<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
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 Section240.14a-11(c) or
Section240.14a-12
FRONTLINE CAPITAL GROUP
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/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:
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(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:
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(4) Date Filed:
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</TABLE>
<PAGE>
FRONTLINE CAPITAL GROUP
1350 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 22, 2000
------------------------
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders (the
"Annual Meeting") of FrontLine Capital Group (the "Company" or "FrontLine") will
be held on June 22, 2000 at 9:30 a.m. at the MGM theater located adjacent to the
lobby at 1350 Avenue of the Americas, New York, New York 10019, for the
following purposes:
1. To elect three Class II directors of the Company to serve until the 2003
Annual Meeting of Stockholders and until their respective successors are
duly elected and qualified;
2. To ratify the selection of Ernst & Young LLP as the independent auditors
of the Company for the fiscal year ending December 31, 2000;
3. To ratify the adoption of the Company's 2000 Employee Stock Option Plan;
and
4. To consider and act upon any other matters that may properly be brought
before the Annual Meeting and at any adjournments or postponements
thereof.
Any action may be taken on the foregoing matters at the Annual Meeting on
the date specified above, or on any date or dates to which, by original or later
adjournment, the Annual Meeting may be adjourned or to which the Annual Meeting
may be postponed.
The Board of Directors has fixed the close of business on April 10, 2000 as
the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting and at any adjournments or postponements thereof.
Only stockholders of record of the Company's common stock, $.01 par value per
share, at the close of business on that date will be entitled to notice of and
to vote at the Annual Meeting and at any adjournments or postponements thereof.
You are requested to fill in and sign the enclosed form of proxy, which is
being solicited by the Board of Directors, and to mail it promptly in the
enclosed postage-prepaid envelope. Any proxy may be revoked by delivery of a
later dated proxy. Stockholders of record who attend the Annual Meeting may vote
in person, even if they have previously delivered a signed proxy.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ MITCHELL D. RECHLER
MITCHELL D. RECHLER
SECRETARY
New York, New York
May 12, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE
AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE-PREPAID ENVELOPE
PROVIDED. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH,
EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE>
FRONTLINE CAPITAL GROUP
1350 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
------------------------
PROXY STATEMENT
------------------------
FOR 2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 22, 2000
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of FrontLine Capital Group (the "Company" or
"FrontLine") for use at the 2000 Annual Meeting of Stockholders of the Company
to be held on June 22, 2000, and at any adjournments or postponements thereof
(the "Annual Meeting"). At the Annual Meeting, stockholders will be asked to (1)
vote upon the election of three Class II directors of the Company, (2) ratify
the selection of Ernst & Young LLP as the independent auditors of the Company
for the fiscal year ending December 31, 2000, (3) ratify the adoption of the
Company's 2000 Employee Stock Option Plan and (4) act upon any other matters
that may properly be brought before the Annual Meeting and at any adjournments
or postponements thereof.
This Proxy Statement and the accompanying Notice of Annual Meeting and Proxy
Card are first being sent to stockholders on or about May 12, 2000. The Board of
Directors has fixed the close of business on April 10, 2000 as the record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting (the "Record Date"). Only stockholders of record of the Company's
common stock, par value $.01 per share (the "Common Stock"), at the close of
business on the Record Date will be entitled to notice of and to vote at the
Annual Meeting. As of the Record Date, there were 34,433,330 shares of Common
Stock outstanding and entitled to vote at the Annual Meeting. Holders of Common
Stock outstanding as of the close of business on the Record Date will be
entitled to one vote for each share held by them on the Record Date.
The presence, in person or by proxy, of holders of a majority of the total
number of outstanding shares of Common Stock entitled to vote is necessary to
constitute a quorum for the transaction of business at the Annual Meeting. The
affirmative vote of the holders of a plurality of the shares of Common Stock
cast on the matter at the Annual Meeting (assuming a quorum is present) is
sufficient for the election of Class II directors, and the affirmative vote of
the Holders of a majority of the shares of Common Stock cast on the matter at
the Annual Meeting (assuming a quorum is present) is required for each of the
ratification of the selection of the Company's auditors, the ratification of the
adoption of the Company's 2000 Employee Stock Option Plan and the approval of
any other matters properly presented at the Annual Meeting for stockholder
approval. Under Delaware law, abstentions and broker "non-votes," or proxies
from brokers or nominees indicating that such person has not received
instructions from the beneficial owner or other person entitled to vote such
shares on a particular matter with respect to which the broker or nominee does
not have discretionary voting power, will not be counted as votes cast and will
have no effect on the results of the votes.
The cost of solicitation of proxies in the form enclosed herewith will be
paid by the Company. In addition to the solicitation of proxies by mail, the
directors, officers and employees of the Company may also solicit proxies
personally or by telephone without additional compensation for such activities.
The Company will also request persons, firms and corporations holding shares in
their names or in the names of their nominees, which are beneficially owned by
others, to send proxy materials to and obtain proxies from such beneficial
owners. The Company will reimburse such holders for their reasonable expenses.
<PAGE>
STOCKHOLDERS OF THE COMPANY ARE REQUESTED TO COMPLETE, SIGN, DATE AND
PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. SHARES REPRESENTED BY A PROPERLY EXECUTED PROXY RECEIVED PRIOR TO THE
VOTE AT THE ANNUAL MEETING AND NOT REVOKED WILL BE VOTED AT THE ANNUAL MEETING
AS DIRECTED ON THE PROXY. IF A PROPERLY EXECUTED PROXY IS SUBMITTED AND NO
INSTRUCTIONS ARE GIVEN, THE PROXY WILL BE VOTED FOR THE ELECTION OF THE THREE
NOMINEES FOR CLASS II DIRECTORS OF THE COMPANY NAMED IN THIS PROXY STATEMENT,
FOR RATIFICATION OF THE BOARD OF DIRECTORS' SELECTION OF ERNST & YOUNG LLP AS
THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000
AND FOR RATIFICATION OF THE ADOPTION OF THE COMPANY'S 2000 EMPLOYEE STOCK OPTION
PLAN. IT IS NOT ANTICIPATED THAT ANY MATTERS OTHER THAN THOSE SET FORTH IN THE
PROXY STATEMENT WILL BE PRESENTED AT THE ANNUAL MEETING. IF OTHER MATTERS ARE
PRESENTED, PROXIES WILL BE VOTED IN ACCORDANCE WITH THE DISCRETION OF THE PROXY
HOLDERS.
A stockholder of record may revoke a proxy at any time before it has been
exercised by filing a written revocation with the Secretary of the Company at
the address of the Company set forth above, by filing a duly executed proxy
bearing a later date, or by appearing in person and voting by ballot at the
Annual Meeting. Any stockholder of record as of the Record Date attending the
Annual Meeting may vote in person whether or not a proxy has been previously
given, but the presence (without further action) of a stockholder at the Annual
Meeting will not constitute revocation of a previously given proxy.
The Company's 1999 Annual Report, including financial statements for the
fiscal year ended December 31, 1999, accompanies the proxy solicitation
materials. The Annual Report, however, is not part of the proxy solicitation
material.
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors of the Company consists of eight members and is
divided into three classes, with the directors in each class serving for a term
of three years and until their successors are duly elected and qualified. The
term of one class expires at each annual meeting of stockholders.
At the Annual Meeting, three directors will be elected to serve until the
2003 Annual Meeting and until their successors are duly elected and qualified.
The Board of Directors has nominated Mr. Michael Maturo, Mr. Mitchell D. Rechler
and Mr. Roger M. Rechler to serve as Class II directors (the "Nominees"). Each
of the Nominees is currently serving as a Class II director of the Company. The
Board of Directors anticipates that each of the Nominees will serve, if elected,
as a director. However, if any person nominated by the Board of Directors is
unable to accept election, the proxies will be voted for the election of such
other person or persons as the Board of Directors may recommend.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES.
2
<PAGE>
INFORMATION REGARDING NOMINEES AND DIRECTORS
The following table and biographical descriptions set forth certain
information with respect to the three Nominees for election as Class II
directors at the Annual Meeting, the continuing directors whose terms expire at
the annual meetings of stockholders in 2001 and 2002 and the executive officers
of the Company, based upon information furnished to the Company by each director
and executive officer.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
DIRECTOR BENEFICIAL OWNERSHIP OF
NAME AGE SINCE OF COMMON STOCK(1) CLASS(2)
- ---- -------- -------- -------------------- --------
<S> <C> <C> <C> <C>
CLASS II NOMINEES FOR ELECTION AT 2000 ANNUAL
MEETING (TERM TO EXPIRE IN 2003)
Michael Maturo................................... 38 1998 1,124,634(3) 3.18%
Mitchell D. Rechler.............................. 40 1998 1,417,618(4) 4.05%
Roger M. Rechler................................. 58 1998 1,149,898(5) 3.28%
CLASS I CONTINUING DIRECTORS (TERM EXPIRES IN 2002)
Scott H. Rechler................................. 32 1998 2,108,607(6) 5.94%
Paul F. Amoruso.................................. 39 1998 7,500(7) *
CLASS III CONTINUING DIRECTORS (TERM EXPIRES IN
2001)
Donald J. Rechler................................ 65 1998 1,574,280(8) 4.44%
Gregg M. Rechler................................. 33 1998 1,429,668(9) 4.08%
Ronald S. Cooper................................. 61 1998 9,000(10) *
</TABLE>
- ------------------------
* Less than one percent.
(1) All information has been determined as of April 10, 2000. For purposes of
this table a person is deemed to have "beneficial ownership" of the number
of shares of Common Stock that a person has the right to acquire pursuant to
the exercise of stock options exercisable within sixty days.
(2) For purposes of computing the percentage of outstanding shares of Common
Stock held by each person, any shares of Common Stock which such person has
the right to acquire pursuant to the exercise of a stock option exercisable
within 60 days is deemed to be outstanding, but is not deemed to be
outstanding for the purpose of computing the percent ownership of any other
person.
(3) Includes (a) 477,639 shares of Common Stock owned directly and (b) options
to purchase 646,995 shares of Common Stock.
(4) Includes (a) 874,157 shares of Common Stock owned directly, (b) 180,672
shares of Common Stock owned through trusts, (c) 39,292 shares of Common
Stock owned through corporations and partnerships and (d) options to
purchase 323,497 shares of Common Stock.
