and Mr. Lynford's
compensation, see the tables above. Their long-term incentive compensation was
granted in light of the accomplishments of Messrs. Lowenthal and Lynford and the
Company during 1997. These accomplishments included a 51.7 % total return to
Shareholders (compared to a 17.5% total annual return on the NAREIT Index), and
the financial and strategic successes described above under 'Annual Bonus'.
Their long-term incentive compensation reflects the Compensation Committee's
desire to create incentives for each of them and focus them on maximizing
Shareholder value, and the practice of the Company's primary competitors for
executive talent of making long-term incentive grants to their most senior
officers.
It is the responsibility of the Compensation Committee to address the
issues raised by the tax laws which make certain non-performance-based
compensation to executives of public companies in excess of $1,000,000
non-deductible to the Company. In this regard, the Committee must determine
whether any actions with respect to this limit should be taken by the Company.
At this time, it is not anticipated that any Executive Officer will receive any
such compensation in excess of this limit. Therefore, the Compensation Committee
has not taken any action to comply with the limit.
CONCLUSION
Through the programs described above, a very significant portion of the
Company's executive compensation is linked to individual and Company performance
and the creation of Shareholder value. However, periodic business cycle
fluctuations may result in an imbalance for a particular period.
The foregoing report has been furnished by the Compensation Committee.
April 28, 1998
Rodney F. Du Bois Frank J. Sixt
Frank J. Hoenemeyer Mark S. Germain
Douglas Crocker II
12
<PAGE>
COMMON SHARE PRICE PERFORMANCE GRAPH
The following graph compares the cumulative total Shareholder return on the
Common Shares for the period commencing May 30, 1997 through December 31, 1997
with the cumulative total return on the Standard & Poor's 500 Stock Index ('S&P
500') and the NAREIT Index for the same period. Total return values were
calculated based on cumulative total return assuming (i) the investment of $100
in the S&P 500, in the NAREIT Index and in the Common Shares on May 30, 1997,
and (ii) reinvestment of dividends. The total return for the Common Shares since
May 1997 is approximately 51.7% versus approximately 17.5% for the NAREIT Index
and approximately 14.4% for the S&P 500.
WRP S&P 500 NAREIT
--- ------- ------
5/30/97 100 100 100
12/31/97 151.7 114.4 117.5
Since the Company did not commence operations until May 30, 1997, the date of
the Spin-off, no data prior to that date is available.
The NAREIT Index (consisting of 210 companies with a total market
capitalization of $140.5 billion) is maintained by the National Association of
Real Estate Investment Trusts, Inc. and is only published monthly based on the
last closing prices of the preceding month.
13
<PAGE>
CERTAIN TRANSACTIONS
In February 1997, the contracts to purchase Chatham, Pointview, 1700 Valley
Road, 1800 Valley Road and Greenbrook were transferred to the Company by an
entity ('Commercial Partnership') of which Messrs. Lynford and Lowenthal and the
wife of Mark Germain are owners, for 218,447 Common Shares having an aggregate
value of approximately $2.25 million and the Company's agreement to repay a $1.0
million advance used for the down payment on Pointview, 1700 Valley Road and
1800 Valley Road. Upon liquidation of Commercial Partnership in November 1997,
Mr. Lynford, Mr. Lowenthal and the wife of Mark Germain each received
approximately 16.4%, 16.4% and 13.8%, respectively, of the Common Shares issued
to Commercial Partnership. The aggregate purchase price paid by the Company for
these commercial properties was approximately $47.6 million, including the
approximately $2.25 million referred to above.
On May 30, 1997, the Company made short-term loans to Messrs. Lynford and
Lowenthal in the amounts of $590,000 and $119,000, respectively. The proceeds of
these loans, which were repaid on July 1, 1997, were used to satisfy certain
withholding tax obligations.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and the Audit Committee have appointed the firm of
Ernst & Young LLP, the Company's independent public accountants for the fiscal
year ended December 31, 1997, to audit the financial statements of the Company
for the fiscal year ending December 31, 1998. A proposal to ratify this
appointment is being presented to the Shareholders at the Annual Meeting. A
representative of Ernst & Young LLP is expected to be present at the meeting and
available to respond to appropriate questions and, although that firm has
indicated that no statement will be made, an opportunity for a statement will be
provided.
------------------------
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE PROPOSED RATIFICATION OF
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE
COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998.
------------------------
PROPOSAL 3
APPROVAL OF THE COMPANY'S 1998 MANAGEMENT INCENTIVE PLAN
General. The Board of Directors of the Company has approved, subject to
the approval of the Shareholders, the 1998 Management Incentive Plan (the '1998
Management Incentive Plan'). The purpose of the 1998 Management Incentive Plan
is to align the interests of the Company's directors, executive officers and
employees with those of the Shareholders and to enable the Company to attract,
compensate and retain directors, executive officers and employees and provide
them with appropriate incentives and rewards for their performance. The
existence of the 1998 Management Incentive Plan should enable the Company to
compete more effectively for the services of such individuals. The officers,
directors and employees of the Company who receive awards under the 1998
Management Incentive Plan may receive a greater economic benefit to the extent
the fair market value of the Company's Common Shares increases. Further, the
equity of existing Shareholders would be diluted if the Company's Common Shares
were issued pursuant to the 1998 Management Incentive Plan at prices less than
their then current fair market value. In addition, the issuance of a substantial
number of Common Shares under the 1998 Management Incentive Plan or their sale
in the public market might adversely affect prevailing market prices for such
shares.
14
<PAGE>
Awards to directors, executive officers and other employees under the 1998
Management Incentive Plan may take the form of share options ('Options'),
including corresponding share appreciation rights ('SARs') and reload options,
restricted share awards and share purchase awards. The maximum number of Common
Shares that may be the subject of awards under the 1998 Management Incentive
Plan is 5,000,000 shares. The Board has indicated its intention that the
aggregate number of Common Shares that may be the subject of granted and
unexercised share options and restricted share awards and share purchase awards
that have not fully vested, under the Management Incentive Plan and the 1998
Management Incentive Plan will not exceed 15% of the outstanding Common Shares.
As of April 17, 1998, options were granted under the 1998 Management
Incentive Plan to each of Jeffrey H. Lynford and Edward Lowenthal (i) to
purchase 100,000 Common Shares at an exercise price of $17.50 per Common Share
and (ii) to purchase 100,000 Common Shares at an exercise price of $20.00 per
Common Share. As of April 17, 1998, the Common Shares had a fair market value of
$14.50 per share, based upon the closing price of the Common Shares on such
date.
1998 Management Incentive Plan Administration. The 1998 Management
Incentive Plan will be administered by a committee of two or more non-employee
directors (the 'Committee'), which will initially consist of Messrs. Du Bois and
Germain. The Committee will determine the directors, executive officers and
other employees who will be eligible for and granted awards, determine the
amount and type of awards, establish rules and guidelines relating to the 1998
Management Incentive Plan, establish, modify and terminate the terms and
conditions of awards and take such other action as may be necessary for the
proper administration of the 1998 Management Incentive Plan. All employees and
non-employee directors are currently eligible to participate in the 1998
Management Incentive Plan.
Options. 'Incentive Options' meeting the requirements of Section 422 of
the Code and 'Nonqualified Options' that do not meet such requirements are both
available for grant under the 1998 Management Incentive Plan. The term of each
Option will be determined by the Committee, but no Incentive Option will be
exercisable more than ten years after the date of grant. Options may also be
subject to restrictions on exercise, such as exercise in periodic installments,
as determined by the Committee. The exercise price for Incentive Options must be
at least equal to 100% of the fair market value of the Common Shares on the date
of grant and the exercise price for Nonqualified Options will be determined by
the Committee at the time of grant. The exercise price can be paid in cash, or
if approved by the Committee, by tendering (actually or constructively) Common
Shares owned by a participant.
