<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Federal Realty Investment Trust
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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[LOGO OF FEDERAL REALTY INVESTMENT TRUST APPEARS HERE]
March 31, 1998
Dear Shareholder:
Please accept my personal invitation to attend our Annual Meeting of
Shareholders on Wednesday, May 6, 1998 at 10:00 a.m. This year's meeting will
be held at Woodmont Country Club, Rockville, Maryland.
The business to be conducted at the meeting is set forth in the formal
notice that follows. In addition, Management will provide a review of 1997
operating results and discuss the outlook for the future. After the formal
presentation, the Trustees and Management will be available to answer any
questions that you may have.
Your vote is important. I urge you to complete, sign and return the enclosed
proxy card.
I look forward to seeing you on May 6.
Sincerely,
/s/ Steven J. Guttman
Steven J. Guttman
President and Chief Executive
Officer
<PAGE>
FEDERAL REALTY INVESTMENT TRUST
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 6, 1998
To Our Shareholders:
The 1998 Annual Meeting of Shareholders of Federal Realty Investment Trust
("Trust") will be held at Woodmont Country Club, 1201 Rockville Pike,
Rockville, Maryland, on Wednesday, May 6, 1998, at 10:00 a.m. for the purpose
of considering and acting upon the following:
1. The election of two Trustees to serve for the ensuing three years.
2. The approval of the Amendment to the Amended and Restated 1993 Long-Term
Incentive Plan ("Amended Plan").
3. The approval of a stock option award to the Chief Executive Officer.
4. The transaction of such other business as may properly come before the
meeting or any adjournment.
Shareholders of record at the close of business on March 26, 1998 are
entitled to notice of and to vote at the Annual Meeting.
For the Trustees:
/s/ Catherine R. Mack
Catherine R. Mack
Vice President--General
Counsel and Secretary
PLEASE FILL OUT, DATE AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT IN THE
ACCOMPANYING POSTAGE PAID ENVELOPE, EVEN IF YOU PLAN TO ATTEND THE MEETING.
YOU MAY REVOKE YOUR PROXY IN WRITING, OR AT THE ANNUAL MEETING IF YOU WISH TO
VOTE IN PERSON.
<PAGE>
FEDERAL REALTY INVESTMENT TRUST
1626 EAST JEFFERSON STREET, ROCKVILLE, MARYLAND 20852
PROXY STATEMENT
MARCH 27, 1998
Proxies in the form enclosed are solicited by the Board of Trustees of
Federal Realty Investment Trust for use at the 1998 Annual Meeting of
Shareholders ("Annual Meeting") to be held at 10:00 a.m., Wednesday, May 6,
1998, at Woodmont Country Club, 1201 Rockville Pike, Rockville, Maryland. The
close of business on March 26, 1998 has been fixed as the record date for
determining shareholders entitled to notice of and to vote at the meeting. On
that date, the Trust had 39,794,551 common shares of beneficial interest
("Shares") outstanding, each of which is entitled to one vote. If the proxy in
the enclosed form is signed and returned, it will be voted as specified in the
proxy; if no specific voting instructions are indicated, the proxy will be
voted in favor of the two Trustees nominated, to approve the Amendment to the
Amended Plan, to approve the stock option award to the Chief Executive Officer
and in the named proxies' discretion as to other matters at the Annual
Meeting. Any proxy may be revoked by a shareholder at any time before it is
voted by written notice, or by attending the Annual Meeting and voting in
person.
This proxy statement contains three proposals for shareholder consideration.
For the purpose of each of the three proposals, the presence of a majority of
the outstanding Shares entitled to vote, in person or by proxy, constitutes a
quorum. As to each proposal, shareholders are entitled to cast one vote per
Share. Abstentions count for the purposes of determining a quorum.
The affirmative vote of a majority of the Shares entitled to vote and
present, in person or by proxy, is required for the election of Trustees.
The affirmative vote of a majority of the Shares entitled to vote and
present, in person or by proxy, is required for approval of (i) the proposal
to amend the Amended and Restated 1993 Long-Term Incentive Plan and (ii) the
proposal concerning the stock option award to the Trust's Chief Executive
Officer. An abstention will be deemed present and entitled to vote, and thus
have the effect of a vote against, in respect of each of these two proposals.
Rule 452 of the New York Stock Exchange permits its members to vote Shares
held by them as nominees on certain discretionary or routine matters without
instructions from the beneficial owner, provided that the broker has furnished
the beneficial owner with proxy materials and received no voting instructions
in advance of the Annual Meeting. The New York Stock Exchange has informed the
Trust that the three proposals are considered "discretionary" items upon which
members may vote in their discretion on behalf of their clients.