(5) Includes (a) 520,392 shares of Common Stock owned directly, (b) 208,200
shares of Common Stock owned through trusts, (c) 97,809 shares of Common
Stock owned through corporations and partnerships and (d) options to
purchase 323,497 shares of Common Stock.
(6) Includes (a) 1,109,471 shares of Common Stock owned directly, (b) 226,729
shares of Common Stock owned through trusts, (c) 14,589 shares of Common
Stock owned through corporations and partnerships and (d) options to
purchase 757,818 shares of Common Stock.
(7) Represents (a) 6,000 shares of Common Stock owned directly and (b) options
to purchase 1,500 shares of Common Stock.
(8) Includes (a) 623,181 shares of Common Stock owned directly, (b) 70,000
shares of Common Stock owned through trusts, (c) 123,281 shares of Common
Stock owned through corporations and partnerships and (d) options to
purchase 757,818 shares of Common Stock.
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<PAGE>
(9) Includes (a) 865,077 shares of Common Stock owned directly, (b) 226,729
shares of Common Stock owned through trusts, (c) 14,365 shares of Common
Stock owned through corporations and partnerships and (d) options to
purchase 323,497 shares of Common Stock.
(10) Includes (a) 8,000 shares of Common Stock owned directly and (b) options to
purchase 1,000 shares of Common Stock.
NOMINEES FOR ELECTION AT 2000 ANNUAL MEETING--TERM TO EXPIRE IN 2003
MICHAEL MATURO serves as Executive Vice President, Chief Financial Officer
and Treasurer of FrontLine and is also a Director of the Company. Mr. Maturo is
responsible for the Company's financing and capital markets activities and the
supervision of all financial, treasury, tax and reporting functions, as well as
investor relations. Mr. Maturo also serves in a similar executive capacity for
Reckson Associates Realty Corp. ("Reckson"). Mr. Maturo has previously led
efforts to raise approximately $800 million in six common stock offerings,
$300 million in two preferred stock offerings and $1 billion in several public
and private unsecured debt transactions. Previously, Mr. Maturo was a Senior
Manager at E&Y Kenneth Leventhal, where he specialized in diverse phases of
financings and recapitalization transactions. Mr. Maturo is a graduate of Seton
Hall University with a degree in accounting and finance and is a certified
public accountant.
MITCHELL D. RECHLER serves as Secretary of FrontLine and is a member of the
Company's Board of Directors and Management Advisory Committee. Mr. Rechler also
serves as Co-Chief Operating Officer and Director of Reckson and is President of
Reckson Management Group, Inc. (the "Management Company"). From 1981 to 1985, he
was employed by Reckson in various non-supervisory roles, including positions in
property management, construction, acquisitions and space leasing. From 1986
through May 1999, Mr. Rechler served as an Executive Vice President of Reckson,
responsible for all leasing activities including the coordination of leasing and
marketing strategies and overseeing tenant relations. Mr. Rechler has served as
President of the Management Company since its organization in 1991. Mr. Rechler
serves on the Executive Committee of the Children's Medical Fund of Schneider
Children's Hospital of Long Island Jewish Medical Center and as a member of the
Board of Directors of the Long Island Friends of the Arts. He is a graduate of
Emory University. He is the son of Donald J. Rechler.
ROGER M. RECHLER serves as a Director of FrontLine and is a member of the
Management Advisory Committee. Mr. Rechler is also Vice-Chairman of the Board,
Director and Executive Vice President of Development of Reckson. Prior to the
initial public offering of Reckson (the "Reckson IPO"), Mr. Rechler was a
co-founder and general partner of Reckson. Mr. Rechler is responsible for the
supervision of development, property construction, architectural and design
services, interior construction and property management for Reckson. Mr. Rechler
attended Adelphi University. Mr. Rechler is the father of Scott H. Rechler and
Gregg M. Rechler and the brother of Donald J. Rechler.
CLASS I CONTINUING DIRECTORS--TERM EXPIRES IN 2002
SCOTT H. RECHLER serves as President, Chief Executive Officer and as a
Director of FrontLine. Mr. Rechler conceived of, and was primarily responsible
for, the spin-off of FrontLine from Reckson which occurred in June 1998. In that
regard, Mr. Rechler is credited with recognizing the trend of small to
medium-sized businesses toward outsourcing of non-core services and expanding
reliance on the Internet. Mr. Rechler is also President, Co-CEO and Director of
Reckson and has been a member of senior management since 1989. Mr. Rechler is a
graduate of Clark University and received a Masters Degree in Finance from New
York University. He is the son of Roger M. Rechler and the brother of Gregg M.
Rechler.
4
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PAUL F. AMORUSO serves as a Director of FrontLine. Since 1983, Mr. Amoruso
has been the Managing Director of Oxford & Simpson Realty, Inc. of Jericho, New
York. Prior to that time, he was President of Lanstar International
Realty, Inc., a real estate advisory services firm. Mr. Amoruso is President of
Island Hospitality Associates and is a member of the Board of Directors of the
Nature Conservancy. He is a co-founder of the Long Island Commercial Industrial
Brokers Society and is a licensed real estate broker in New York and
Connecticut.
CLASS III CONTINUING DIRECTORS--TERM EXPIRES IN 2001
DONALD J. RECHLER serves as Chairman of the Board and Director of FrontLine
and Chairman of the Board, Co-Chief Executive Officer and Director of Reckson.
Prior to the Reckson IPO, Mr. Rechler was a co-founder and general partner of
Reckson. He is a founder and former President and Chairman of the Association
For A Better Long Island, a founder of the Long Island Commercial & Industrial
Development Association, a member of the Board of Directors of the Development
Division of North Shore Hospital, and a member of the Council of Overseers of
Long Island University, C.W. Post College. Mr. Rechler is a graduate of the
University of Miami. Mr. Rechler is the father of Mitchell D. Rechler and the
brother of Roger M. Rechler.
GREGG M. RECHLER serves as a Director of FrontLine and is a member of the
Management Advisory Committee. Mr. Rechler also serves as Co-Chief Operating
Officer and Secretary of Reckson and is President of Reckson Construction
Group, Inc. (the "Construction Company"). From 1985 to 1988, Mr. Rechler held
non-supervisory roles at Reckson in the construction and property management
areas. Beginning in 1989, as an Executive Vice President of Reckson, Mr. Rechler
served as the person responsible for the construction of the Omni office
building and supervised all construction aspects of this project. In 1991, he
organized the Construction Company and has been responsible for its significant
growth. Mr. Rechler is a member of the Board of Directors of the Long Island
chapter of the Building Owners and Managers Association. Mr. Rechler attended
the New York Institute of Technology. He is the son of Roger M. Rechler and the
brother of Scott H. Rechler.
RONALD S. COOPER serves as a Director of FrontLine. Mr. Cooper was the
Managing Partner of the Long Island office of Ernst & Young LLP, one of the "Big
5" accounting firms. A partner in that firm and its predecessors from 1973
through 1998, he held several positions including Partner-in-charge of the New
York office's Privately Owned Business Group. Mr. Cooper is well known in the
Long Island business community having served on numerous civic and charitable
boards, including the Long Island Association where he was Treasurer for eight
years. He has a significant contact base among the investment and banking
communities and spent much of his career working with growth-oriented companies.
In 1999, Mr. Cooper co-founded LARC Strategic Concepts LLC, a management
consulting firm serving emerging and early-stage companies.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
JASON M. BARNETT serves as Executive Vice President, General Counsel and
Assistant Secretary of FrontLine. His responsibilities include the coordination
of legal and compliance matters for the Company. His experience includes the
investment of over $1.5 billion, numerous public and private capital markets
transactions as well as the spin-off of FrontLine from Reckson. Prior to
June 1999, Mr. Barnett served as Senior Vice President and General Counsel of
the Company. Previously, Mr. Barnett practiced law in the corporate and
securities department of Brown & Wood LLP, an international law firm
specializing in complex corporate and financing transactions. Mr. Barnett is
also Executive Vice President, General Counsel and Assistant Secretary of
Reckson. Mr. Barnett holds a Bachelor of Arts degree from Clark University and a
JURIS DOCTOR from Emory University School of Law. Mr. Barnett is a member of the
American Bar Association, a member of the Board of Editors of the ALLEY WAY, a
New York Law Journal publication focusing on Silicon Alley, and is involved in
various industry related groups. Mr. Barnett is admitted to the Bar of the State
of New York. Mr. Barnett is 31 years old.
5
<PAGE>
JEFFREY D. NEUMANN serves as Executive Vice President and Chief Investment
Officer of FrontLine and is responsible for all investments and acquisitions for
the Company. Prior to June 1999, Mr. Neumann served as Senior Vice President of
the Company. Prior to joining FrontLine in 1998, Mr. Neumann was a Vice
President in GE Capital's private equity investment subsidiary. While at GE
Capital, Mr. Neumann was involved in numerous investments in start-up and growth
companies. Previously, Mr. Neumann was the President of a manufacturing company
and of a health care company. He started his career with the investment banking
firm of Bear, Stearns & Co. Inc. in New York. Mr. Neumann is a director of
VANTAS, OnSite Access, Employee Matters and RealtyIQ.com. Mr. Neumann holds an
MBA in Finance from New York University Stern School of Business. Mr. Neumann is
37 years old.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Company is managed by an eight member Board of Directors. The Board of
Directors held eleven meetings during fiscal year 1999. Each of the directors
attended at least 75% of the total number of meetings of the Board of Directors
and of the committees of the Company of which he was a member during 1999.
AUDIT COMMITTEE. The Audit Committee, which consists of Mr. Amoruso and Mr.
Cooper, makes recommendations concerning the engagement of independent public
accountants, reviews with the independent public accountants the plans and
results of the audit engagements, approves 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 and reviews
the adequacy of the Company's internal accounting controls. The Audit Committee
held one meeting during fiscal year 1999.
EXECUTIVE COMMITTEE. As of April 30, 2000, the Company did not have an
Executive Committee.
COMPENSATION COMMITTEE. The Compensation Committee, which consists of Mr.
Amoruso and Mr. Donald Rechler, makes recommendations and exercises all powers
of the Board of Directors in connection with compensation matters, including
incentive compensation and benefit plans. The Compensation Committee also has
authority to grant awards under the Company's stock option plans. The
Compensation Committee held one meeting during fiscal year 1999.