Share Appreciation Rights. The 1998 Management Incentive Plan provides
that SARs may be granted in connection with a grant of Options. Each SAR must be
associated with a specific Option and must be granted at the time of grant of
such Option. A SAR is exercisable only to the extent the related Option is
exercisable. Upon the exercise of a SAR, the recipient is entitled to receive
from the Company, without the payment of any cash (except for any applicable
withholding taxes), up to, but no more than, an amount in cash or Common Shares
equal to the excess of (A) the fair market value of one Common Share on the date
of such exercise over (B) the exercise price of any related Option, times the
number of Common Shares in respect of which such SAR shall have been exercised.
Upon the exercise of a SAR, the related share Option, or the portion thereof in
respect of which such SAR is exercised, will terminate. Upon the exercise of an
Option granted in tandem with a SAR, such tandem SAR will terminate.
Reload Options. The Committee may grant, concurrently with the award of
any Option (each an 'Underlying Option') to such participants, one or more
reload options (each a 'Reload Option') to purchase for cash (or, if permissible
under the Underlying Option, by tendering Common Shares) a number of Common
Shares equal to the number of Common Shares delivered (or deemed delivered) by
the participant to the Company to exercise the Underlying Option. Although an
Underlying Option may be an Incentive Option, a Reload Option is not intended to
qualify as an Incentive Option. A Reload Option may be granted in connection
with the exercise of an Option that is itself a Reload Option. Each Reload
Option will have the same expiration date as the Underlying Option and an
exercise price equal to the fair market value of the Common Shares on the date
of grant of the Reload Option. A Reload Option is exercisable immediately.
Restricted Shares. The Company may award restricted Common Shares to a
participant. Such a grant gives a participant the right to receive Common Shares
subject to a risk of forfeiture based upon certain
15
<PAGE>
conditions. The forfeiture restrictions on the Common Shares may be based upon
performance standards, length of service or other criteria as the Committee may
determine. Until all restrictions are satisfied, lapsed or waived, the Company
will maintain custody over the restricted Common Shares but the participant will
be able to vote the Common Shares and will be entitled to an amount equal to all
distributions, if any, paid with respect to the Common Shares, as provided by
the Committee. During such restrictive period, the restricted Common Shares may
not be sold, assigned, transferred, pledged or otherwise encumbered. Upon
termination of employment, the participant generally forfeits the right to the
Common Shares to the extent the applicable performance standards, length of
service requirements, or other measurement criteria have not been met.
Share Purchase Awards. The 1998 Management Incentive Plan also permits the
grant of share purchase awards to participants. Participants who are granted a
share purchase award are provided with a share purchase loan to enable them to
pay the purchase price for the Common Shares acquired pursuant to the award. The
terms of each share purchase loan will be determined by the Committee. The
purchase price of Common Shares acquired with a share purchase loan is the fair
market value on the date of the award. The 1998 Management Incentive Plan
provides that some or all of a share purchase loan can be forgiven under terms
determined by the Committee. At the end of the loan term, the remainder of the
share purchase loan will be due and payable. The interest rate, if any, on a
share purchase loan will be determined by the Committee. Share purchase loans
may be recourse or nonrecourse under terms determined by the Committee.
Antidilution Provisions. The number of Common Shares authorized to be
issued under the 1998 Management Incentive Plan and subject to outstanding
awards (and the grant or exercise price thereof) may be adjusted to prevent
dilution or enlargement of rights in the event of any dividend or other
distribution, recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Common Shares or other securities, or other similar
capitalization change.
Certain Federal Income Tax Consequences of the 1998 Management Incentive
Plan. The following is a brief summary of the principal federal income tax
consequences of awards under the 1998 Management Incentive Plan. The summary is
based upon current federal income tax laws and interpretations thereof, all of
which are subject to change at any time, possibly with retroactive effect. The
summary is not intended to be exhaustive and, among other things, does not
describe state, local or foreign tax consequences.
In general, a participant is not subject to federal income tax either at
the time of grant or at the time of exercise of an Incentive Option. However,
upon exercise, the difference between the fair market value of the Common Shares
and the exercise price is a tax preference item subject to the possible
application of the alternative minimum tax. If a participant does not dispose of
Common Shares acquired through the exercise of an Incentive Option in a
'disqualifying disposition' (i.e., no disposition occurs within two years from
the date of grant of the share option nor within one year of the transfer of the
Common Shares to the participant), then the participant will be taxed only upon
the gain, if any, from the sale of such Common Shares, and such gain will be
taxable as gain from the sale of a capital asset.
The Company will not receive any tax deduction on the exercise of an
Incentive Option or, if the above holding period requirements are met, on the
sale of the underlying Common Shares. If there is a disqualifying disposition
(i.e., one of the holding period requirements is not met), the participant will
be treated as receiving compensation subject to ordinary income tax in the year
of the disqualifying disposition and the Company will be entitled to a deduction
for compensation expense in an amount equal to the amount included in income by
the participant. The participant generally will be required to include in income
an amount equal to the difference between the fair market value of the Common
Shares at the time of exercise and the exercise price. Any appreciation in value
after the time of exercise will be taxed as capital gain and will not result in
any deduction by the Company.
If Nonqualified Options are granted to a participant, there are no federal
income tax consequences at the time of grant. Upon exercise of the Option, the
participant must report as ordinary income an amount equal to the difference
between the exercise price and the fair market value of the Common Shares on the
date of exercise. The Company will receive a tax deduction in like amount. Any
appreciation in value after the time of exercise will be taxed as capital gain
and will not result in any deduction by the Company.
16
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No income will be realized by a participant in connection with the grant of
any SAR. The participant must include in ordinary income the amount of cash
received and the fair market value on the exercise date of any Common Shares
received upon the exercise of a SAR. The Company will be entitled to a deduction
equal to the amount included in such participant's income by reason of the
exercise of any SAR.
The receipt of a Reload Option by a holder of an Incentive Option or a
Nonqualified Option (including a Reload Option) who pays the exercise price in
full or in part with previously acquired Common Shares should not affect the tax
treatment of the exercise of such Incentive or Nonqualified Option (including
the amount of ordinary income, if any, recognized upon exercise). A participant
will not be subject to tax at the time a Reload Option is granted (except for
any income recognized upon the exercise of a Nonqualified Option at the time of
grant of the Reload Option). A Reload Option will constitute a Nonqualified
Option for federal income tax purposes and will be taxed as such in the manner
set forth above.
A grant of restricted Common Shares does not constitute a taxable event for
either a participant or the Company. However, the participant will be subject to
tax, at ordinary income rates, when the Common Shares are no longer subject to a
substantial risk of forfeiture or they become transferable. The Company will be
entitled to take a commensurate deduction at that time.
A participant may elect, within 30 days of the date of grant, to recognize
taxable ordinary income at the time restricted Common Shares are awarded in an
amount equal to the fair market value of the Common Shares at the time of grant,
determined without regard to any forfeiture restrictions. If such an election is
made, the Company will be entitled to a deduction at that time in the same
amount. Future appreciation on the Common Shares will be taxed at the capital
gains rate when the Common Shares are sold. However, if, after making such an
election, the Common Shares are forfeited, the participant will be unable to
claim a deduction.
In general, a participant who receives a share purchase award incurs no tax
liability and the Company does not receive any deduction at the time Common
Shares are acquired through a share purchase award. However, as the share
purchase loan is forgiven, the participant will be required to recognize income
in an amount equal to the forgiven portion of the loan. The Company will be
entitled to take a commensurate deduction at such time.