This Proxy Statement and an accompanying proxy are being mailed to
shareholders on or about March 31, 1998, together with the Trust's 1997 Annual
Report, which includes certified financial statements for the year ended
December 31, 1997. The Consolidated Balance Sheets as of December 31, 1997 and
1996 and the Consolidated Statements of Operations, the Consolidated
Statements of Shareholders' Equity, the Consolidated Statements of Cash Flows,
and the Notes to Consolidated Financial Statements (each of such Statements
being for the years ended December 31, 1997, 1996 and 1995), certified and
contained in the Trust's 1997 Annual Report, are incorporated herein by
reference to that Report.
OWNERSHIP OF SHARES BY CERTAIN BENEFICIAL OWNERS
To the Trust's knowledge, based upon a Schedule 13G filed as of January 14,
1998 with the Securities and Exchange Commission ("SEC") and other information
available to the Trust, beneficial owners of more than 5% of the Trust's
Shares are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
------------------- ----------------------- --------
<S> <C> <C>
Merrill Lynch & Co., Inc. (1) 4,051,950 10.3%
800 Scudders Mill Road
Plainsboro, NJ 08536
</TABLE>
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(1) Such shares are not owned by one person, therefore such ownership is not
in violation of the Declaration of Trust.
<PAGE>
PROPOSAL 1
ELECTION OF TRUSTEES
Pursuant to Section 2.2 of the Trust's Declaration of Trust, the Trustees
are divided into three classes serving three year terms. Two Trustees,
comprising one class of Trustees, are to be elected at the Annual Meeting. Mr.
Dennis L. Berman and Ms. Kristin Gamble have been nominated for election as
Trustees to hold office until the 2001 Annual Meeting and until their
successors have been elected and shall qualify. Mr. Donald H. Misner is not
seeking reelection to the Board of Trustees when his term expires as of the
1998 Annual Meeting. Proxies may not be voted for more than two Trustees.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS TRUSTEE TERM TO
NAME AGE AND OTHER DIRECTORSHIPS* SINCE EXPIRE
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<S> <C> <C> <C> <C>
Dennis L. Berman........ 47 General Partner, Berman Enterprises, 1989 2001
Vingarden Associates, GDR Partnerships,
builders/developers; Director, Beco Manage-
ment, office building owners/managers.
Kristin Gamble.......... 52 President, Flood, Gamble Associates, Inc., 1995 2001
an investment counseling firm; Director,
Ethan Allen Interiors, Inc., a furniture
manufacturer and retailer.
Terms of office of the seven Trustees named below will continue until the
Annual Meeting in the years indicated.
<CAPTION>
PRINCIPAL OCCUPATIONS TRUSTEE TERM TO
NAME AGE AND OTHER DIRECTORSHIPS* SINCE EXPIRE
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<S> <C> <C> <C> <C>
Samuel J. Gorlitz....... 80 Founder of the Trust; President, Gorlitz 1975 1999
Associates, real estate developers.
Steven J. Guttman....... 51 President and Chief Executive Officer of 1979 1999
the Trust; Trustee, International Council
of Shopping Centers; Chairman, National As-
sociation of Real Estate Investment Trusts
Board of Governors and Executive Committee.
Mark S. Ordan........... 38 Chief Executive Officer, Chartwell Health 1996 1999
Management Inc.; Former Chairman, President
and Chief Executive Officer, Fresh Fields
Markets, Inc., a healthy foods supermarket;
Trustee, Vassar College; Director, Center
for Science in the Public Interest.
George L. Perry......... 64 Senior Fellow, Brookings Institution; Di- 1993 1999
rector, State Farm Life Insurance Company;
Director, State Farm Mutual Automobile Com-
pany and various mutual funds managed by
the Dreyfus Corporation.
Kenneth D. Brody........ 54 Founding Partner, Winslow Partners LLC, a 1997 2000
private equity investment firm; Former
President and Chairman, Export-Import Bank
of the United States; Director, Quest Diag-
nostics, Inc.; Director, Yurie Systems,
Inc.; Director, American Red Cross; Direc-
tor, St. John's College.
A. Cornet de Ways 64 Director of SIPEF S.A., an international 1983 2000
Ruart.................. holding company principally of agricultural
interests; Director of Interbrew S.A., an
international brewery.
Walter F. Loeb.......... 73 President, Loeb Associates Inc., a manage- 1991 2000
ment consulting firm. Publisher, Loeb Re-
tail Letter; Director, InterTAN Inc., an
international electronics retailer; Direc-
tor, The Gymboree Corp.; Director, Mothers
Work, Inc.; Director, Wet Seal, Inc., a
women's apparel retailer; Director,
Hudson's Bay Company, a Canadian chain of
retail department stores and discount
stores; Director, The Warnaco Group, Inc.;
Retired Principal and Senior Retail Ana-
lyst, Morgan Stanley & Co., Inc.