NOMINATING COMMITTEE. In March 2000, the Board of Directors formed a
Standing Nominating Committee to appoint a third independent director to the
Board of Directors. The Standing Nominating Committee consists of Mr. Cooper,
Mr. Donald Rechler and Mr. Scott Rechler. Such appointment will be in the sole
discretion of the Standing Nominating Committee and shareholder recommendations
will not be considered.
DIRECTOR COMPENSATION
Each of the non-employee directors of the Company receives an annual
director's fee of $7,500. Each non-employee director also receives $500 for each
regular quarterly meeting of the Board of Directors attended, $500 for each
special meeting of the Board of Directors attended, $500 for each special
telephonic meeting of the Board of Directors participated in and $500 for each
committee meeting attended. Each non-employee director appointed or elected for
the first time receives an initial option to purchase 1,000 shares of Common
Stock at the market price of the Common Stock on the date of grant. In addition,
following their first year of appointment, each of the Company's non-employee
directors who is serving as a director of the Company on the fifth business day
following each annual meeting of stockholders receives an option to purchase 500
shares of Common Stock at the market price of the Common Stock on the date of
grant. All options granted to non-employee directors vest on the date of grant.
In addition, on April 13, 2000, Mr. Amoruso and Mr. Cooper were each granted
options to purchase 10,000 shares of common stock at an exercise price of
$24.875 per share.
6
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PROPOSAL 2: RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors of the Company, upon the recommendation of the Audit
Committee, has selected the accounting firm of Ernst & Young LLP to serve as
independent auditors of the Company for the fiscal year ending December 31,
2000, subject to ratification of this appointment by the stockholders of the
Company. Ernst & Young LLP has served as the Company's independent auditors
since the Company's formation in July 1997 and is considered by management of
the Company to be well qualified. The Company has been advised by that firm that
neither it nor any member thereof has any financial interest, direct or
indirect, in the Company or any of its subsidiaries in any capacity. Ernst &
Young LLP also serves as the independent auditors of Reckson. Mr. Cooper was a
partner of Ernst & Young LLP and certain of its predecessors from 1973 through
1998. A representative of Ernst & Young LLP will be present at the Annual
Meeting, will be given the opportunity to make a statement if he or she so
desires and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
SELECTION OF THE INDEPENDENT AUDITORS.
PROPOSAL 3: RATIFICATION OF THE 2000 EMPLOYEE STOCK OPTION PLAN
In January 2000, the Board of Directors approved the adoption of the 2000
Employee Stock Option Plan. The following is a description of such plan:
The 2000 Employee Stock Option Plan will be administered by the Compensation
Committee. Officers and employees of the Company and its subsidiaries are
eligible to participate in the 2000 Employee Stock Option Plan. The 2000
Employee Stock Option Plan provides for the grant of awards under such plan
(including the grant of stock options and restricted and unrestricted shares of
Common Stock) in respect of up to an aggregate of 2,500,000 shares of Common
Stock. Non-employee directors of the Company receive an initial stock option
grant to purchase 1,000 shares of Common Stock upon appointment as a director
and annual stock option grants to purchase 500 shares of Common Stock under the
2000 Employee Stock Option Plan.
The 2000 Employee Stock Option Plan authorizes (i) the grant of stock
options that qualify as incentive stock options under section 422 of the Code
("ISOs"), (ii) the grant of stock options that do not so qualify ("NQSOs"),
(iii) the grant of shares of Common Stock subject to certain restrictions on
transfer and certain risks of forfeiture ("Restricted Stock"), (iv) the grant of
stock options in lieu of cash Directors' fees and employee bonuses, (v) grants
of unrestricted shares of Common Stock in lieu of cash compensation and (vi) the
making of loans to acquire shares of Common Stock in lieu of compensation. The
exercise price of stock options is determined by the Compensation Committee, but
may not be less than 100% of the fair market value of the shares of Common Stock
on the date of grant in the case of ISOs; provided that, in the case of grants
of NQSOs granted in lieu of cash Directors' fees and employee bonuses, the
exercise price may not be less than 50% of the fair market value of the shares
of Common Stock on the date of grant.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE 2000 EMPLOYEE STOCK OPTION
PLAN. The following is a brief summary of the principal Federal income tax
consequences of awards under the 2000 Employee Stock Option 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. This
summary is not intended to be exhaustive and, among other things, does not
describe state, local or foreign tax consequences.
A participant is not subject to Federal income tax either at the time of
grant or at the time of exercise of an ISO. However, upon exercise, the
difference between the fair market value of the Common Stock and the exercise
price is an item of tax preference subject to the possible application of the
alternative minimum tax. If a participant does not dispose of Common Stock
acquired through the exercise of an ISO
7
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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 Stock to the participant), then the participant will be taxed only
upon the gain, if any, from the sale of such Common Stock, 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 ISO or,
if the above holding period requirements are met, on the sale of the underlying
Common Stock. 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 Stock 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 NQSOs 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 Stock 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.
If a participant is granted unrestricted shares of Common Stock, such
participant will have compensation income at the time of grant equal to the fair
market value of such shares. The company will receive a tax deduction in the
amount of the income recognized by the participant.
A participant who is awarded Restricted Stock that is subject to a
substantial risk of forfeiture (as defined in the Code) will not be taxed at the
time of the grant unless the participant makes a special election under section
83(b) of the Code. Assuming that no such election is made, the Company will
receive no tax deduction at the time of the grant. Upon the lapse of the
substantial risk of forfeiture associated with the Restricted Stock, a
participant will recognize ordinary income equal to the fair market value of the
Restricted Stock at the time of the lapse. At the same time, the Company will
receive a tax deduction in the amount of the ordinary income recognized by a
participant.
If a participant makes an election under section 83(b) of the Code or if the
Restricted Stock is subject to restrictions that do not comprise a substantial
risk of forfeiture, he or she will recognize ordinary income in an amount equal
to the fair market value of the Restricted Stock at the time of the grant
(determined without regard to any restrictions which may lapse). The Company
will receive a tax deduction in the equal amount at the same time. No tax will
be payable by a participant (and no additional deduction will be taken by the
Company) upon lapse of restrictions.
A participant who receives a Stock Loan generally will not be taxed at the
time of the grant of such a Loan. Similarly, the Company will receive no tax
deduction at the time of such Loan. Generally, any portion of a Stock Loan that
is forgiven by the Company will be treated as ordinary compensation income in
the year of forgiveness, and the Company will receive a tax deduction in equal
amount at the same time.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
ADOPTION OF THE 2000 EMPLOYEE STOCK OPTION PLAN.
8
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information regarding the compensation
awarded for the past two fiscal years to Scott H. Rechler, the President and
Chief Executive Officer of the Company, and each of the executive officers of
the Company whose total base salary and bonus, on an annualized basis, exceeded
$100,000 for the fiscal year ended December 31, 1999 (the "Named Executive
Officers"). The Company did not pay any compensation prior to 1998.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------- ---------------------------------------------
SHARES RESTRICTED
UNDERLYING STOCK
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) AWARDS($)(1)(2) OTHER($)(3)
- --------------------------- -------- --------- --------- ---------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Scott H. Rechler.................... 1999 -- 1,000,000 250,000 1,243,750(4) --
Chief Executive Officer and 1998 -- -- 757,818 346,875(5) 40,500
President
Michael Maturo...................... 1999 -- 600,000 175,000 746,250(4) --
Executive Vice President, Chief 1998 -- -- 646,995 231,250(5) 18,696
Financial Officer and Treasurer
Jason M. Barnett.................... 1999 -- 600,000 175,000 746,250(4) --
Executive Vice President and 1998 -- -- 141,855 346,875(5) 18,696
General Counsel
Jeffrey D. Neumann.................. 1999 200,000 600,000 175,000 746,250(4) --
Executive Vice President and 1998 150,000 150,000 358,709 693,750(5) 45,000
Chief Investment Officer
</TABLE>
- ------------------------
(1) Calculated by multiplying the number of shares awarded by the closing price
of the Common Stock on the date of grant. Although the Company has not
previously paid any dividends on its Common Stock, the restricted stock will
be entitled to dividends if any are declared on the Common Stock.
(2) As of December 31, 1999, the aggregate number of shares of restricted stock
granted to the Named Executive Officers totaled 231,666 shares for an
aggregate dollar value of $14,450,167, based on the closing price of the
Common Stock on December 31, 1999.
(3) Represents a grant of shares of common stock in OnSite Access, Inc.
("OnSite"), a privately-held company which is approximately 37% owned by the
Company, at a price of $0.45 per share.
(4) Represents an award of 50,000 shares (with respect to Mr. Rechler) and
30,000 shares (with respect to Messrs. Maturo, Barnett and Neumann) of
restricted Common Stock of the Company at a price of $24.875 per share, the
closing price on the date of grant.
(5) Represents an award of 75,000 shares (with respect to Messrs. Rechler and
Barnett), 50,000 shares (with respect to Mr. Maturo) and 150,000 shares
(with respect to Mr. Neumann) of restricted Common Stock of the Company at a
price of $4.625 per share, the closing price on the date of grant. The stock
grants with respect to Messrs. Rechler, Maturo and Barnett vested in full on
January 1, 2000. Two-thirds of Mr. Neumann's stock grant vests over three
years and the remaining one-third vests over two years.
9
<PAGE>
OPTION GRANTS FOR FISCAL YEAR 1999
The following table sets forth information regarding stock options granted
under the Company's 2000 Employee Stock Option Plan in respect of the fiscal
year ended December 31, 1999 to the Named Executive Officers. In addition, as
required by SEC rules, the table sets forth the hypothetical gains that would
exist for the shares subject to such options on assumed annual compounded rates
of stock price appreciation over the option term.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
PERCENT OF TOTAL RATES OF COMMON STOCK
OPTIONS GRANTED EXERCISE PRICE PRICE APPRECIATION FOR
NUMBER OF SHARES TO EMPLOYEES PER SHARE OF OPTION TERM(4)
UNDERLYING FOR FISCAL COMMON -----------------------
NAME OPTIONS GRANTED(1) YEAR(2) STOCK($)(3) EXPIRATION DATE 5% 10%
- ---- ------------------ ---------------- -------------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Scott H. Rechler..... 250,000 12.02% 24.875 4/13/10 3,910,938 9,911,086
Michael Maturo....... 175,000 8.42% 24.875 4/13/10 2,737,657 6,937,760
Jason M. Barnett..... 175,000 8.42% 24.875 4/13/10 2,737,657 6,937,760
Jeffrey D. Neumann... 175,000 8.42% 24.875 4/13/10 2,737,657 6,937,760
</TABLE>
- ------------------------
(1) All options granted to employees are nonqualified stock options and vest in
three equal annual installments commencing on the first anniversary of the
date of grant.