Applicable withholding taxes may be withheld in connection with any award
under the 1998 Management Incentive Plan. In that regard, the Committee has the
discretion to allow a participant to satisfy its withholding tax obligations
with Common Shares.
Change in Control. Depending on the terms of a particular award as
determined by the Committee, upon the occurrence of a change in control of the
Company, all options and related SARs may become immediately exercisable, the
restricted Common Shares may fully vest and share purchase loans may be forgiven
in full.
Termination, Amendment and ERISA Status. The 1998 Management Incentive
Plan will terminate by its terms and without any action by the Board on the day
preceding the tenth anniversary of the date of its effectiveness. No awards may
be made after that date. Awards outstanding on such date will remain valid in
accordance with their terms.
The Committee may amend or alter the terms of awards under the 1998
Management Incentive Plan, including to provide for the forgiveness in whole or
in part of share purchase loans, the release of the Common Shares securing such
loans or the termination or modification of the vesting or performance
provisions of the grants of restricted Common Shares but no such action shall in
any way impair the rights of a participant under any award without such
participant's consent.
The Committee may amend or terminate the 1998 Management Incentive Plan. No
such amendments or termination of the 1998 Management Incentive Plan shall in
any way impair the rights of a participant under any award previously granted
without such participant's consent. In addition, any amendment or termination
will be subject to Shareholder approval if approval is required by Federal or
state law or regulation or rule of any stock exchange or quotation system on
which the Common Shares are listed or quoted.
The 1998 Management Incentive Plan is not subject to the provisions of the
Employee Retirement Income Security Act of 1976, as amended.
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17
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THE BOARD RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO ADOPT THE COMPANY'S
1998 MANAGEMENT INCENTIVE PLAN.
------------------------
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater-than-ten-percent Shareholders are required by
regulation of the Securities and Exchange Commission to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during the fiscal year
ended December 31, 1997, all Section 16 filing requirements applicable to its
officers, directors and greater-than-ten-percent beneficial owners were complied
with.
SHAREHOLDERS PROPOSALS
Proposals of Shareholders intended to be presented at the annual meeting of
Shareholders to be held in 1999 must be received by the Company at its principal
executive offices no later than December 23, 1998 for inclusion in the Company's
proxy statement and form of proxy relating to that meeting.
FINANCIAL AND OTHER INFORMATION
The Company's Annual Report for the fiscal year ended December 31, 1997,
including financial statements, has been concurrently sent to the Shareholders.
The Annual Report is not a part of the proxy solicitation materials. Additional
copies of the Company's Annual Report and Form 10-K for the year ended December
31, 1997, as filed with the SEC, may be obtained without charge by contacting
Stasia Ananson at the Company's principal executive offices at 610 Fifth Avenue,
New York, NY 10020.
EXPENSES OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. Brokers and
nominees should forward soliciting materials to the beneficial owners of the
Common Shares held of record by such persons, and the Company will reimburse
them for their reasonable forwarding expenses. In addition to the use of the
mails, proxies may be solicited by directors, officers and regular employees of
the Company, who will not be specially compensated for such services, by means
of personal calls upon, or telephonic or telegraphic communications with
Shareholders or their personal representatives. MacKenzie Partners, Inc. has
been retained to assist in the solicitation of proxies for a fee not to exceed
$5,000, plus reimbursement of out-of-pocket expenses. No officer or director of
the Company has an interest in, or is related to any principal of, MacKenzie
Partners, Inc.
OTHER MATTERS
The Board knows of no matters other than those described in this Proxy
Statement which are likely to come before the Annual Meeting. If any other
matters properly come before the Annual Meeting, the persons named in the
accompanying form of proxy intend to vote the proxies in accordance with their
best judgement.
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18
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WELLSFORD REAL PROPERTIES, INC.
1998 MANAGEMENT INCENTIVE PLAN
WELLSFORD REAL PROPERTIES, INC., a Maryland corporation (the
"Company"), hereby establishes and adopts the following 1998 Management
Incentive Plan (the "Plan").
RECITALS
WHEREAS, the Company desires to encourage high levels of
performance by those individuals who are key to the success of the Company, to
attract new individuals who are highly motivated and who will contribute to
the success of the Company and to encourage such individuals to remain as
directors and/or employees of the Company and its subsidiaries by increasing
their proprietary interest in the Company's growth and success.
WHEREAS, to attain these ends, the Company has formulated
the Plan embodied herein to authorize the granting of incentive awards through
grants of stock options ("Options"), grants of stock appreciation rights,
grants of Stock Purchase Awards (hereafter defined), and grants of Restricted
Stock Awards (hereafter defined) to those individuals whose judgment,
initiative and efforts are responsible for the success of the Company.
NOW, THEREFORE, the Company hereby constitutes, estab lishes
and adopts the following Plan and agrees to the following provisions:
ARTICLE 1.
PURPOSE OF THE PLAN
1.1. Purpose. The purpose of the Plan is to assist the
Company in attracting and retaining selected individuals to serve as
directors, officers and employees of the Company who will contribute to the
Company's success and to achieve long-term objectives which will inure to the
benefit of all shareholders of the Company through the additional incentive
inherent in the ownership of the Company's Common Stock (the "Shares").
Options granted under the Plan will be either "incentive stock options,"
intended to qualify as such under the provisions of section 422 of the
Internal Revenue Code of 1986, as from time to time amended (the "Code"), or
"nonqualified stock options." For purposes of the Plan, the term "subsidiary"
shall mean "subsidiary corporation," as such term is defined in section 424(f)
of the Code, and "affiliate" shall have the meaning set forth in Rule 12b-2 of
the Securities Exchange Act of 1934, as
<PAGE>
amended (the "Exchange Act"). For purposes of the Plan, the term "Award" shall
include a grant of an Option, stock appreciation rights, a Stock Purchase
Award, a Restricted Stock Award, or any other award made under the terms of
the Plan.
ARTICLE 2.
SHARES SUBJECT TO AWARDS
2.1. Number of Shares. Subject to the adjustment pro visions
of Section 9.9 hereof, the aggregate number of Shares which may be issued
under Awards under the Plan, whether pursuant to Options, Stock Purchase
Awards or Restricted Stock Awards shall not exceed 5,000,000. No Options to
purchase fractional Shares shall be granted or issued under the Plan. For
purposes of this Section 2.1, the Shares that shall be counted toward such
limitation shall include all Shares:
(1) issued or issuable pursuant to Options that have
been or may be exercised;
(2) issued or issuable pursuant to Stock Purchase Awards;
and
(3) issued as, or subject to issuance as a Restricted Stock
Award.
2.2. Shares Subject to Terminated Awards. The Shares covered
by any unexercised portions of terminated Options granted under Articles 4 and
6, Shares forfeited as provided in Section 8.2(a) and Shares subject to any
Awards which are otherwise surrendered by the Participant without receiving
any payment or other benefit with respect thereto may again be subject to new
Awards under the Plan. In the event the purchase price of an Option is paid in
whole or in part through the delivery of Shares, the number of Shares issuable
in connection with the exercise of the Option shall not again be available for
the grant of Awards under the Plan. Shares subject to Options, or portions
thereof, which have been surrendered in connection with the exercise of share
appreciation rights shall not again be available for the grant of Awards under
the Plan.
2.3. Character of Shares. Shares delivered under the Plan
may be authorized and unissued Shares or Shares acquired by the Company, or
both.
2.4. Limitations on Grants to Individual Participant.
Subject to adjustments pursuant to the provisions of Section 9.9 hereof, the
maximum number of Shares with respect to which Options or stock appreciation
rights may be granted hereunder to
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<PAGE>
any employee during any fiscal year shall be 500,000 Shares (the
"Limitation"). If an Option is canceled, the canceled Option shall continue to
be counted toward the Limitation for the year granted. An Option (or a stock
appreciation right) that is repriced during any fiscal year is treated as the
cancellation of the Option (or stock appreciation right) and a grant of a new
Option (or stock appreciation right) for purposes of the Limitation for that
fiscal year.
ARTICLE 3.
ELIGIBILITY AND ADMINISTRATION
3.1. Awards to Employees and Directors. (a) Partici pants
who receive Options under Articles 4 and 6 hereof (including stock
appreciation rights under Article 5) ("Optionees"), Stock Purchase Awards
under Article 7 or Restricted Stock Awards under Article 8 (in either case, a
"Participant") shall consist of such key employees and Directors (hereinafter
defined) of the Company or any of its subsidiaries or affiliates as the
Committee shall select from time to time. The Committee's designation of an
Optionee or Participant in any year shall not require the Committee to
designate such person to receive Awards or grants in any other year. The
designation of an Optionee or Participant to receive Awards or grants under
one portion of the Plan shall not require the Committee to include such
Optionee or Participant under other portions of the Plan.
(b) No Option which is intended to qualify as an
"incentive stock option" may be granted to any employee or Director who, at
the time of such grant, owns, directly or in directly (within the meaning of
sections 422(b)(6) and 424(d) of the Code), shares possessing more than ten
percent (10%) of the total combined voting power of all classes of shares of
the Com pany or any of its subsidiaries or affiliates, unless at the time of
such grant, (i) the option price is fixed at not less than 110% of the Fair
Market Value (as defined below) of the Shares subject to such Option,
determined on the date of the grant, and (ii) the exercise of such Option is
prohibited by its terms after the expiration of five (5) years from the date
such Option is granted.
3.2. Administration. (a) The Plan shall be admini stered by
a committee (the "Committee") consisting of not fewer than two Directors of
the Company (the directors of the Company being hereinafter referred to as the
"Directors"), as designated by the Directors. The Directors may remove from,
add members to, or fill vacancies in the Committee. Unless otherwise
determined by the Directors, each member of the Committee will be a "Non-
Employee Director" within the meaning of Rule 16b-3 (or any
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<PAGE>
successor rule) of the Exchange Act and an "outside director" within the
meaning of Section 162(m)(4)(C)(i) of the Code and the regulations thereunder.
Any Award to a member of the Committee shall be on
terms consistent with Awards made to other Directors who are not members of
the Committee, except where the Award is approved or ratified by the
Compensation Committee (excluding persons who are also members of the
Committee) of the Board of Directors of the Company.
(b) The Committee is authorized, subject to the
provisions of the Plan, to establish such rules and regulations as it may deem
appropriate for the conduct of meetings and proper administration of the Plan.
All actions of the Committee shall be taken by majority vote of its members.
The Committee is also authorized, subject to the provisions of the Plan, to
make provisions in various Awards pertaining to a "change of control" of the
Company and to amend or modify existing Awards.
(c) Subject to the provisions of the Plan, the
Committee shall have authority, in its sole discretion, to inter pret the
provisions of the Plan and, subject to the requirements of applicable law,
including Rule 16b-3 of the Exchange Act, to prescribe, amend, and rescind
rules and regulations relating to it as it may deem necessary or advisable.
All decisions made by the Committee pursuant to the provisions of the Plan
shall be final, conclusive and binding on all persons, including the Com pany,
its shareholders, Directors and employees, and Plan participants.
ARTICLE 4.
OPTIONS
4.1. Grant of Options. The Committee shall determine, within
the limitations of the Plan, the Directors and employees of the Company and
its subsidiaries and affiliates to whom Options are to be granted under the
Plan, the number of Shares that may be purchased under each such Option and
the option price, and shall designate such Options at the time of the grant as
either "incentive stock options" or "nonqualified stock options;" provided,
however, that Options granted to employees of an affiliate (that is not also a
subsidiary) or to non-employees of the Company may only be "nonqualified stock
options."
All Options granted pursuant to this Article 4 and Article 6
herein shall be authorized by the Committee and shall be evidenced in writing
by stock option agreements ("Stock Option Agreements") in such form and
containing such terms and condi-
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<PAGE>
tions as the Committee shall determine which are not inconsistent with the
provisions of the Plan, and, with respect to any Stock Option Agreement
granting Options which are intended to qualify as "incentive stock options,"
are not inconsistent with Section 422 of the Code. Granting of an Option
pursuant to the Plan shall impose no obligation on the recipient to exercise
such op tion. Any individual who is granted an Option pursuant to this Article
4 and Article 6 herein may hold more than one Option granted pursuant to such
Articles at the same time and may hold both "incentive stock options" and
"nonqualified stock options" at the same time. To the extent that any Option
does not qualify as an "incentive stock option" (whether because of its
provisions, the time or manner of its exercise or otherwise) such Option or
the portion thereof which does not so qualify shall constitute a separate
"nonqualified stock option."
4.2. Option Price.
(a) Subject to Section 3.1(b), the option price
per each Share purchasable under any "incentive stock option" granted pursuant
to this Article 4 and any "nonqualified stock option" granted pursuant to
Article 6 herein shall not be less than 100% of the Fair Market Value (as
hereinafter defined) of such Share on the date of the grant of such Option.
(b) The option price per share of each Share
purchasable under any "nonqualified stock option" granted pursuant to this
Article 4 shall be such amount as the Committee shall determine at the time of
the grant of such Option.
4.3. Other Provisions. Options granted pursuant to this
Article 4 shall be made in accordance with the terms and provision of Article
9 hereof and any other applicable terms and provisions of the Plan.
ARTICLE 5.
STOCK APPRECIATION RIGHTS
5.1. Grant and Exercise. Stock appreciation rights may be
granted in conjunction with all or part of any Option granted under the Plan
provided such rights are granted at the time of the grant of such Option. A
"stock appreciation right" is a right to receive cash or Shares, as provided
in this Article 5, in lieu of the purchase of a Share under a related Option.
A share appreciation right or applicable portion thereof shall terminate and
no longer be exercisable upon the termination or exercise of the related
Option, and a stock appreciation right granted with respect to less than the
full number of Shares cov ered by a related Option shall not be reduced until,
and then
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<PAGE>
only to the extent that, the exercise or termination of the related Option
exceeds the number of Shares not covered by the share appreciation right. A
stock appreciation right may be exercised by the holder thereof (the
"Holder"), in accordance with Section 5.2 of this Article 5, by giving written
notice thereof to the Company and surrendering the applicable portion of the
related Option. Upon giving such notice and surrender, the Holder shall be
entitled to receive an amount determined in the manner prescribed in Section
5.2 of this Article 5. Options which have been so surrendered, in whole or in
part, shall no longer be exercisable to the extent the related share apprecia
tion rights have been exercised.
5.2. Terms and Conditions. Stock appreciation rights shall
be subject to such terms and conditions, not inconsistent with the provisions
of the Plan, as shall be determined from time to time by the Committee,
including the following:
(a) Stock appreciation rights shall be exer cisable
only at such time or times and to the extent that the Options to
which they relate shall be exercisable in accordance with the
provisions of the Plan.
(b) Upon the exercise of a stock appreciation
right, a Holder shall be entitled to receive up to, but no more than,
an amount in cash or whole Shares equal to the excess of the then
Fair Market Value of one Share over the option price per Share
specified in the related Option mul tiplied by the number of Shares
in respect of which the share appreciation right shall have been
exercised. The Holder shall specify in his written notice of
exercise, whether payment shall be made in cash or in whole Shares.