(2) The Company granted stock options representing 2,079,167 shares of Common
Stock to employees in respect of the fiscal year ended December 31, 1999.
(3) The exercise price represents the closing price of the Common Stock on April
13, 2000, the date of grant.
(4) Potential Realizable Value is based on the assumed annual growth rates shown
over their 10-year option term. For example, a 5% growth rate, compounded
annually, results in a stock price of $40.519 per share, and a 10% growth
rate, compounded annually, results in a stock price of $64.519 per share.
These Potential Realizable Values are listed to comply with the regulations
of the SEC, and the Company cannot predict whether these values will be
achieved. Actual gains, if any, on stock option exercises are dependent on
the future performance of the stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
AGGREGATED FISCAL YEAR-END 1999 OPTION VALUES
The following table sets forth the value of options held at the end of 1999
by the Named Executive Officers and information concerning each exercise of
stock options by the Named Executive Officers during the 1999 fiscal year.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(2)
SHARES ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------------ -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Scott H. Rechler........ -- -- 757,818 250,000 46,473,067 9,375,000
Michael Maturo.......... -- -- 646,995 175,000 39,677,107 6,562,500
Jason M. Barnett........ -- -- 141,855 175,000 8,699,265 6,562,000
Jeffrey D. Neumann...... 50,000 1,192,125 164,139 319,570 9,844,287 8,597,144
</TABLE>
- ------------------------
(1) The aggregate dollar value realized upon exercise was determined based on
the difference between the closing price of the Company's Common Stock on
the date of exercise and the exercise price of the options.
(2) The value of unexercised in-the-money options at fiscal year-end is based on
the $62.375 closing price of the Common Stock on December 31, 1999, less the
exercise price.
10
<PAGE>
EMPLOYMENT AND NONCOMPETITION AGREEMENTS
The Company is a party to an employment agreement with Jeffrey D. Neumann.
The term of employment is at-will and provides for a minimum annual base salary
of $150,000. The agreement also provides for an annual discretionary bonus of up
to 100% of base salary. The agreement contains non-competition covenants in
favor of the Company for one year following the date employment is terminated
either voluntarily or for Cause.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
THE ROLE OF THE COMMITTEE. The Compensation Committee of the Board of
Directors (the "Compensation Committee") establishes, oversees and directs the
Company's executive compensation policies and programs, administers the
Company's stock option and long-term incentive plans and seeks to ensure that
the Company's executive compensation philosophy is consistent with the Company's
best interests.
COMPENSATION PHILOSOPHY AND REVIEW. The Compensation Committee seeks to
align executive compensation with the Company's business objectives and
strategies, management programs and financial performance. The Company's
compensation philosophy for executive officers serves three principal purposes:
(i) to provide a total compensation package for executive officers that is
competitive with the current market for executive talent and enables the Company
to attract and retain key executive and employee talent needed to achieve the
Company's business objectives, (ii) to provide key executives with motivation to
perform to the full extent of their abilities in an effort to maximize Company
performance to deliver enhanced value to the Company's stockholders and (iii) to
encourage senior management's long-term equity ownership in the Company.
The Compensation Committee regularly reviews and approves generally all
compensation and fringe benefit programs of the Company and also reviews and
determines the actual compensation of the Company's executive officers, as well
as all cash bonuses, stock option grants and other long-term incentive grants
awarded to all key employees. The Compensation Committee also reviews and makes
recommendations to the Board of Directors on policies and programs for the
development of management personnel and management structure and organization.
The Compensation Committee may from time to time review executive compensation
reports prepared by independent organizations in order to evaluate the
appropriateness of its executive compensation program.
EXECUTIVE COMPENSATION. The Company's executive compensation consists
primarily of an annual salary, cash bonuses linked to the performance of the
Company and long-term equity-based compensation.
The annual base salaries of the Company's executive officers are set at
levels designed to attract and retain exceptional individuals by rewarding them
for individual and Company achievements. The Compensation Committee reviews
executive officers' salaries annually to adjust such salaries based on each
executive officer's past performance, expected future contributions and the
scope and nature of responsibilities of the executive officer, including changes
in such responsibilities.
The Compensation Committee believes that a portion of the executives'
compensation should be tied to the achievement of the Company's goals in order
to reward individual performance and overall Company success. Such targets
include the Company's individual strategic and operating targets and expansion
of the Company's network of partner companies. Additionally, a portion of each
officer's bonus is based on subjective criteria particular to each officer's
individual operating responsibilities.
In addition to salaries and incentive bonuses, the Compensation Committee
also grants awards under the Company's stock option plans to executive officers
and other key employees of the Company in order to focus the efforts of these
employees on the long-term growth and success of the Company. Awards under the
Company's stock option plans may be in the form of options, restricted stock or
stock appreciation rights.
11
<PAGE>
In March 2000, the Compensation Committee adopted a long-term incentive
plan. Under the long-term incentive plan, participants may purchase or be
granted interests in limited partnerships established by the Company to hold a
portion of the securities acquired by the Company. The plan contemplates the
allocation to such partnerships of up to a 12.5% interest in each investment
made by the Company. FrontLine, through a wholly-owned subsidiary, will act as
the general partner of each partnership and will retain an 87.5% or greater
interest in each partnership depending upon the vesting and type of interest
participants receive. FrontLine generally must receive a minimum return on its
holdings in a particular partnership, typically two times the cost of its
investment, before participants receive any distributions from such partnership.
It is anticipated that partnership interests will vest 25% each year, but the
Compensation Committee has the authority to accelerate vesting. A partnership
will generally distribute the securities or cash it holds to its partners after
five to ten years, but may distribute securities or cash earlier if the company
has completed an initial public offering or been sold.
In determining compensation levels for 1999, the Compensation Committee
obtained survey information from William Mercer, Inc., a third-party consultant,
with respect to cash compensation and stock option grants to similarly situated
officers of similar companies of comparable size and market capitalization and
awarded compensation packages in-line with such report. The Compensation
Committee also relied upon publicly available compensation information and
informal survey information obtained by the Company's management with respect to
other Internet-related operating companies.
In addition, the Compensation Committee took into consideration the
Company's performance and accomplishments during 1999. In particular, the
Compensation Committee noted that the Company had achieved a 1,412% return
making it one of the top performing stocks on the Nasdaq National Market and the
sixth best performing stock of any small to mid-size company. The Compensation
Committee also noted that the Company had increased its market capitalization
from approximately $101 million to $1.9 billion, successfully raised
approximately $142 million of new capital and had acquired interests in
nine partner companies. The Compensation Committee recognized that due to
management's efforts, the Company had made significant progress in achieving its
long-term goal of becoming an industry leader by committing approximately
$300 million of capital into its network of partner companies, building its
infrastructure to over 30 professionals and establishing a "world class"
advisory board.
1999 CHIEF EXECUTIVE OFFICER. The Compensation Committee determined the
1999 compensation of Mr. Rechler in accordance with the above discussion.
Specifically, the Compensation Committee awarded Mr. Rechler a cash bonus and
long-term incentives based on his individual performance and his overall
leadership and management of the Company. The Committee also issued Mr. Rechler
stock options which vest over a period of three years.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION. Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), limits the deductibility on the
Company's federal tax return of compensation over $1 million to any of the Named
Executive Officers of the Company unless, in general, the compensation is paid
pursuant to a plan which is performance-related and non-discretionary and has
been approved by the Company's stockholders. The Compensation Committee's policy
with respect to section 162(m) is to make every reasonable effort to ensure that
compensation is deductible to the extent permitted while simultaneously
providing Company executives with appropriate compensation for their
performance. The Company did not pay any compensation during 1999 that would be
subject to the limitations set forth in section 162(m).
Submitted by the Compensation
Committee
of the Board of Directors:
Paul F. Amoruso
Donald J. Rechler
12
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph provides a comparison of the cumulative total
stockholder return on the Common Stock for the period from June 8, 1998 (the
date upon which the Company's Common Stock began trading) to December 31, 1999
with the cumulative total return on the Nasdaq Composite Index (the "Nasdaq
Index") and the Dow Jones Internet Index (Composite) (the "Dow Index"). Total
return values were calculated based on cumulative total return assuming (i) the
investment of $100 in the Common Stock on June 8, 1998 and in the Nasdaq Index
and the Dow Index on June 8, 1998 and (ii) the reinvestment of dividends, if
any.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOW JONES
<S> <C> <C> <C>
FrontLine NASDAQ Internet Index
Capital Group Composite Index (Composite)
6/8/98 $100 $100 $100
6/30/98 $120 $106 $129
9/30/98 $85 $95 $103
12/31/98 $150 $123 $197
3/31/99 $164 $138 $316
6/30/99 $550 $150 $319
9/30/99 $575 $154 $303
12/31/99 $2,268 $228 $519
</TABLE>
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table sets forth the beneficial ownership of Common Stock for
(i) each stockholder of the Company holding more than a 5% beneficial interest
in the Company, (ii) executive officers who are not directors of the Company and
(iii) the directors and executive officers of the Company as a group. Stock
ownership of the directors of the Company appears under the heading "Information
Regarding Nominees and Directors" in this Proxy Statement.
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK BENEFICIALLY OWNED
AS OF APRIL 10, 2000(1)
-------------------------------
NAME OF BENEFICIAL OWNERS NUMBER PERCENT OF TOTAL(2)
- ------------------------- --------- -------------------
<S> <C> <C>
Cohen & Steers Capital Management, Inc.(3).................. 3,190,500 9.27%
LaSalle Advisors Capital Management, Inc. and ABKB/LaSalle
Securities Limited Partnership(4)......................... 1,555,992 4.52%
JAH Realties, L.P., JLH Realty Management Service, Inc.,
Veritech Ventures LLC and Jon L. Halpern(5)............... 2,672,295 7.76%
Jason M. Barnett............................................ 347,815 1.0%
Jeffrey D. Neumann.......................................... 482,473 1.38%
All directors and executive officers as a group (10
persons).................................................. 9,651,493 27.35%
</TABLE>
- ------------------------
(1) All information has been determined as of April 10, 2000. For purposes of
this table a person is deemed to have "beneficial ownership" of the number
of shares of Common Stock that person has the right to acquire pursuant to
the exercise of stock options within 60 days.