Each share appreciation right may be exercised only at the time and
so long as a related Option, if any, would be exercisable or as
otherwise permitted by applicable law.
(c) Upon the exercise of a stock appreciation
right, the Option or part thereof to which such share appre ciation
right is related shall be deemed to have been exer cised for the
purpose of the limitation of the number of Shares to be issued under
the Plan, as set forth in Sec tion 2.1 of the Plan.
(d) With respect to stock appreciation rights
granted in connection with an Option that is intended to be an
"incentive stock option," the following shall apply:
(i) No stock appreciation right shall be
transferable by a Holder otherwise than by will or by the
laws of descent and distribution, and stock appreciation
rights shall be exercisable, during the Holder's lifetime,
only by the Holder.
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<PAGE>
(ii) Stock appreciation rights granted in
connection with an Option may be exercised only when the
Fair Market Value of the Shares subject to the Option
exceeds the option price at which Shares can be acquired
pursuant to the Option.
ARTICLE 6.
RELOAD OPTIONS
6.1. Authorization of Reload Options. Concurrently with the
award of any Option (such Option hereinafter referred to as the "Underlying
Option") to any participant in the Plan, the Committee may grant one or more
reload options (each, a "Reload Option") to such participant to purchase for
cash or Shares a number of Shares as specified below. A Reload Option shall be
exercisable for an amount of Shares equal to (i) the number of Shares
delivered by the Optionee to the Company to exercise the Underlying Option,
and (ii) to the extent authorized by the Com mittee, the number of Shares used
to satisfy any tax withholding requirement incident to the exercise of the
Underlying Option, subject to the availability of Shares under the Plan at the
time of such exercise. Any Reload Option may provide for the grant, when
exercised, of subsequent Reload Options to the extent and upon such terms and
conditions consistent with this Article 6, as the Committee in its sole
discretion shall specify at or after the time of grant of such Reload Option.
The grant of a Reload Option will become effective upon the exercise of an
Underlying Option or Reload Option by delivering to the Company Shares in
payment of the exercise price and/or tax withholding obligations.
Notwithstanding the fact that the Underlying Option may be an "incentive stock
option," a Reload Option is not intended to qualify as an "incentive stock
option" under Section 422 of the Code.
6.2. Reload Option Amendment. Each Share Option Agreement
shall state whether the Committee has authorized Reload Options with respect
to the Underlying Option. Upon the exercise of an Underlying Option or other
Reload Option, the Reload Option will be evidenced by an amendment to the
underlying Share Option Agreement.
6.3. Reload Option Price. The option price per Share
deliverable upon the exercise of a Reload Option shall be the Fair Market
Value of a Share on the date the grant of the Reload Option becomes effective.
6.4. Term and Exercise. Each Reload Option is fully
exercisable immediately upon its grant. The term of each Reload
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<PAGE>
Option shall be equal to the remaining option term of the Underlying Option.
6.5. Termination of Employment. No additional Reload Options
shall be granted to Optionees when Options and/or Reload Options are exercised
pursuant to the terms of this Plan follow ing termination of the Optionee's
employment unless the Committee, in its sole discretion, shall determine
otherwise.
6.6. Applicability of Other Sections. Except as otherwise
provided in this Article 6, the provisions of Article 9 applicable to Options
shall apply equally to Reload Options.
ARTICLE 7.
STOCK PURCHASE AWARDS
7.1. Grant of Stock Purchase Award. The term "Stock Purchase
Award" means the right to purchase Shares of the Company and to pay for such
Shares through a loan made by the Company to the Participant (a "Purchase
Loan") as set forth in this Article 7.
7.2. Terms of Purchase Loans.
(a) Purchase Loan. Each Purchase Loan shall be
evidenced by a promissory note. The term of the Purchase Loan shall be for a
period of years, as determined by the Committee, and the proceeds of the
Purchase Loan shall be used exclusively by the Participant for purchase of
Shares from the Company at a purchase price equal to the Fair Market Value on
the date of the Stock Purchase Award.
(b) Interest on Purchase Loan. A Purchase Loan
shall be non-interest bearing or shall bear interest at whatever rate the
Committee shall determine (but not in excess of the maximum rate permissible
under applicable law), payable in a manner and at such times as the Committee
shall determine. Those terms and provisions as the Committee shall determine
shall be incorporated into the promissory note evidencing the Purchase Loan.
(c) Forgiveness of Purchase Loan. Subject to
Section 7.4 hereof, the Company may forgive the repayment of up to 100% of the
principal amount of the Purchase Loan, subject to such terms and conditions as
the Committee shall determine and set forth in the promissory note evidencing
the Purchase Loan. A Participant's Purchase Loan can be prepaid at any time,
and from time to time, without penalty.
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<PAGE>
7.3. Security for Loans.
(a) Stock Power and Pledge. Purchase Loans
granted to Participants shall be secured by a pledge of the Shares acquired
pursuant to the Stock Purchase Award. Such pledge shall be evidenced by a
pledge agreement (the "Pledge Agreement") containing such terms and conditions
as the Committee shall determine. The share certificates for the Shares
purchased by a Participant pursuant to a Stock Purchase Award shall be issued
in the Participant's name, but shall be held by the Company as security for
repayment of the Participant's Purchase Loan together with a stock power
executed in blank by the Participant (the execution and delivery of which by
the Participant shall be a condition to the issuance of the Stock Purchase
Award). The Participant shall be entitled to exercise all rights applicable to
such Shares, including, but not limited to, the right to vote such Shares and
the right to receive dividends and other distributions made with respect to
such Shares. When the Purchase Loan and any accrued but unpaid interest
thereon has been repaid or otherwise satisfied in full, the Company shall
deliver to the Participant the share certificates for the Shares purchased by
a Participant under the Stock Purchase Award. Purchase Loans shall be recourse
or non-recourse with respect to a Participant, as determined by the Committee.
(b) Release and Delivery of Stock Certificates
During the Term of the Purchase Loan. The Company shall release and deliver to
each Participant certificates for Shares purchased by a Participant pursuant
to a Stock Purchase Award, in such amounts and on such terms and conditions as
the Committee shall determine, which shall be set forth in the Pledge
Agreement.
(c) Release and Delivery of Stock Certificates
Upon Repayment of the Purchase Loan. The Company shall release and deliver to
each Participant certificates for the Shares purchased by the Participant
under the Stock Purchase Award and then held by the Company, provided the
Participant has paid or otherwise satisfied in full the balance of the
Purchase Loan and any accrued but unpaid interest thereon. In the event the
balance of the Purchase Loan is not repaid, forgiven or otherwise satisfied
within ninety (90) days after (i) the date repayment of the Purchase Loan is
due (whether in accordance with its term, by reason of acceleration or
otherwise), or (ii) such longer time as the Committee, in its discretion,
shall provide for repayment or satisfaction, the Company shall retain those
Shares then held by the Company in accordance with the Pledge Agreement.
(d) Recourse Purchase Loans. Notwithstanding
Sections 7.3(a), (b) and (c) above, in the case of a recourse
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<PAGE>
Purchase Loan, the Committee may make a Purchase Loan on such terms as it
determines, including without limitation, not requiring a pledge of the
acquired Shares.
7.4. Termination of Employment.
(a) Termination of Employment by Death, Disability
or by the Company Without Cause; Change of Control. In the event of a
Participant's termination of employment by reason of death, "disability" or
by the Company without "cause", or in the event of a "change of control", the
Committee shall have the right (but shall not be required) to forgive the
remaining unpaid amount (principal and interest) of the Purchase Loan in whole
or in part as of the date of such occurrence. "Change of Control",
"disability" and "cause" shall have the respective meanings as set forth in
the promissory note evidencing the Purchase Loan.
(b) Termination of Employment. Subject to
Section 7.4(a) above, in the event of a Participant's termination of
employment for any reason, the Participant shall repay to the Company the
entire balance of the Purchase Loan and any accrued but unpaid interest
thereon, which amounts shall become immediately due and payable, provided,
however, that if the Participant voluntarily resigns as an employee in good
standing, such amounts will become due and payable on the ninetieth (90th )
day after the effective date of such resignation.
7.5. Restrictions on Transfer. No Stock Purchase Award or
Shares purchased through such an Award and pledged to the Company as
collateral security for the Participant's Purchase Loan (and accrued by unpaid
interest thereon) may be otherwise pledged, sold, assigned or transferred
(other than by will or by the laws of descent and distribution).
ARTICLE 8.
RESTRICTED STOCK AWARDS
8.1. Restricted Stock Awards. (a) A grant of Shares made
pursuant to this Article 8 is referred to as a "Restricted Stock Award." The
Committee may grant to any Participant an amount of Shares in such manner, and
subject to such terms and conditions relating to vesting, forfeitability and
restrictions on delivery and transfer (whether based on performance standards,
periods of service or otherwise) as the Committee shall establish (such
Shares, "Restricted Shares"). The terms of any Restricted Stock Award granted
under this Plan shall be set forth in a written agreement (a "Restricted Stock
Agreement") which shall contain provisions determined by the Committee and not
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inconsistent with this Plan. The provisions of Restricted Stock Awards need
not be the same for each Participant receiving such Awards.
(b) Issuance of Restricted Shares. As soon as
practicable after the date of grant of a Restricted Stock Award by the
Committee, the Company shall cause to be transferred on the books of the
Company, Shares registered in the name of the Company, as nominee for the
Participant, evidencing the Restricted Shares covered by the Award, but
subject to forfeiture to the Company retroactive to the date of grant, if a
Restricted Stock Agreement delivered to the Participant by the Company with
respect to the Restricted Shares covered by the Award is not duly executed by
the Participant and timely returned to the Company. All Restricted Shares
covered by Awards under this Article 8 shall be subject to the restrictions,
terms and conditions contained in the Plan and the Restricted Stock Agreement
entered into by and between the Company and the Participant. Until the lapse
or release of all restrictions applicable to an Award of Restricted Shares,
the share certificates representing such Restricted Shares shall be held in
custody by the Company or its designee.
(c) Shareholder Rights. Beginning on the date of
grant of the Restricted Stock Award and subject to execution of the Restricted
Stock Agreement as provided in Sections 8.1(a) and (b), the Participant shall
become a shareholder of the Company with respect to all Shares subject to the
Restricted Stock Agreement and shall have all of the rights of a shareholder,
including, but not limited to, the right to vote such Shares and the right to
receive distributions made with respect to such Shares; provided, however,
that any Shares distributed as a dividend or otherwise with respect to any
Restricted Shares as to which the restrictions have not yet lapsed shall be
subject to the same restrictions as such Restricted Shares and shall be
represented by book entry and held as prescribed in Section 8.1(b).
(d) Restriction on Transferability. None of the
Restricted Shares may be assigned or transferred (other than by will or the
laws of descent and distribution), pledged or sold prior to lapse or release
of the restrictions applicable thereto.
(e) Delivery of Shares Upon Release of
Restrictions. Upon expiration or earlier termination of the forfeiture period
without a forfeiture and the satisfaction of or release from any other
conditions prescribed by the Committee, the restrictions applicable to the
Restricted Shares shall lapse. As promptly as administratively feasible
thereafter, subject to the requirements of Section 10.1, the Company shall
deliver to the Participant or, in case of the Participant's death, to the
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Participant's beneficiary, one or more stock certificates for the appropriate
number of Shares, free of all such restrictions, except for any restrictions
that may be imposed by law.
8.2. Terms of Restricted Shares.
(a) Forfeiture of Restricted Shares. Subject to
Section 8.2(b), all Restricted Shares shall be forfeited and returned to the
Company and all rights of the Participant with respect to such Restricted
Shares shall terminate unless the Participant continues in the service of the
Company as an employee until the expiration of the forfeiture period for such
Restricted Shares and satisfies any and all other conditions set forth in the
Restricted Stock Agreement. The Committee in its sole discretion, shall
determine the forfeiture period (which may, but need not, lapse in
installments) and any other terms and conditions applicable with respect to
any Restricted Stock Award.
(b) Waiver of Forfeiture Period. Notwithstanding
anything contained in this Article 8 to the contrary, the Committee may, in
its sole discretion, waive the forfeiture period and any other conditions set
forth in any Restricted Stock Agreement under appropriate circumstances
(including the death, disability or retirement of the Participant or a
material change in circumstances arising after the date of an Award) and
subject to such terms and conditions (including forfeiture of a proportionate
number of the Restricted Shares) as the Committee shall deem appropriate.
ARTICLE 9.
GENERALLY APPLICABLE PROVISIONS
9.1. Option Period. Subject to Section 3.1(b), the period
for which an Option is exercisable shall not exceed ten (10) years from the
date such Option is granted, provided, however, in the case of an Option that
is not intended to be an "incentive stock option", the Committee may prescribe
a period in excess of ten years. After the Option is granted, the option
period may not be reduced.
9.2. Fair Market Value. If the Shares are listed or admitted
to trading on a securities exchange registered under the Exchange Act, the
"Fair Market Value" of a Share as of a speci fied date shall mean the average
of the high and low price of the shares for the day immediately preceding the
date as of which Fair Market Value is being determined (or if there was no re
ported sale on such date, on the last preceding date on which any reported
sale occurred) reported on the principal securities exchange on which the
Shares are listed or admitted to trading.
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If the Shares are not listed or admitted to trading on any such exchange but
are listed as a national market security on the National Association of
Securities Dealers, Inc. Automated Quo tations System ("NASDAQ"), traded in
the over-the-counter market or listed or traded on any similar system then in
use, the Fair Market Value of a Share shall be the average of the high and low
sales price for the day immediately preceding the date as of which the Fair
Market Value is being determined (or if there was no reported sale on such
date, on the last preceding date on which any reported sale occurred) reported
on such system. If the Shares are not listed or admitted to trading on any
such exchange, are not listed as a national market security on NASDAQ and are
not traded in the over-the-counter market or listed or traded on any similar
system then in use, but are quoted on NASDAQ or any similar system then in
use, the Fair Market Value of a Share shall be the average of the closing high
bid and low asked quotations on such system for the Shares on the date in
question. If the Shares are not publicly traded, Fair Market Value shall be
determined by the Committee in its sole discretion using appropriate criteria.
An Option shall be considered granted on the date the Committee acts to grant
the Option or such later date as the Committee shall specify.