13
<PAGE>
(2) For purposes of computing the percentage of outstanding shares of Common
Stock held by each person, any shares of Common Stock which such person has
the right to acquire pursuant to the exercise of a stock option exercisable
within 60 days is deemed to be outstanding, but is not deemed to be
outstanding for the purposes of computing the percent ownership of any other
person.
(3) This information is based upon information reported by the stockholder in
filings made with the SEC. The address of Cohen & Steers Capital
Management, Inc. is 757 Third Avenue, New York, New York 10017.
(4) This information is based upon information reported by the stockholder in
filings made with the SEC. LaSalle Advisors Capital Management, Inc.
("LaSalle") beneficially owns 674,460 shares of Common Stock of the Company
and ABKB/LaSalle Securities Limited Partnership ("ABKB"), a subsidiary of
LaSalle, beneficially owns 881,532 shares of Common Stock of the Company.
The address of both LaSalle and ABKB is 200 East Randolph Drive, Chicago,
Illinois 60601.
(5) This information is based upon information reported by the stockholder in
filings with the SEC. JAH Realties, L.P. ("JAH L.P.") beneficially owns
2,671,093 shares of Common Stock of the Company, JLH Realty Management
Service, Inc. ("JLH Inc.") beneficially owns 2,671,335 shares of Common
Stock of the Company, Veritech Ventures LLC ("Veritech") beneficially owns
1,731,597 shares of Common Stock of the Company and Jon L. Halpern
beneficially owns 2,672,295 shares of Common Stock of the Company. Mr.
Halpern is the sole stockholder of JLH Inc. JLH Inc. is the general partner
of JAH L.P. JAH L.P. is the managing member of Veritech. The address of each
of Mr. Halpern, JLH Inc., JAH L.P. and Veritech is c/o JAH Realties, L.P., 2
Manhattanville Road, Suite 205, Purchase, New York 10577.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 1999, Mr. Scott Rechler, an officer of the Company and an
officer and director of Reckson and Mr. Donald Rechler, an officer and director
of Reckson, served on the Compensation Committee of the Company. Mr. Scott
Rechler no longer serves on the Compensation Committee. With respect to the
compensation of the chief executive officer, Mr. Scott Rechler abstained from
any discussions.
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors, and
persons who own more than 10% of a registered class of the Company's equity
securities ("10% Holders"), to file reports of ownership and changes in
ownership with the SEC. Officers, directors and 10% Holders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms that
they file. To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company, all Section 16(a) filing requirements
applicable to its executive officers, directors and 10% Holders were satisfied
during 1999, except that Mr. Ronald S. Cooper, a director of the Company,
purchased 4,000 shares of Common Stock on May 19, 1999 and 2,000 shares of
Common Stock on May 20, 1999 and did not file a report until February 21, 2000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Donald J. Rechler, Scott H. Rechler, Michael Maturo, Gregg Rechler, Mitchell
D. Rechler and Roger Rechler, each of whom serves as a director and/or officer
of FrontLine, serves as an officer and, in certain cases, a director of Reckson,
and collectively own approximately 12.87% of Reckson's outstanding common stock
(assuming the exercise of vested stock options and the exchange of operating
partnership units in Reckson Operating Partnership for shares of common stock of
Reckson) as of April 10, 2000.
14
<PAGE>
FrontLine and Reckson Operating Partnership are parties to an intercompany
agreement whereby Reckson Operating Partnership has a right of first opportunity
to make any REIT-qualified investment that becomes available to FrontLine.
FrontLine has a right of first opportunity under the intercompany agreement to
provide commercial services to Reckson Operating Partnership and the tenants of
its properties at rates and on terms as attractive as either FrontLine provides
to third parties or the best available for comparable services in the
marketplace.
In 1998, Reckson Operating Partnership established a credit facility with
FrontLine (the "FrontLine Facility") in the amount of $100 million for
FrontLine's service sector operations and other general corporate purposes. As
of December 31, 1999, borrowings under the FrontLine Facility aggregated
$79.5 million. These advances bear interest at 12% per annum. In addition,
during 1998 Reckson Operating Partnership approved the funding of investments of
up to $100 million in connection with Reckson Strategic Venture Partners, LLC
("RSVP"), a real estate venture capital fund formed and managed by a subsidiary
of the Company (the "RSVP Commitment"). The RSVP Commitment may be funded
through either REIT-qualified investments made by Reckson Operating Partnership
in RSVP-controlled joint ventures or through advances made to FrontLine under a
credit facility with terms similar to the FrontLine Facility. As of December 31,
1999, Reckson Operating Partnership had made advances under the RSVP Commitment
aggregating approximately $42.3 million and had invested approximately
$24.8 million in RSVP-controlled joint venture REIT-qualified investments. Both
the FrontLine and RSVP facilities expire in June 2003.
In November 1999, the Board of Directors of FrontLine and Reckson approved
amendments to the credit facilities necessary in order for FrontLine to proceed
with certain short-term financings for proposed acquisitions. In consideration
for such amendments, FrontLine paid a fee to Reckson Operating Partnership of
approximately $3.6 million in the form of shares of FrontLine common stock.
FrontLine is entitled to a cumulative annual management fee of $2 million
with respect to RSVP, of which $1.5 million is subordinate to PaineWebber Real
Estate Securities, Inc. receiving an annual minimum rate of return of 16% and a
return of its capital. The unsubordinated amounts for the year ended December
31, 1999 was approximately $.5 million.
In July 1999, certain senior officers of the Company were granted shares of
restricted common stock of the Company and Onsite Access, Inc., a company in
which FrontLine owns an approximately 37% interest. Certain of such officers
elected to be taxed currently on such shares. These officers received loans from
the Company to pay their aggregate tax liabilities. The loans bear interest at a
rate of 5.42% per year and have a one year maturity. The principal amount of
each loan, together with accrued interest, is forgiven upon maturity, provided
the officer is still employed by the Company. In addition, each loan is forgiven
upon a change-in-control of the Company, the death or permanent disability of
the borrowing officer or a reduction in the nature or scope of his duties. Each
officer is also entitled to a tax payment upon forgiveness of the loan. The
following aggregate loan amounts were made to the following executives: Scott H.
Rechler--$537,542, Michael Maturo--$350,153, Jason M. Barnett--$571,763 and
Jeffrey D. Neumann--$1,111,762. In addition, in order to encourage long-term
ownership in the Company, while at the same time provide some liquidity to the
Named Executive Officers, in April 2000 the Company made certain advances
against future distributions from the Company's long-term incentive plan in the
amount of $1 million to Scott H. Rechler and $600,000 to each of the other Named
Executive Officers.
During 1999, the Company sub-leased office space located at 10 East 50(th)
Street, New York, New York from Reckson Operating Partnership for approximately
$268,959. The Company leases office space from Reckson Operating Partnership for
its executive offices located at 1350 Avenue of the Americas, New York, New York
10019 at an annual base rent of approximately $906,564.
15
<PAGE>
During a portion of 1999, the Company leased 2,018 square feet of office
space at its offices located at 225 Broadhollow Road, Melville, New York 11747,
at an annual base rent of approximately $129,460 from a partnership in which
Donald J. Rechler, Mitchell Rechler, Roger Rechler and trusts established for
Rechler family members maintain an equity interest.
FrontLine and RSVP reimburse Reckson Operating Partnership for certain
general and administrative expenses (including payroll expenses) incurred by
Reckson Operating Partnership for their benefit. During 1999, FrontLine and RSVP
reimbursed Reckson Operating Partnership approximately $525,000 for such
expenses.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
For a proposal of a stockholder to be presented to an annual meeting, other
than a stockholder proposal included in the Company's proxy statement pursuant
to Rule 14a-8 of the Exchange Act ("Rule 14a-8"), the Secretary of the Company
must receive written notice thereof on or before the date specified in the
Company's Bylaws, and the proponent or a representative of the proponent must
attend the annual meeting. In addition, pursuant to Rule 14a-4 of the Exchange
Act, if a stockholder failed to notify the Company at least 45 days before the
date on which the Company first mailed its proxy materials for the prior year's
annual meeting, management proxies are allowed to use their discretionary voting
authority when the proposal is raised at the annual meeting, without any
discussion of the matter in the proxy statement.
For a proposal of a stockholder to be presented to the Company's 2001 annual
meeting of stockholders, other than a stockholder proposal included in the
Company's proxy statement pursuant to Rule 14a-8, it must be received at the
principal executive offices of the Company after March 24, 2001 and on or before
April 8, 2001 unless the 2001 annual meeting of stockholders is scheduled to
take place before June 22, 2001. The Company's Bylaws provide that any
stockholder wishing to nominate a director or have a stockholder proposal other
than a stockholder proposal included in the Company's proxy statement pursuant
to Rule 14a-8 considered at an annual meeting must provide written notice of
such nomination or proposal and appropriate supporting documentation, as set
forth in the Bylaws, to the Company at its principal executive offices not less
than 75 days nor more than 90 days prior to the anniversary of the immediately
preceding annual meeting of stockholders (the "Anniversary Date"); provided,
however, that in the event that the annual meeting is scheduled to be held more
than seven calendar days prior, or more than 60 days subsequent, to the
Anniversary Date, such nominations or proposals must be delivered to the Company
not earlier than the 90th day prior to such meeting and not later than the later
of the 75th day prior to such annual meeting or the twentieth day following the
earlier of the day on which public announcement of the meeting is first made or
notice of the meeting is mailed to stockholders. Any such proposal should be
mailed to: Frontline Capital Group, 1350 Avenue of the Americas, New York, New
York 10019, Attn: Mitchell D. Rechler, Secretary.
OTHER MATTERS
The Board of Directors does not know of any matters other than those
described in this Proxy Statement that will be presented for action at the
Annual Meeting. If other matters are presented, proxies will be voted in
accordance with the best judgment of the proxy holders.