9.3. Exercise of Options. Options granted under the Plan
shall be exercised by the Optionee thereof (or by his or her executors,
administrators, guardian or legal representative, or by a Permitted Assignee,
as provided in Sections 9.6 and 9.7 hereof) as to all or part of the Shares
covered thereby, by the giving of written notice of exercise to the Company,
specifying the number of Shares to be purchased, accompanied by payment of the
full purchase price for the Shares being purchased. Full payment of such
purchase price shall be made within five (5) business days following the date
of exercise and shall be made (i) in cash or by certified check or bank check,
(ii) with the consent of the Committee, by delivery of a promissory note in
favor of the Company upon such terms and conditions as determined by the
Committee, (iii) with the consent of Committee, by tendering previously
acquired Shares (valued at its Fair Market Value, as determined by the
Committee as of the date of tender), or (iv) with the consent of the
Committee, any combination of (i), (ii) and (iii). In connection with a tender
of previously acquired Shares pursuant to clause (iii) above, the Committee,
in its sole discretion, may permit the Optionee to constructively exchange
Shares already owned by the Optionee in lieu of actually tendering such Shares
to the Company, provided that adequate documentation concerning the ownership
of the Shares to be constructively tendered is furnished in form satisfactory
to the Committee. The notice of exercise, accompanied by such payment, shall
be delivered to the Company at its principal business office or such other
office as the Committee may from time to time direct, and shall be in such
form, containing such further provisions consistent with the provisions of the
Plan, as the
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Committee may from time to time prescribe. In no event may any Option granted
hereunder be exercised for a fraction of a Share. The Company shall effect the
transfer of Shares purchased pursuant to an Option as soon as practicable,
and, within a reasonable time thereafter, such transfer shall be evidenced on
the books of the Company. No person exercising an Option shall have any of the
rights of a holder of Shares subject to an Option until certificates for such
Shares shall have been issued following the exercise of such Option. No
adjustment shall be made for cash dividends or other rights for which the
record date is prior to the date of such issuance.
9.4. Transferability. No Option that is intended to qualify
as an "incentive stock option" under Section 422 of the Code shall be
assignable or transferable by the Optionee, other than by will or the laws of
descent and distribution, and such Option may be exercised during the life of
the Optionee only by the Optionee or his guardian or legal representative.
"Nonqualified stock options" and any stock appreciation rights granted in
tandem therewith are transferrable (together and not separately) by the
Optionee or Holder, as the case may be, to any one or more of the following
persons (each, a "Permitted Assignee"): (i) the spouse, parent, issue, spouse
of issue, or issue of spouse ("issue" shall include all descendants whether
natural or adopted) of such Optionee or Holder, as the case may be; (ii) a
trust for the benefit of one or more of those persons described in clause (i)
above or for the benefit of such Optionee or Holder, as the case may be, or
for the benefit of any such persons and such Optionee or Holder, as the case
may be; or (iii) an entity in which the Optionee or Holder or any Permitted
Assignee thereof is a beneficial owner; provided, however, that such Permitted
Assignee shall be bound by all of the terms and conditions of this Plan and
shall execute an agreement satisfactory to the Company evidencing such
obligation; provided further, however that any transfer by an Optionee or
Holder who is not then a Director of the Company to any Permitted Assignee
shall be subject to the prior consent of the Committee; and provided further,
however, that such Optionee or Holder shall remain bound by the terms and
conditions of this Plan. The Company shall cooperate with an Optionee's
Permitted Assignee and the Company's transfer agent in effectuating any
transfer permitted pursuant to this Section 9.4.
9.5. Termination of Employment. In the event of the
termination of employment of an Optionee or the separation from service of a
Director (who is an Optionee) for any reason (other than death or disability
as provided below), any Option(s) held by such Optionee (or its Permitted
Assignee) under this Plan and not previously exercised or expired shall be
deemed canceled and terminated on the day of such termination or separation,
unless the Committee decides, in its sole discretion, to extend the term of
the Option for a period not to exceed three months after the
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date of such termination or separation, provided, however, that in no instance
may the term of the Option, as so extended, exceed the maximum term set forth
in Section 3.1(b)(ii) or 9.1 above. Notwithstanding the foregoing, in the
event of the separation from service of a non-employee Director (who is an
Optionee) by reason of death, disability or under conditions satisfactory to
both the Director and the Company, any nonqualified stock options held by such
Director (or its Permitted Assignee) under the Plan and not previously
exercised or expired shall be exercisable for a period not to exceed five (5)
years after the date of such separation, provided, however, that in no
instance may the term of the Option, as so extended, exceed the maximum term
set forth in Sections 3.1(b)(ii) or 9.1 above.
9.6. Death. In the event an Optionee (other than a
non-employee Director) dies while employed by the Company or any of its
subsidiaries or affiliates any Option(s) held by such Optionee (or its
Permitted Assignee) and not previously expired or exercised shall, to the
extent exercisable on the date of death, be exercisable by the estate of such
Optionee or by any person who acquired such Option by bequest or inheritance,
or by the Permitted Assignee at any time within one year after the death of
the Optionee, unless earlier terminated pursuant to its terms, provided,
however, that if the term of such Option would expire by its terms within six
months after the Optionee's death, the term of such Option shall be extended
until six months after the Optionee's death, provided further, however, that
in no instance may the term of the Option, as so extended, exceed the maximum
term set forth in Section 3.1(b)(ii) or 9.1 above.
9.7. Disability. In the event of the termination of
employment of an Optionee (other than a non-employee Director) due to total
disability, the Optionee, or his guardian or legal representative, or a
Permitted Assignee shall have the unqualified right to exercise any Option(s)
which have not been previously exercised or expired and which the Optionee was
eli gible to exercise as of the first date of total disability (as determined
by the Committee), at any time within one (1) year after such termination,
unless earlier terminated pursuant to its terms, provided, however, that if
the term of such Option would expire by its terms within six months after such
termination, the term of such Option shall be extended until six months after
such termination, provided further, however, that in no instance may the term
of the Option, as so extended, exceed the maximum term set forth in Section
3.1(b)(ii) or 9.1 above. The term "total disability" shall, for purposes of
this Plan, be defined in the same manner as such term is defined in Section
22(e)(3) of the Code.
9.8. Amendment and Modification of the Plan. The
Compensation Committee of the Board of Directors of the Company may, from time
to time, alter, amend, suspend or terminate the
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Plan as it shall deem advisable, subject to any requirement for shareholder
approval imposed by applicable law or any rule of any stock exchange or
quotation system on which Shares are listed or quoted; provided that such
Compensation Committee may not amend the Plan, without the approval of the
Company's shareholders, to increase the number of Shares that may be the
subject of Options under the Plan (except for adjustments pursuant to Section
9.9 hereof). In addition, no amendments to, or termination of, the Plan shall
in any way impair the rights of an Optionee or a Participant (or a Permitted
Assignee thereof) under any Award previously granted without such Optionee's
or Participant's consent.
9.9. Adjustments. In the event that the Committee shall determine
that any dividend or other distribution (whether in the form of cash, Shares,
other securities, or other prop erty), recapitalization, stock split, reverse
stock split, reor ganization, merger, consolidation, split-up, spin-off,
combina tion, repurchase, or exchange of Shares or other securities, the
issuance of warrants or other rights to purchase Shares or other securities,
or other similar corporate transaction or event affects the Shares with
respect to which Options have been or may be issued under the Plan, such that
an adjustment is determined by the Committee to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan, then the Committee shall, in such manner
as the Committee may deem equitable, adjust any or all of (i) the number and
type of Shares that thereafter may be made the subject of Options, (ii) the
number and type of Shares subject to outstanding Options and share
appreciation rights, and (iii) the grant or exercise price with respect to any
Option, or, if deemed appropriate, make provision for a cash payment to the
holder of any outstanding Option; provided, in each case, that with respect to
"incentive stock options," no such adjustment shall be authorized to the
extent that such adjustment would cause such options to violate Section 422(b)
of the Code or any successor provision; and provided further, that the number
of Shares subject to any Option denominated in Shares shall always be a whole
number. In the event of any reorganization, merger, consolidation, split-up,
spin-off, or other business combination involving the Company (collectively, a
"Reorganization"), the Compensation Committee of the Board of Directors or the
Board of Directors may cause any Award outstanding as of the effective date of
the Reorganization to be canceled in consideration of a cash payment or
alternate Award made to the holder of such canceled Award equal in value to
the fair market value of such canceled Award. The determination of fair market
value shall be made by the Compensation Committee of the Board of Directors or
the Board of Directors, as the case may be, in their sole discretion.
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ARTICLE 10.
MISCELLANEOUS
10.1. Tax Withholding. All payments or distributions made
pursuant to the Plan to an Optionee or Participant (or a Permitted Assignee
thereof) shall be net of any applicable federal, state and local withholding
taxes arising as a result of the grant of any Award, exercise of an Option or
stock appreciation rights or any other event occurring pursuant to this Plan.
The Company shall have the right to withhold from such Optionee or Participant
(or a Permitted Assignee thereof) such withholding taxes as may be required by
law, or to otherwise require the Optionee or Participant (or a Permitted
Assignee thereof) to pay such withholding taxes. If the Optionee or
Participant (or a Permitted Assignee thereof) shall fail to make such tax
payments as are required, the Company or its subsidiaries or affiliates shall,
to the extent permitted by law, have the right to deduct any such taxes from
any payment of any kind otherwise due to such Optionee or Participant or to
take such other action as may be necessary to satisfy such withholding
obligations. In satisfaction of the requirement to pay withholding taxes, the
Optionee or Participant(or Permitted Assignee) make a written election (the
"Tax Election"), which may be accepted or rejected in the discretion of the
Committee, to have withheld a portion of the Shares then issuable to the
Optionee (or Permitted Assignee) pursuant to the Plan, having an aggregate
Fair Market Value equal to the withholding taxes.
10.2. Right of Discharge Reserved. Nothing in the Plan nor the
grant of an Award hereunder shall confer upon any em ployee, Director or other
individual the right to continue in the employment or service of the Company
or any subsidiary or affil iate of the Company or affect any right that the
Company or any subsidiary or affiliate of the Company may have to terminate
the employment or service of (or to demote or to exclude from future Options
under the Plan) any such employee, Director or other in dividual at any time
for any reason. Except as specifically provided by the Committee, the Company
shall not be liable for the loss of existing or potential profit from an Award
granted in the event of termination of an employment or other relationship
even if the termination is in violation of an obligation of the Company or any
subsidiary or affiliate of the Company to the employee or Director.
10.3. Nature of Payments. All Awards made pursuant to the Plan
are in consideration of services performed for the Com pany or any subsidiary
or affiliate of the Company. Any income or gain realized pursuant to Awards
under the Plan and any share appreciation rights constitutes a special
incentive payment to the Optionee, Participant or Holder and shall not be
taken into
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account, to the extent permissible under applicable law, as compensation for
purposes of any of the employee benefit plans of the Company or any subsidiary
or affiliate of the Company except as may be determined by the Committee or by
the Directors or directors of the applicable subsidiary or affiliate of the
Company.
10.4. Severability. If any provision of the Plan shall be held
unlawful or otherwise invalid or unenforceable in whole or in part, such
unlawfulness, invalidity or unenforceability shall not affect any other
provision of the Plan or part thereof, each of which remain in full force and
effect. If the making of any payment or the provision of any other benefit
required under the Plan shall be held unlawful or otherwise invalid or unen
forceable, such unlawfulness, invalidity or unenforceability shall not prevent
any other payment or benefit from being made or provided under the Plan, and
if the making of any payment in full or the provision of any other benefit
required under the Plan in full would be unlawful or otherwise invalid or
unenforceable, then such unlawfulness, invalidity or unenforceability shall
not prevent such payment or benefit from being made or provided in part, to
the extent that it would not be unlawful, invalid or unenforceable, and the
maximum payment or benefit that would not be unlawful, invalid or
unenforceable shall be made or provided under the Plan.
10.5. Gender and Number. In order to shorten and to improve the
understandability of the Plan document by eliminating the repeated usage of
such phrases as "his or her" and any mas culine terminology herein shall also
include the feminine, and the definition of any term herein in the singular
shall also in clude the plural except when otherwise indicated by the context.
10.6. Governing Law. The Plan and all determinations made and
actions taken thereunder, to the extent not otherwise governed by the Code or
the laws of the United States, shall be governed by the laws of the State of
New York and construed accordingly.
10.7. Termination of Plan. The Plan shall be effective on the
date of the approval of the Plan by the holders of a majority of the shares
entitled to vote thereon, provided such approval is obtained within 12 months
after the date of adoption of the Plan by the Board of Directors. Awards may
be granted under the Plan at any time and from time to time on or prior to
March 10,2008, on which date the Plan will expire except as to Awards and
related share appreciation rights then outstanding under the Plan. Such
outstanding Awards and stock appreciation rights shall remain in effect until
they have been exercised or terminated, or have expired.
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10.8. Captions. The captions in this Plan are for convenience of
reference only, and are not intended to narrow, limit or affect the substance
or interpretation of the provisions contained herein.
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WELLSFORD REAL PROPERTIES, INC.
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED BY MANAGEMENT
The undersigned shareholder of Wellsford Real Properties, Inc., a Maryland
corporation (the 'Company'), hereby appoints Edward Lowenthal and Jeffrey H.
Lynford, and each of them, as proxy for the undersigned, with full power of
substitution, to vote and otherwise represent all the shares that the
undersigned is entitled to vote at the Annual Meeting of Shareholders of the
Company to be held on Thursday, May 28, 1998 at 10:00 a.m. at the offices of
Robinson Silverman Pearce Aronsohn & Berman LLP, 1290 Avenue of the Americas,
31st floor, New York, NY 10104, and at any adjournment(s) or postponement(s)
thereof, with the same effect as if the undersigned were present and voting such
shares, on the following matters and in the following manner as further
described in the accompanying Proxy Statement. The undersigned hereby revokes
any proxy previously given with respect to such shares.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Shareholders and the accompanying Proxy Statement.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE. IF THIS PROXY IS EXECUTED BUT NO SPECIFICATION IS MADE, THE
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR EACH OF THE NOMINEES AND THE
PROPOSALS AND IN THE DISCRETION OF THE PROXY HOLDERS ON ANY OTHER MATTERS THAT
MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT(S) OR POSTPONEMENT(S)
THEREOF.
1. The election of the following persons as Directors of the Company to serve
for the term set forth in the accompanying Proxy Statement.
Edward Lowenthal Rodney F. Du Bois
/ / FOR all nominees
/ / WITHHELD as to all nominees
/ / FOR all nominees except for the following nominee:
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(CONTINUED FROM REVERSE SIDE)
2. The ratification of the appointment of Ernst & Young LLP as the Company's
independent public accountants for the fiscal year ending December 31, 1998.
/ / FOR / / WITHHELD / / ABSTAIN
3. The approval of the 1998 Management Incentive Plan.
/ / FOR / / WITHHELD / / ABSTAIN
4. To vote and otherwise represent the shares on any other matters which may
properly come before the meeting or any adjournment(s) or postponement(s)
thereof, in their discretion.
/ / MARK HERE IF YOU PLAN TO
ATTEND THE MEETING
Please sign exactly as name
appears hereon and date. If the
shares are held jointly, each
holder should sign. When signing
as an attorney, executor,
administrator, trustee, guardian
or as an officer signing for a
corporation, please give full
title under signature.
Dated ___________________, 1998
_______________________________
Signature
_______________________________
Signature, if held jointly
Votes must be indicated by
filling in (x) in Black or Blue
ink.
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope