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Appendix A
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RECKSON SERVICE INDUSTRIES, INC.
2000 EMPLOYEE STOCK OPTION PLAN
ARTICLE 1. GENERAL
1.1. PURPOSE. The purpose of the Reckson Service Industries, Inc. 2000
Employee Stock Option Plan (the "Plan") is to provide for a broad base of
officers, directors and employees, as defined in Section 1.3, of Reckson Service
Industries, Inc. (the "Company"), and certain of its Affiliates (as defined
below) an equity-based incentive to maintain and enhance the performance and
profitability of the Company.
1.2. ADMINISTRATION.
(a) The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board"), which
Committee shall consist of two or more directors, or by the Board. It is
intended that from and after the initial public offering of Common Stock, the
directors appointed to serve on the Committee shall be "non-employee directors"
(within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act
of 1934 (the "Act")); however, the mere fact that a Committee member shall fail
to qualify under this requirement shall not invalidate any award made by the
Committee which award is otherwise validly made under the Plan. The members of
the Committee shall be appointed by, and may be changed at any time and from
time to time in the discretion of, the Board.
(b) The Committee shall have the authority (i) to exercise all of the
powers granted to it under the Plan, (ii) to construe, interpret and implement
the Plan and any Plan agreements executed pursuant to the Plan, (iii) to
prescribe, amend and rescind rules relating to the Plan, (iv) to make any
determination necessary or advisable in administering the Plan, and (v) to
correct any defect, supply any omission and reconcile any inconsistency in the
Plan.
(c) The determination of the Committee on all matters relating to the
Plan or any Plan agreement shall be conclusive.
(d) No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any award
hereunder.
(e) Notwithstanding anything to the contrary contained herein, the
Board may, in its sole discretion, at any time and from time to time, resolve to
administer the Plan, in which case, the term Committee as used herein shall be
deemed to mean the Board.
1.3. PERSONS ELIGIBLE FOR AWARDS. Awards under the Plan may be made to
such officers, directors and other employees ("key personnel") of the Company or
its Affiliates as the Committee shall from time to time in its sole discretion
select.
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1.4. TYPES OF AWARDS UNDER PLAN.
(a) Awards may be made under the Plan in the form of (i) stock options
("options"), (ii) restricted stock awards, and (iii) unrestricted stock awards
in lieu of cash compensation, all as more fully set forth in Articles 2 and 3.
(b) Options granted under the Plan shall be "nonqualified" stock
options ("NQSOs"). Grants of options made under the Plan may also be made in
lieu of cash fees otherwise payable to Directors of the Company or cash bonuses
payable to employees of the Company or any Affiliate.
1.5. SHARES AVAILABLE FOR AWARDS.
(a) Subject to Section 4.5 (relating to adjustments upon changes in
capitalization), as of any date the total number of shares of Common Stock with
respect to which awards may be granted under the Plan, shall equal the excess
(if any) of 2,500,000 shares of Common Stock, over (i) the number of shares of
Common Stock subject to outstanding awards under the Plan, (ii) the number of
shares in respect of which options have been exercised, or grants of restricted
or unrestricted Common Stock have been made pursuant to the Plan, and (iii) the
number of shares issued subject to forfeiture restrictions which have lapsed.
In accordance with (and without limitation upon) the preceding
sentence, awards may be granted in respect of the following shares of Common
Stock: shares covered by previously-granted awards that have expired, terminated
or been cancelled for any reason whatsoever (other than by reason of exercise or
vesting).
(b) Shares of Common Stock that shall be subject to issuance pursuant
to the Plan shall be authorized and unissued or treasury shares of Common Stock,
or shares of Common Stock purchased on the open market or from shareholders of
the Company for such purpose.
(c) Without limiting the generality of the foregoing, the Committee
may, with the grantee's consent, cancel any award under the Plan and issue a new
award in substitution therefor upon such terms as the Committee may in its sole
discretion determine, provided that the substituted award shall satisfy all
applicable Plan requirements as of the date such new award is made.
1.6. DEFINITIONS OF CERTAIN TERMS.
(a) The term "Affiliate" as used herein means RSI Fund Management, LLC,
RSVP Holdings, LLC and Reckson Strategic Venture Partners, LLC, and any person
or entity as subsequently approved by the Board which, at the time of reference,
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the Company.
(b) The term "Cause" shall mean a finding by the Committee that the
recipient of an award under the Plan has (i) acted with gross negligence or
willful misconduct in connection with the performance of his material duties to
the Company or its Affiliates; (ii) defaulted in the performance of his material
duties to the Company or its Affiliates and has not corrected such
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action within 15 days of receipt of written notice thereof; (iii) willfully
acted against the best interests of the Company or its Affiliates, which act has
had a material and adverse impact on the financial affairs of the Company or its
Affiliates; or (iv) been convicted of a felony or committed a material act of
common law fraud against the Company, its Affiliates or their employees and such
act or conviction has, or the Committee reasonably determines will have, a
material adverse effect on the interests of the Company or its Affiliates.
(c) The term "Common Stock" as used herein means the shares of common
stock of the Company as constituted on the effective date of the Plan, and any
other shares into which such common stock shall thereafter be changed by reason
of a recapitalization, merger, consolidation, split-up, combination, exchange of
shares or the like.
(d) The "fair market value" (or "FMV") as of any date and in respect of
any share of Common Stock shall be:
(i) if the Common Stock is listed for trading on the New York
Stock Exchange, the closing price, regular way, of the Common
Stock as reported on the New York Stock Exchange Composite
Tape, or if no such reported sale of the Common Stock shall
have occurred on such date, on the next preceding date on
which there was such a reported sale; or
(ii) if the Common Stock is not so listed but is listed on
another national securities exchange or authorized for
quotation on the National Association of Securities Dealers
Inc.'s NASDAQ National Market System ("NASDAQ/NMS"), the
closing price, regular way, of the Common Stock on such
exchange or NASDAQ/NMS, as the case may be, on which the
largest number of shares of Common Stock have been traded in
the aggregate on the preceding twenty trading days, or if no
such reported sale of the Stock shall have occurred on such
date on such exchange or NASDAQ/NMS, as the case may be, on
the preceding date on which there was such a reported sale on
such exchange or NASDAQ/NMS, as the case may be; or
(iii) if the Common Stock is not listed for trading on a
national securities exchange or authorized for quotation on
NASDAQ/NMS, the average of the closing bid and asked prices as
reported by the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") or, if no such prices
shall have been so reported for such date, on the next
preceding date for which such prices were so reported; or
(iv) if the Common Stock is not listed for trading on a
national securities exchange or authorized for quotation on
NASDAQ/NMS or NASDAQ generally, the average of the closing bid
and asked prices as reported on the OTC Bulletin Board or, if
no such prices shall have been so reported for such date, on
the next preceding date for which such prices were so
reported.
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1.7. AGREEMENTS EVIDENCING AWARDS.
(a) Options and restricted stock awards granted under the Plan shall be
evidenced by written agreements. Any such written agreements shall (i) contain
such provisions not inconsistent with the terms of the Plan as the Committee may
in its sole discretion deem necessary or desirable and (ii) be referred to
herein as "Plan Agreements."
(b) Each Plan agreement shall set forth the number of shares of Common
Stock subject to the award granted thereby.
(c) Each Plan agreement with respect to the granting of an option shall
set forth the amount (the "option exercise price") payable by the grantee to the
Company in connection with the exercise of the option evidenced thereby. The
option exercise price per share may be less than, equal to or greater than the
fair market value of a share of Common Stock on the date the option is granted.
ARTICLE 2. STOCK OPTIONS
2.1. OPTION AWARDS.
(a) GRANT OF STOCK OPTIONS. The Committee may grant options to purchase
shares of Common Stock in such amounts and subject to such terms and conditions
as the Committee shall from time to time in its sole discretion determine,
subject to the terms of the Plan.
(b) DIVIDEND EQUIVALENT RIGHTS. To the extent expressly provided by the
Committee at the time of the grant, each NQSO granted under this Section 2.1
shall also generate Dividend Equivalent Rights ("DERs"), which shall entitle the
grantee to receive an additional share of Common Stock for each DER received
upon the exercise of the NQSO, at no additional cost, based on the formula set
forth herein. As of the last business day of each calendar quarter, the amount
of dividends paid by the Company on each share of Common Stock with respect to
that quarter shall be divided by the FMV per share to determine the actual
number of DERs accruing on each share subject to the NQSO. Such amount of DERs
shall be multiplied by the number of shares covered by the NQSO to determine the
number of DERs which accrued during such quarter. The provisions of this Section
2.1(b) shall not be amended more than once every six months other than to
comport with changes in the Code, the Employee Retirement Income Security Act
("ERISA") or the rules thereunder.
FOR EXAMPLE. Assume that a grantee holds a NQSO to purchase 600 shares
of Common Stock. Further assume that the dividend per share for the first
quarter was $0.10, and that the FMV per share on the last business day of the
quarter was $20. Therefore, .005 DER would accrue per share for that quarter and
such grantee would receive three DERs for that quarter (600 X .005). For
purposes of determining how many DERs would accrue during the second quarter,
the NQSO would be considered to be for 603 shares of Common Stock.
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2.2. EXERCISABILITY OF OPTIONS. Subject to the other provisions of the
Plan:
(a) EXERCISABILITY DETERMINED BY PLAN AGREEMENT. Each Plan agreement
shall set forth the period during which and the conditions subject to which the
option shall be exercisable (including, but not limited to vesting of such
options), as determined by the Committee in its discretion.
(b) PARTIAL EXERCISE PERMITTED. Unless the applicable Plan agreement
otherwise provides, an option granted under the Plan may be exercised from time
to time as to all or part of the full number of shares for which such option is
then exercisable, in which event the DERs relating to the portion of the option
being exercised shall also be exercised.
(c) NOTICE OF EXERCISE; EXERCISE DATE.
(i) An option shall be exercisable by the filing of a written
notice of exercise with the Company, on such form and in such
manner as the Committee shall in its sole discretion
prescribe, and by payment in accordance with Section 2.4.
(ii) Unless the applicable Plan agreement otherwise provides,
or the Committee in its sole discretion otherwise determines,
the date of exercise of an option shall be the date the
Company receives such written notice of exercise and payment.
2.3. LIMITATION ON EXERCISE. Notwithstanding any other provision of the
Plan, no Plan agreement shall permit an option to be exercisable more than 10
years after the date of grant.
2.4. PAYMENT OF OPTION PRICE.
(a) TENDER DUE UPON NOTICE OF EXERCISE. Unless the applicable Plan
agreement otherwise provides or the Committee in its sole discretion otherwise
determines, any written notice of exercise of an option shall be accompanied by
payment of the full purchase price for the shares being purchased.
(b) MANNER OF PAYMENT. Payment of the option exercise price shall be
made in any combination of the following:
(i) by certified or official bank check payable to the Company
(or the equivalent thereof acceptable to the Committee);
(ii) by personal check (subject to collection), which may in
the Committee's discretion be deemed conditional;
(iii) with the consent of the Committee in its sole
discretion, by delivery of previously acquired shares of
Common Stock owned by the grantee for at least six months
having a fair market value (determined as of the option
exercise date) equal to the portion of the option exercise
price being paid thereby, provided that the Committee may
require the grantee to furnish an opinion of counsel
acceptable to the Committee to the effect that such delivery
would not result in
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the grantee incurring any liability under Section 16(b) of the
Act and does not require any Consent (as defined in Section
4.2); and
(iv) with the consent of the Committee in its sole discretion,
by the full recourse promissory note and agreement of the
grantee providing for payment with interest on the unpaid
balance accruing at a rate not less than that needed to avoid
the imputation of income under Code Section 7872 and upon such
terms and conditions (including the security, if any,
therefor) as the Committee may determine; and
(v) by withholding shares of Common Stock from the shares
otherwise issuable pursuant to the exercise.
(c) CASHLESS EXERCISE. Payment in accordance with Section 2.4(b) may be
deemed to be satisfied, if and to the extent provided in the applicable Plan
agreement, by delivery to the Company of an assignment of a sufficient amount of
the proceeds from the sale of Common Stock acquired upon exercise to pay for all
of the Common Stock acquired upon exercise and an authorization to the broker or
selling agent to pay that amount to the Company, which sale shall be made at the
grantee's direction at the time of exercise, provided that the Committee may
require the grantee to furnish an opinion of counsel acceptable to the Committee
to the effect that such delivery would not result in the grantee incurring any
liability under Section 16 of the Act and does not require any Consent (as
defined in Section 4.2).
(d) ISSUANCE OF SHARES. As soon as practicable after receipt of full
payment, the Company shall, subject to the provisions of Section 4.2, deliver to
the grantee one or more certificates for the shares of Common Stock so
purchased, which certificates may bear such legends as the Company may deem
appropriate concerning restrictions on the disposition of the shares in
accordance with applicable securities laws, rules and regulations or otherwise.
2.5. DEFAULT RULES CONCERNING TERMINATION OF EMPLOYMENT.
Subject to the other provisions of the Plan and unless the applicable
Plan agreement otherwise provides:
(a) GENERAL RULE. All options granted to a grantee shall terminate upon
the grantee's termination of employment for any reason except to the extent
post-employment exercise of the option is permitted in accordance with this
Section 2.5.
(b) TERMINATION FOR CAUSE. All unexercised or unvested options granted
to a grantee shall terminate and expire on the day a grantee's employment is
terminated for Cause.
(c) REGULAR TERMINATION; LEAVE OF ABSENCE. If the grantee's employment
terminates for any reason other than as provided in subsection (b), (d) or (f)
of this Section 2.5, any awards granted to such grantee which were exercisable
immediately prior to such termination of employment may be exercised, and any
awards subject to vesting may continue to vest, until the earlier of either: (i)
90 days after the grantee's termination of employment and (ii) the date on which
such options terminate or expire in accordance with the provisions of the Plan
(other than this Section 2.5) and the Plan agreement; provided that the
Committee may, in its sole discretion,
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determine such other period for exercise in the case of a grantee whose
employment terminates solely because the grantee's employer ceases to be an
Affiliate or the grantee transfers employment with the Company's consent to a
purchaser of a business disposed of by the Company. The Committee may, in its
sole discretion, determine (i) whether any leave of absence (including
short-term or long-term disability or medical leave) shall constitute a
termination of employment for purposes of the Plan and (ii) the effect, if any,
of any such leave on outstanding awards under the Plan.
(d) RETIREMENT. If a grantee's employment terminates by reason of
retirement (I.E., THE VOLUNTARY TERMINATION OF EMPLOYMENT BY A GRANTEE AFTER
ATTAINING THE AGE OF 55), the options exercisable by the grantee immediately
prior to the grantee's retirement shall be exercisable by the grantee until the
earlier of (i) 12 months after the grantee's retirement and (ii) the date on
which such options terminate or expire in accordance with the provisions of the
Plan (other than this Section 2.5) and the Plan agreement.
(e) DEATH AFTER TERMINATION. If a grantee's employment terminates in
the manner described in subsections (c) or (d) of this Section 2.5 and the
grantee dies within the period for exercise provided for therein, the options
exercisable by the grantee immediately prior to the grantee's death shall be
exercisable by the personal representative of the grantee's estate or by the
person to whom such options pass under the grantee's will (or, if applicable,
pursuant to the laws of descent and distribution) until the earlier of (i) 12
months after the grantee's death and (ii) the date on which such options
terminate or expire in accordance with the provisions of subsections (c) or (d)
of this Section 2.5.
(f) DEATH BEFORE TERMINATION. If a grantee dies while employed by the
Company or any Affiliate, all options granted to the grantee but not exercised
before the death of the grantee, whether or not exercisable by the grantee
before the grantee's death, shall immediately become and be exercisable by the
personal representative of the grantee's estate or by the person to whom such
options pass under the grantee's will (or, if applicable, pursuant to the laws
of descent and distribution) until the earlier of (i) 12 months after the
grantee's death and (ii) the date on which such options terminate or expire in
accordance with the provisions of the Plan (other than this Section 2.5) and the
Plan agreement.
ARTICLE 3. RESTRICTED STOCK AND UNRESTRICTED STOCK AWARDS
3.1. RESTRICTED STOCK AWARDS.
(a) GRANT OF AWARDS. The Committee may grant restricted stock awards,
alone or in tandem with other awards, under the Plan in such amounts and subject
to such terms and conditions as the Committee shall from time to time in its
sole discretion determine; provided, however, that the grant of any such
restricted stock awards may be made only in lieu of cash compensation and
bonuses. The vesting of a restricted stock award granted under the Plan may be
conditioned upon the completion of a specified period of employment with the
Company or any Affiliate, upon the attainment of specified performance goals,
and/or upon such other criteria as the Committee may determine in its sole
discretion.
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(b) PAYMENT. Each Plan agreement with respect to a restricted stock
award shall set forth the amount (if any) to be paid by the grantee with respect
to such award. If a grantee makes any payment for a restricted stock award which
does not vest, appropriate payment may be made to the grantee following the
forfeiture of such award on such terms and conditions as the Committee may
determine. The Committee shall have the authority to make or authorize loans to
finance, or to otherwise accommodate the financing of, the acquisition, vesting
or exercise of a restricted stock award.
(c) FORFEITURE UPON TERMINATION OF EMPLOYMENT. Unless the applicable
Plan agreement otherwise provides or the Committee otherwise determines, (i) if
a grantee's employment terminates for any reason (including death) before all of
his restricted stock awards have vested, such awards shall terminate and expire
upon such termination of employment, and (ii) in the event any condition to the
vesting of restricted stock awards is not satisfied within the period of time
permitted therefor, such unvested shares shall be returned to the Company.
(d) ISSUANCE OF SHARES. The Committee may provide that one or more
certificates representing restricted stock awards shall be registered in the
grantee's name and bear an appropriate legend specifying that such shares are
not transferable and are subject to the terms and conditions of the Plan and the
applicable Plan agreement, or that such certificate or certificates shall be
held in escrow by the Company on behalf of the grantee until such shares vest or
are forfeited, all on such terms and conditions as the Committee may determine.
Unless the applicable Plan agreement otherwise provides, no share of restricted
stock may be assigned, transferred, otherwise encumbered or disposed of by the
grantee until such share has vested in accordance with the terms of such award.
Subject to the provisions of Section 4.2, as soon as practicable after any
restricted stock award shall vest, the Company shall issue or reissue to the
grantee (or to the grantee's designated beneficiary in the event of the
grantee's death) one or more certificates for the Common Stock represented by
such restricted stock award.
(e) GRANTEES' RIGHTS REGARDING RESTRICTED STOCK. Unless the applicable
Plan agreement otherwise provides: (i) a grantee may vote and receive dividends
on restricted stock awarded under the Plan; and (ii) any stock received as a
distribution with respect to a restricted stock award shall be subject to the
same restrictions as such restricted stock.
3.2. UNRESTRICTED SHARES. The Committee may issue stock under the Plan,
alone or in tandem with other awards, in such amounts and subject to such terms
and conditions as the Committee shall from time to time in its sole discretion
determine; provided, however, that the grant of any such unrestricted stock
awards may be made only in lieu of cash compensation and bonuses.
ARTICLE 4. MISCELLANEOUS
4.1. AMENDMENT OF THE PLAN; MODIFICATION OF AWARDS.
(a) PLAN AMENDMENTS. The Board may, without stockholder approval, at
any time and from time to time suspend, discontinue or amend the Plan in any
respect whatsoever, except that (i) no such amendment shall impair any rights
under any award theretofore made under the Plan without the consent of the
grantee of such award and (ii) except as and to the extent otherwise
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permitted by Section 4.5 or 4.11, no such amendment shall cause the Plan to fail
to satisfy any applicable requirement under Rule 16b-3 without stockholder
approval.
(b) AWARD MODIFICATIONS. Subject to the terms and conditions of the
Plan (including Section 4.1(a)), the Committee may amend outstanding Plan
agreements with such grantee, including, without limitation, any amendment which
would (i) accelerate the time or times at which an award may vest or become
exercisable and/or (ii) extend the scheduled termination or expiration date of
the award, provided, however, that no modification having a material adverse
effect upon the interest of a grantee in an award shall be made without the
consent of such grantee.
4.2. RESTRICTIONS.
(a) CONSENT REQUIREMENTS. If the Committee shall at any time determine
that any Consent (as hereinafter defined) is necessary or desirable as a
condition of, or in connection with, the granting of any award under the Plan,
the acquisition, issuance or purchase of shares or other rights hereunder or the
taking of any other action hereunder (each such action being hereinafter
referred to as a "Plan Action"), then such Plan Action shall not be taken, in
whole or in part, unless and until such Consent shall have been effected or
obtained to the full satisfaction of the Committee. Without limiting the
generality of the foregoing, the Committee shall be entitled to determine not to
make any payment whatsoever until Consent has been given if (i) the Committee
may make any payment under the Plan in cash, Common Stock or both, and (ii) the
Committee determines that Consent is necessary or desirable as a condition of,
or in connection with, payment in any one or more of such forms.
(b) CONSENT DEFINED. The term "Consent" as used herein with respect to
any Plan Action means (i) any and all listings, registrations or qualifications
in respect thereof upon any securities exchange or other self-regulatory
organization or under any federal, state or local law, rule or regulation, (ii)
the expiration, elimination or satisfaction of any prohibitions, restrictions or
limitations under any federal, state or local law, rule or regulation or the
rules of any securities exchange or other self-regulatory organization, (iii)
any and all written agreements and representations by the grantee with respect
to the disposition of shares, or with respect to any other matter, which the
Committee shall deem necessary or desirable to comply with the terms of any such
listing, registration or qualification or to obtain an exemption from the
requirement that any such listing, qualification or registration be made, and
(iv) any and all consents, clearances and approvals in respect of a Plan Action
by any governmental or other regulatory bodies or any parties to any loan
agreements or other contractual obligations of the Company or any Affiliate.
4.3. NONTRANSFERABILITY. Except as may otherwise be set forth in any
Plan agreement, (i) no award granted to any grantee under the Plan or under any
Plan agreement shall be assignable or transferable by the grantee other than by
will or by the laws of descent and distribution, and (ii) during the lifetime of
the grantee, all rights with respect to any award granted to the grantee under
the Plan or under any Plan agreement shall be exercisable only by the grantee.
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4.4. WITHHOLDING TAXES.
(a) Whenever under the Plan shares of Common Stock are to be delivered
pursuant to an award, the Committee may require as a condition of delivery that
the grantee remit an amount sufficient to satisfy all federal, state and other
governmental withholding tax requirements related thereto. Whenever cash is to
be paid under the Plan, the Company may, as a condition of its payment, deduct
therefrom, or from any salary or other payments due to the grantee, an amount
sufficient to satisfy all federal, state and other governmental withholding tax
requirements related thereto or to the delivery of any shares of Common Stock
under the Plan.
(b) Without limiting the generality of the foregoing, (i) a grantee may
elect to satisfy all or part of the foregoing withholding requirements by
delivery of unrestricted shares of Common Stock owned by the grantee for at
least six months (or such other period as the Committee may determine) having a
fair market value (determined as of the date of such delivery by the grantee)
equal to all or part of the amount to be so withheld, provided that the
Committee may require, as a condition of accepting any such delivery, the
grantee to furnish an opinion of counsel acceptable to the Committee to the
effect that such delivery would not result in the grantee incurring any
liability under Section 16(b) of the Act, (ii) the Committee may permit any such
delivery to be made by withholding shares of Common Stock from the shares
otherwise issuable pursuant to the award giving rise to the tax withholding
obligation (in which event the date of delivery shall be deemed the date such
award was exercised), or (iii) the Committee may make or authorize loans to
finance, or to otherwise accommodate the financing of, the foregoing withholding
requirements.
4.5. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. If and to the extent
specified by the Committee, the number of shares of Common Stock which may be
issued pursuant to awards under the Plan, the maximum number of options which
may be granted to any one person in any year, the number of shares of Common
Stock subject to awards, the option exercise price of options theretofore
granted under the Plan, and the amount payable by a grantee in respect of an
award, shall be appropriately adjusted (as the Committee may determine) for any
change in the number of issued shares of Common Stock resulting from the
subdivision or combination of shares of Common Stock or other capital
adjustments, or the payment of a stock dividend after the effective date of the
Plan, or other change in such shares of Common Stock effected without receipt of
consideration by the Company; provided that any awards covering fractional
shares of Common Stock resulting from any such adjustment shall be eliminated.
Adjustments under this Section shall be made by the Committee, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive.
4.6. RIGHT OF DISCHARGE RESERVED. Nothing in the Plan or in any Plan
agreement shall confer upon any person the right to continue in the employment
of the Company or an Affiliate or affect any right which the Company or an
Affiliate may have to terminate the employment of such person.
4.7. NO RIGHTS AS A STOCKHOLDER. No grantee or other person shall have
any of the rights of a stockholder of the Company with respect to shares subject
to an award until the issuance of a stock certificate to him for such shares.
Except as otherwise provided in Section 4.5, no adjustment shall be made for
dividends, distributions or other rights (whether ordinary or
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extraordinary, and whether in cash, securities or other property) for which the
record date is prior to the date such stock certificate is issued. In the case
of a grantee of an award which has not yet vested, the grantee shall have the
rights of a stockholder of the Company if and only to the extent provided in the
applicable Plan agreement.
4.8. NATURE OF PAYMENTS.
(a) Any and all awards or payments hereunder shall be granted, issued,
delivered or paid, as the case may be, in consideration of services performed
for the Company or for its Affiliates by the grantee.
(b) No such awards and payments shall be considered special incentive
payments to the grantee or, unless otherwise determined by the Committee, be
taken into account in computing the grantee's salary or compensation for the
purposes of determining any benefits under (i) any pension, retirement, life
insurance or other benefit plan of the Company or any Affiliate or (ii) any
agreement between the Company or any Affiliate and the grantee.
(c) By accepting an award under the Plan, the grantee shall thereby
waive any claim to continued exercisability or vesting of an award or to damages
or severance entitlement related to non-continuation of the award beyond the
period provided herein or in the applicable Plan agreement, notwithstanding any
contrary provision in any written employment contract with the grantee, whether
any such contract is executed before or after the grant date of the award.
4.9. NON-UNIFORM DETERMINATIONS. The Committee's determinations under
the Plan need not be uniform and may be made by it selectively among persons who
receive, or are eligible to receive, awards under the Plan (whether or not such
persons are similarly situated). Without limiting the generality of the
foregoing, the Committee shall be entitled, among other things, to make
non-uniform and selective determinations, and to enter into non-uniform and
selective Plan agreements, as to (a) the persons to receive awards under the
Plan, (b) the terms and provisions of awards under the Plan, and (c) the
treatment of leaves of absence pursuant to Section 2.7(c).
4.10. OTHER PAYMENTS OR AWARDS. Nothing contained in the Plan shall be
deemed in any way to limit or restrict the Company, any Affiliate or the
Committee from making any award or payment to any person under any other plan,
arrangement or understanding, whether now existing or hereafter in effect.
4.11. REORGANIZATION.
(a) In the event that the Company is merged or consolidated with
another corporation and, whether or not the Company shall be the surviving
corporation, there shall be any change in the shares of Common Stock by reason
of such merger or consolidation, or in the event that all or substantially all
of the assets of the Company are acquired by another person, or in the event of
a reorganization or liquidation of the Company (each such event being
hereinafter referred to as a "Reorganization Event") or in the event that the
Board shall propose that the Company enter into a Reorganization Event, then the
Committee may in its discretion, by written notice to a grantee, provide that
his options will be terminated unless exercised within 30 days (or such longer
period as the Committee shall determine in its sole discretion) after the date
of such notice; provided
11
<PAGE>
that if, and to the extent that, the Committee takes such action with respect to
the grantee's options not yet exercisable, the Committee shall also accelerate
the dates upon which such options shall be exercisable. The Committee also may
in its discretion by written notice to a grantee provide that all or some of the
restrictions on any of the grantee's awards may lapse in the event of a
Reorganization Event upon such terms and conditions as the Committee may
determine.
(b) Whenever deemed appropriate by the Committee, the actions referred
to in Section 4.11(a) may be made conditional upon the consummation of the
applicable Reorganization Event.
4.12. SECTION HEADINGS. The section headings contained herein are for
the purposes of convenience only and are not intended to define or limit the
contents of said sections.
4.13. EFFECTIVE DATE AND TERM OF PLAN.
(a) The Plan has been adopted and shall be effective as of January 19,
2000.
(b) The Plan shall terminate as of January 19, 2010, and no awards
shall thereafter be made under the Plan. Notwithstanding the foregoing, all
awards made under the Plan prior to such termination date shall remain in effect
until such awards have been satisfied or terminated in accordance with the terms
and provisions of the Plan and the applicable Plan agreement.
4.14. GOVERNING LAW. The Plan shall be governed by the laws of the
State of New York applicable to agreements made and to be performed entirely
within such state.
<PAGE>
FRONTLINE CAPITAL GROUP
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 22, 2000
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
The undersigned hereby appoints each of Scott H. Rechler and Paul F. Amoruso as
proxies, with full power of substitution in each, to vote all shares of common
stock, par value $0.01 per share (the "Common Stock"), of FrontLine Capital
Group (the "Company"), which the undersigned is entitled to vote at the annual
meeting of shareholders of the Company to be held on June 22, 2000, at 9:30
A.M., Eastern Time, and at any adjournment thereof, on all matters set forth
herein.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED
"FOR" EACH OF THE MATTERS STATED.
1. ELECTION OF DIRECTORS:
Nominees: Michael Maturo, Mitchell D. Rechler and Roger M. Rechler
/ / FOR / / WITHHELD
/ / INSTRUCTION: To withhold authority to vote for any
individual nominee, write that nominee's name in
the space provided below.
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2. RATIFICATION of the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31, 2000:
/ / FOR / / AGAINST / / ABSTAIN
3. Ratification of the adoption of the 2000 Employee Stock Option Plan:
/ / FOR / / AGAINST / / ABSTAIN
4. GRANT AUTHORITY to vote upon such other matters as may properly come before
the meeting, including the adjournment of meeting, as the proxies determine
to be in the best interest of the Company:
/ / FOR / / AGAINST / / ABSTAIN
Dated: , 2000
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Signature of Shareholder(s)
IMPORTANT: Please mark this Proxy, date, sign exactly as your name(s) appear(s),
and return in the enclosed envelope. If shares are held jointly,
signature need only include one name. Trustees and others signing in
a representative capacity should so indicate.