</TABLE>
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* The business histories set forth in these tables cover a five-year period.
2
<PAGE>
The Board of Trustees has an Audit Committee, comprised of Messrs. Berman,
Ordan and Perry, which independently reviews the Trust's financial statements
and coordinates its review with the Trust's independent public accountants.
The Audit Committee held four meetings in 1997. The Compensation Committee,
comprised of Mr. Brody, Ms. Gamble, Mr. Loeb and Mr. Ordan, reviews and
reports to the Board on incentive plans and remuneration of officers. That
committee held nine meetings in 1997. The Compensation Committee administers
the Trust's Amended and Restated 1993 Long-Term Incentive Plan (the "Amended
Plan"). During 1997 the Board of Trustees held nine meetings. The Board of
Trustees has no standing nominating committee.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR THE TWO NOMINEES.
OWNERSHIP OF SHARES BY TRUSTEES AND OFFICERS
As of March 26, 1998, Trustees and executive officers as a group, and the
Trustees and named executive officers, individually, beneficially owned the
following Shares:
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES OUTSTANDING SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) OF THE TRUST
- --------------------------------------------------------------------------
<S> <C> <C>
Trustees and executive officers
as a group (16 individuals) 2,805,967 7.05%
Dennis L. Berman(2) 465,743 1.17%
Kenneth D. Brody 6,500 under 1%
A. Cornet de Ways Ruart(3) 32,851 under 1%
Kristin Gamble(4) 107,312 under 1%
Steven J. Guttman(5) 1,104,756 2.78%
Samuel J. Gorlitz(6) 152,470 under 1%
Ron D. Kaplan(7) 293,333 under 1%
Walter F. Loeb 24,254 under 1%
Catherine R. Mack 84,333 under 1%
Donald H. Misner(8) 34,215 under 1%
Mark S. Ordan(9) 8,000 under 1%
George L. Perry 16,015 under 1%
Hal A. Vasvari 221,902 under 1%
Cecily A. Ward 60,036 under 1%
</TABLE>
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(1) The number and percentage of Shares shown in this table reflect
beneficial ownership, determined in accordance with Rule 13d-3 of the
Securities Exchange Act of 1934, including Shares which are not owned but as
to which options are outstanding and may be exercised within 60 days. Except
as noted in the following footnotes, each Trustee and named executive officer
has sole voting and investment power as to all Shares listed. Fractions are
rounded to the nearest full Share.
(2) Includes 434,875 Shares as to which Mr. Berman is Trustee under Voting
Trust Agreements for certain family members. Mr. Berman does not have
disposition rights with respect to these Shares. This number also includes
1,000 Shares owned by a partnership in which Mr. Berman is a general partner.
(3) Does not include 700 Shares owned by a corporation of which Mr. Cornet's
wife is a controlling shareholder.
(4) Includes 95,917 Shares as to which Ms. Gamble shares investment power
for clients. Includes 1,400 shares as to which Ms. Gamble is a Trustee of a
profit sharing plan, of which Ms. Gamble has a direct interest in 571 shares.
(5) Includes 12,000 Shares in trust as to which Mr. Guttman shares voting
and investment power with two other trustees, 4,647 Shares owned jointly with
his wife, 37,022 Shares held in trust for his children and a Performance Share
Award of 300,000 Shares. Does not include 20,000 Shares as to which Mr.
Guttman's wife has sole voting and investment power.
(6) Includes 22,100 Shares as to which Mr. Gorlitz shares voting and
investment power. Does not include 4,954 Shares as to which Mr. Gorlitz's wife
has sole voting and investment power.
(7) Includes a Performance Share Award of 62,500 Shares and a Restricted
Share Award of 62,500 Shares. Does not include 1,672 Shares as to which Mr.
Kaplan's wife has sole voting and investment power.
(8) Includes 574 Shares as to which voting and investment power is shared
with Mr. Misner's wife.
(9) Includes 3,000 Shares owned jointly as to which voting and investment
power is shared with Mr. Ordan's wife.
3
<PAGE>
REMUNERATION OF EXECUTIVE OFFICERS AND TRUSTEES
The following table sets forth the summary compensation of the Chief
Executive Officer, the four other most highly paid executive officers
("executive officers" or "named officers") and a former executive officer who
would have been a named officer had she remained in the employ of the Trust on
December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------ ------------------
(A) (B) (C) (D) (E) (F) (G) (H)
OTHER RESTRICTED
ANNUAL STOCK ALL OTHER
SALARY COMPENSATION AWARDS(S) OPTIONS COMPENSATION
(A) BONUS (B) (C) (D) (E)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Steven J. Guttman(1) 1997 $529,000 -- -- $366,000 800,000 $217,000(F)
President & Chief Executive 1996 529,000 $235,000 -- -- -- 229,000(F)
Officer 1995 500,000 235,000 -- -- 80,000 214,000(F)
Ron D. Kaplan(2) 1997 285,000 140,000 $240,075 249,375 100,000 72,000(G)
Senior Vice President, Capital 1996 201,000 125,000 -- -- -- 70,000(G)
Markets, Chief 1995 190,000 85,000 -- -- 45,000 130,000(G)
Investment Officer
Catherine R. Mack 1997 175,000 55,000 -- -- -- 28,000(F)
Vice President, General 1996 170,000 30,000 -- -- -- 27,000(F)
Counsel & Secretary 1995 163,000 15,000 -- -- 25,000 32,000(F)
Mary Jane Morrow(3) 1997 225,000 50,000 -- -- 100,000 54,000(F)
Senior Vice President, 1996 211,000 90,000 -- -- -- 54,000(F)
Finance & Treasurer, Chief 1995 200,000 75,000 -- -- 45,000 62,000(F)
Financial Officer
Hal A. Vasvari(4) 1997 345,000 150,000 -- -- 100,000 564,000(F)
Executive Vice President, 1996 345,000 150,000 -- -- -- 68,000(F)
Chief Operating Officer 1995 225,000 150,000 -- -- 75,000 69,000(F)
Cecily A. Ward 1997 140,000 100,000 -- -- -- 14,000(F)
Vice President, Controller 1996 127,000 45,000 -- -- -- 13,000(F)
1995 120,000 35,000 -- -- 25,000 11,000(F)
</TABLE>
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(1) In January 1998 Mr. Guttman received 14,521 Shares valued at $366,000 in
lieu of a cash bonus of $275,000. The terms of this arrangement are
described below in "Employment Agreements; Change in Control
Arrangements." The 800,000 options awarded to Mr. Guttman in 1997 include
a 300,000 option award subject to shareholder approval at the 1998 Annual
Meeting.
(2) On September 26, 1997 Mr. Kaplan was awarded a bonus of 10,000 Shares
valued at $249,375 and cash of $240,075 to pay the income taxes on those
Shares.
(3) Ms. Morrow resigned on October 31, 1997. The salary shown was paid to her
between January 1, 1997 and October 31, 1997. The $50,000 bonus for 1997
was paid in accordance with her amended severance agreement. The 100,000
options awarded to Ms. Morrow in 1997 were unvested on the date of her
departure and were therefore forfeited in accordance with her amended
severance agreement. The terms of this agreement are described below in
"Employment Agreements; Change in Control Arrangements."
(4) Mr. Vasvari has submitted his resignation to be effective no later than
June 1, 1998. The terms of his amended severance agreement are described
below in "Employment Agreements; Change in Control Arrangements."
(A) Amounts shown include amounts deferred at the election of the named
officer pursuant to plans available to substantially all employees and
pursuant to a non-qualified deferred compensation plan available to all
officers.
(B) No named officer other than Mr. Kaplan received perquisites or other
personal benefits aggregating the lesser of 10% of annual salary and bonus
or $50,000.
(C) Dividends are paid on Restricted Stock.
4
<PAGE>
(D) Option exercise price is equal to the fair market value of the Shares on
the date of grant.
(E) The amounts shown in this column for the last fiscal year include the
following: (i) Mr. Guttman: $9,000--Trust paid group term life insurance;
$5,000--Trust contribution to Section 401 (k) Plan and the deferred
compensation plan; $4,000--Trust paid annuity contract premium; and
$10,000--Trust paid long-term disability insurance premium; and $189,000--
deferred compensation from forgiveness of loans as described below in (F);
(ii) Mr. Kaplan: $1,000--Trust paid group term life insurance; $5,000--
Trust contribution to Section 401 (k) Plan and the deferred compensation
plan; $3,000--Trust paid long-term disability insurance premium; $63,000--
deferred compensation from forgiveness of loans as described below in (G);
(iii) Ms. Mack: $3,000--group term life insurance premium; $4,000--Trust
contribution to Section 401 (k) Plan and the deferred compensation plan;
$2,000--Trust paid long-term disability insurance premium; and $19,000--
deferred compensation from forgiveness of loans as described below in (F);
(iv) Ms. Morrow: $2,000--group term life insurance premium; $5,000--Trust
contribution to Section 401 (k) Plan and the deferred compensation plan;
$2,000--Trust paid long-term disability insurance premium; and $47,000--
deferred compensation from forgiveness of loans as described below in (F);
(v) Mr. Vasvari: $495,000--payment upon signing amended severance
agreement; $6,000--Trust paid group term life insurance; $5,000--Trust
contribution to Section 401 (k) Plan and the deferred compensation plan;
$11,000--Trust paid long-term disability insurance premium; and $47,000--
deferred compensation from forgiveness of loans as described below in (F);
and (vi) Ms. Ward: $2,000--group term life insurance premium; $3,000--
Trust contribution to Section 401 (k) Plan; $1,000--Trust paid long-term
disability insurance premium; and $8,000--deferred compensation from
forgiveness of loans as described below in (F).
(F) In 1991, the named officers, except Mr. Kaplan, were awarded the
opportunity to purchase Shares of the Trust and the Trust made available
loans for 100% of the purchase price. One-half of the loan was originally
scheduled to be forgiven, by forgiving one-sixteenth each January 31, over
an eight-year period so long as the officer was employed by the Trust. The
Trust and the named officers agreed to modify the terms of the loan so
that beginning in 1995 and each year thereafter, there will be no
forgiveness as of January 31 of each year if Funds from Operations ("FFO")
per Share increases by less than 5% during the preceding fiscal year. If
FFO per Share increases by 5% or more, one-sixteenth of the loan will be
forgiven. Beginning in 1996 and thereafter, if FFO per Share increases by
10% or more and total return to shareholders is 10% or greater during the
fiscal year, one-eighth of the loan will be forgiven on the following
January 31. However, 25% of the original principal amount of each loan is
not subject to forgiveness by the Trust. The loans were also modified
during 1994 so that they are due on January 31, 2004.
(G) On December 17, 1993, the Trust awarded Mr. Kaplan the opportunity to
purchase 40,000 Shares as of January 1, 1994 at the closing price of $25
per share on December 31, 1993. The Trust loaned Mr. Kaplan 100% of the
purchase price for a term of 12 years. Forgiveness of Mr. Kaplan's loan
is subject to the same performance measures described above in (F).
TRUSTEE COMPENSATION; ATTENDANCE; LEGAL PROCEEDINGS
Trustees' fees are paid to Trustees other than Mr. Guttman. In accordance
with the provisions of the Amended Plan, Trustees' fees are payable in cash or
Shares or a combination of both, at the election of the Trustee; the Trust
issued Shares for 39% of the Trustees' fees paid in 1997. The annual Trustee
fee for 1997 was $25,000. Each Trustee was paid the fee based on the number of
months during the year he/she served as a Trustee. The annual fee in 1997 for
service on the Compensation Committee was $2,500 and $3,000 for service as its
Chairman. The annual fee in 1997 for service on the Audit Committee was $2,000
and $2,500 for service as its Chairman. Committee fees were also prorated
based on the number of months of service. In accordance with the Amended Plan,
as of the date of the 1997 Annual Meeting of Shareholders, each non-employee
Trustee received an option to purchase 2,500 Shares at an exercise price of
$27.13. Donald H. Misner, an employee Trustee whose term as Trustee expires on
the date of the 1998 Annual Meeting, also received an option to purchase 2,500
shares at an exercise price of $27.13. Pursuant to a consulting agreement, Mr.
Gorlitz provides consulting services to the Trust and is paid an annual
consulting fee of $120,000.
5
<PAGE>
Due to his residence in Europe, Mr. Cornet was able to participate in only
six of the nine meetings of the Board of Trustees in 1997.
Mr. Loeb was a Director for Color Tile, Inc. until 1995. Color Tile filed
for bankruptcy in 1996 and the unsecured creditors committee for Color Tile
has recently initiated litigation against various entities, including the
Board of Directors. The allegations are being seriously contested.
EMPLOYMENT AGREEMENTS; CHANGE IN CONTROL ARRANGEMENTS
The Trust has an amended and restated employment agreement with Mr. Guttman
which provides, among other things, that his salary may not be decreased below
its then-current level and is increased on January 1 of each year by 50% of
any increase in the Consumer Price Index ("CPI") for the prior year and that
Mr. Guttman is eligible to receive an annual bonus, in the Board of Trustees'
discretion, of up to 120% of his salary. The agreement provides for a three-
year term of employment to be automatically renewed at the end of each month
unless either party notifies the other that it has elected not to extend the
term. The Trust may terminate Mr. Guttman's employment if he is totally
disabled for at least six consecutive months, in which case Mr. Guttman is
entitled to receive each month for a three-year period the difference, if any,
between the monthly payments he receives under the disability insurance
policies the Trust maintains on his behalf and his base monthly salary. The
Trust may terminate Mr. Guttman's employment for cause (as defined in the
agreement) without payment to Mr. Guttman. Mr. Guttman may terminate his
employment under certain circumstances, including if his responsibilities are
materially modified without his written consent, a change in control occurs
(as defined in the agreement), the Trust relocates its principal office
outside the Washington, D.C. area, he is not reappointed as a member of the
Trust's Board of Trustees, a Chairman of the Trust's Board of Trustees is
appointed other than Mr. Guttman, or his employment agreement is not assumed
by a successor to the Trust. If Mr. Guttman so terminates his employment, he
is entitled to receive the compensation he would have otherwise received
(including bonuses) for the remaining term of the employment agreement. Mr.
Guttman may also terminate his employment for any other reason upon at least
six months notice, in which case the Trust's obligation to pay compensation to
him ceases on the effective date of termination.
Mr. Guttman and the Trust have entered into restricted share award
agreements (the "Restricted Share Agreements") pursuant to which Mr. Guttman
will receive (unless he elects otherwise six months in advance) Shares in lieu
of his salary for the years 1998 through 2002 and Shares in lieu of his bonus
for the years 1997 through 2001. The Shares granted pursuant to the Restricted
Share Agreements (the "Restricted Shares"), which will be 133% of the salary
and bonus levels determined by the Board of Trustees, will vest five years
after the date of grant, subject to accelerated vesting in the event of a
change in control (as defined in the Amended Plan) or the termination of Mr.
Guttman's employment due to his death, disability (as defined in his
employment agreement) or without cause (as defined in his employment
agreement). Dividends are paid on the Shares if and when awarded. If Mr.
Guttman voluntarily resigns from his employment with the Trust or his
employment is terminated for cause prior to the end of the aforementioned
five-year period, his rights to the Restricted Shares are forfeited.
The Trust has severance agreements with Mr. Kaplan, Ms. Mack and Ms. Ward
which provide, among other things, that if the employee is terminated without
cause (as defined in the agreements), the employee will be entitled to receive
his or her salary for up to 18 months, depending upon length of service, and
benefits for nine months. The employee also will receive the benefits payable
upon termination without cause under certain additional circumstances,
including, among other things, a demotion or a substantial reduction in the
employee's responsibilities without his or her written consent, relocation of
the Trust's principal office outside the Washington, D.C. area, the occurrence
of a change in control (as defined in the agreements), or the decrease of the
employee's base salary below a percentage specified in each employee's
severance agreement. The Trust may terminate the employee's employment with
cause without payment to the employee. If Mr. Kaplan or Ms.
6
<PAGE>
Ward voluntarily resigns, they will receive their salary and benefits for up
to six months, depending upon length of service, unless they become employed
by a competing firm; if Ms. Mack voluntarily resigns, she will receive the
greater of (i) $102,802.50 or (ii) one-half of the sum of her salary at the
effective date of her resignation and previous year's bonus. Ms. Mack's
severance agreement also provides that, in the event of her voluntary
resignation, she will continue to act in a legal advisory position to the
Trust for a two-year period.
Ms. Morrow resigned from employment with the Trust as of October 31, 1997.
Pursuant to the terms of her amended severance agreement with the Trust, any
options that were vested and outstanding on the date of her resignation are
exercisable until the first anniversary thereof; and any unvested options were
forfeited. Of the share purchase loan extended to her under the Trust's 1991
Share Purchase Plan, as amended (the "Share Purchase Plan"), $39,388.02 was
forgiven in January 1998, which is equal to five-sixths of the amount of
forgiveness she would have received had she remained in the employ of the
Trust on January 31, 1998; and she received a loan from the Trust for
$15,755.21 to pay income tax incurred in connection with such forgiveness. The
remaining balance of the share purchase loan and associated tax loans shall
become due and payable on April 30, 1998. Ms. Morrow received a bonus of
$50,000 for the period of 1997 during which she was an employee of the Trust.
No other payments were made upon separation.
Mr. Vasvari has resigned from the Trust effective no later than June 1,
1998. Until such date he shall receive his base salary of $345,000 per annum
in bi-weekly installments. The Trust has amended its severance agreement with
Mr. Vasvari to provide that, upon his resignation, any unvested options shall
vest and shall be exercisable for two years. After his departure he will
receive healthcare benefits for 18 months, together with life, disability, and
accidental death insurance coverage for 24 months, and conversion premium
payments for long-term disability coverage on the group plan for 12 months,
unless he is entitled to be covered at an earlier date under another
employer's plan. In addition, of the share purchase loans extended to him
under the Share Purchase Plan, $141,796.86 will be forgiven, which is equal to
the amount of forgiveness he would have received had he remained in the employ
of the Trust through January 31, 2000; and he will receive loans from the
Trust in an aggregate amount of $56,718.75 to pay income tax incurred in
connection with such forgiveness. The remaining balance of the share purchase
loan and associated tax loans shall become due and payable one year after his
departure. Mr. Vasvari received a $495,000 severance payment upon executing
the amendment to his severance agreement, and will receive a further severance
payment of $495,000 within 10 days of his departure.
The Trust has entered into agreements with each of the current executive
officers named in the Summary Compensation Table above providing that, if any
of these officers leave the employment of the Trust within six months
following a change in control (generally defined to include control of a
specified percentage of the outstanding Shares), he or she will be entitled to
receive a lump sum cash payment and benefits and executive perquisites for a
period following such termination, to have the restrictions on the exercise or
receipt of any stock options or stock grants lapse and, at the option of the
officer, to have the Trust redeem all Shares owned at termination at a formula
price. The cash payments the officers are entitled to receive are computed
using a formula based upon the officer's salary at the date his or her
employment terminates and bonuses that were paid over the previous three
years. This amount is multiplied by a certain percentage: 299% for Mr.
Guttman; 200% for Mr. Kaplan, Mr. Vasvari and Ms. Mack; and 100% for Ms. Ward.
These agreements also provide that if benefits paid pursuant thereto are
determined to be subject to an excise or similar tax, the Trust will provide
the officer with such additional compensation as is necessary to place him or
her in the same after-tax position as he or she would have been had such tax
not been paid or incurred.
The Share Purchase Plan permits the Trust to make non-recourse purchase
loans to participants to facilitate the purchase of Shares pursuant to awards
made thereunder. The Share Purchase Plan provides that the outstanding balance
and interest due on any purchase loan will be forgiven as of the date of a
change in control.
The Trust granted performance share awards ("Performance Awards") to Mr.
Guttman and Mr. Kaplan in January 1998 for 300,000 and 62,500 Shares
("Performance Shares"), respectively. Pursuant to the terms of
7
<PAGE>
these awards, a specified number of Performance Shares will vest each year
from 1998 through 2005 if the Trust meets or exceeds the "Performance Target."
The Performance Target will have been met or exceeded based upon the
application of an annual test, which requires the FFO annual growth rate per
Share to equal or exceed seven percent (7%). Any Performance Shares which
remain unvested after 2005 vest in five equal annual installments through
2010. All Performance Shares vest in the event of a change in control (as
defined in the Performance Awards), or the termination of Mr. Guttman's or Mr.
Kaplan's employment due to disability (as defined in the Performance Awards)
or without cause (as defined in the Performance Awards). If Mr. Guttman's or
Mr. Kaplan's employment is terminated for cause, his rights to any unvested
Performance Shares are forfeited. If Mr. Guttman or Mr. Kaplan dies or
voluntarily resigns from his employment with the Trust, a pro rata number of
Performance Shares for that year will vest if the Performance Target is met,
and his rights to any future unvested Shares are forfeited.
The Trust granted restricted share awards ("Service Awards") to Mr. Kaplan
in January 1998 for an aggregate of 62,500 Shares. Pursuant to the terms of
the Service Awards, an aggregate of 651 Shares vest each month over an eight-
year period, subject to accelerated vesting in the event of a change in
control (as defined in the Service Awards) or the termination of Mr. Kaplan's
employment due to disability (as defined in the Service Awards) or without
cause (as defined in the Service Awards). If Mr. Kaplan voluntarily resigns
from his employment with the Trust or his employment is terminated for cause
prior to the aforementioned eight-year period, his rights to any unvested
Shares are forfeited. If Mr. Kaplan dies, the number of Shares which would
have vested in the month of his death vest and his rights to any future
unvested Shares are forfeited.
In January 1998, Howard S. Biel commenced employment with the Trust as
Senior Vice President and Managing Director of Development. The Trust and Mr.
Biel entered into a letter agreement in November 1997 setting forth the terms
of his employment providing, among other things, that he will receive an
annual salary of $300,000 and is eligible to receive an annual bonus of up to
75% of his salary. In addition, Mr. Biel received an option grant for 200,000
Shares on the date he began his employment. The options will vest in equal
annual installments beginning on the second anniversary of the date of grant.
The option was priced at the closing price per Share on the date of grant. If
his employment is terminated with cause, he will not receive any severance
payment. If his employment is terminated without cause, (i) he will be
entitled to receive his salary for up to 18 months, depending upon length of
service, and benefits for nine months, and (ii) if such termination occurs
after he has been employed by the Trust for one year, any unvested stock
options granted to him will vest. The agreement also provides that Mr. Biel is
entitled to receive an annual stock grant equal to 7.5% to 10% of the value
created in certain development projects. Value is a measure based on
capitalization of net operating income. In any year in which the stock grant's
value to Mr. Biel exceeds $700,000, no bonus will be paid to him.
8
<PAGE>
OPTION AWARDS IN 1997
The following table provides information on option awards in 1997 to the
named executive officers and a former executive officer who would have been a
named officer had she remained in the employ of the Trust on December 31,
1997.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION
INDIVIDUAL AWARDS FOR OPTION TERM(1)
- -------------------------------------------------------------------- --------------------
(A) (B) (C) (D) (E) (F) (G)
% OF
TOTAL
OPTIONS
AWARDED TO
OPTIONS EMPLOYEES EXERCISE
AWARDED IN FISCAL PRICE EXPIRATION
NAME (#) YEAR ($/SH) DATE 5% ($) 10% ($)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Steven J. Guttman....... 400,000(/2/) 24.8% 26.875 3/24/07 6,758,000 17,132,000
400,000(/3/) 24.8% 24.9375 9/24/07 6,272,000 15,896,000
Ron D. Kaplan........... 100,000(/2/) 6.2% 26.875 3/24/07 1,689,500 4,283,000
Catherine R. Mack....... -- -- -- -- -- --
Mary Jane Morrow........ 100,000(/4/) 6.2% 26.875 10/31/97 -- --
Hal A. Vasvari.......... 100,000(/2/) 6.2% 26.875 3/24/07 1,689,500 4,283,000
Cecily A. Ward.......... -- -- -- -- -- --
</TABLE>
- --------
(1) These assumed annual rates of stock price appreciation are specified by
the SEC. No assurance can be given that such rates will be achieved.
(2) These options vest in equal annual installments over three years, with the
first installment vesting on March 24, 1998.
(3) These options vest in equal annual installments over four years, with the
first installment vesting on September 26, 1998. This number includes
300,000 options subject to shareholder approval at the 1998 Annual
Meeting.
(4) Ms. Morrow resigned on October 31, 1997. The 100,000 options awarded to
her in 1997 were unvested on the date of her departure and were therefore
forfeited in accordance with her amended severance agreement.
AGGREGATED OPTION EXERCISES IN 1997 AND DECEMBER 31, 1997 OPTION VALUES
The following table provides information on option exercises in 1997 by the
named executive officers and a former executive officer who would have been a
named officer had she remained in the employ of the Trust on December 31,
1997, and the value of each such officer's unexercised options at December 31,
1997.
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR-END (#) FISCAL YEAR-END ($)(1)
SHARES ACQUIRED ------------------------- -------------------------
NAME ON EXERCISE (#) VALUE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Steven J. Guttman....... -- -- 143,333 826,667(/2/) $319,167 $458,333
Ron D. Kaplan........... -- -- 30,000 115,000 150,000 75,000
Catherine R. Mack....... -- -- 33,333 8,334 41,665 41,670
Mary Jane Morrow........ -- -- 75,122 0 176,891 0
Hal A. Vasvari.......... -- -- 95,122 125,000 276,891 125,000
Cecily A. Ward.......... 1,500 $10,125 43,666 8,334 142,080 41,670
</TABLE>
- --------
(1) Based on $25.75 per Share closing price on the NYSE on December 31, 1997.
(2) Includes an award of 300,000 options subject to shareholder approval at
the 1998 Annual Meeting.
9
<PAGE>
RETIREMENT AND DISABILITY PLANS
The Trust has a retirement and disability plan for Mr. Guttman, in effect
since 1978. The agreement implementing the plan provides generally for an
annual payment after retirement at or after age 62, or at any time on
suffering a total and permanent disability, of $40,000. A lump-sum death
benefit of $40,000 will be paid to Mr. Guttman's estate. Mr. Guttman's plan
requires funding, and a $200,000 annuity contract was purchased to assist the
Trust in meeting this obligation.
The Trust has a retirement and consulting plan for Mr. Gorlitz, effective
since 1978, and amended in 1988 and 1992 to revise the annual payment. The
plan provides for an annual consultation fee payment of $120,000, until notice
of retirement is given by either Mr. Gorlitz or the Trust, at which time Mr.
Gorlitz will receive an annual retirement payment of $75,000 plus adjustments
for changes in the Consumer Price Index that occur between June 1, 1988 and
the date of Mr. Gorlitz's retirement. Thereafter the retirement payment will
be adjusted annually for changes in the Consumer Price Index, except that no
annual adjustment may exceed 10%.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
In 1997, as in prior years, the Compensation Committee was responsible for
determining the level of compensation paid to the Trust's executive officers,
subject to the review and approval of the Board of Trustees. The Compensation
Committee is comprised entirely of non-employee Trustees.
Philosophy: The members of the Compensation Committee believe that the
Trust's success is largely due to the efforts of its employees and, in
particular, the leadership exercised by its executive officers. Therefore, the
Compensation Committee believes that it is important to:
. Adopt compensation programs that stress stock ownership and, thereby, tie
long-term compensation to increases in shareholder value as evidenced by
Trust Share price appreciation.
. Adopt compensation programs that enhance the Trust's ability to attract
and retain qualified executive officers while providing the financial
motivation necessary to achieve continued high levels of Trust
performance.
. Provide a mix of cash and stock-based compensation programs that are
competitive with a select group of successful real estate investment
trusts and other successful national and regional firms that the members
of the Compensation Committee believe are comparable to the Trust.
. Adjust salary, bonuses and other compensation awards commensurate with
overall corporate results.
. Select compensation programs that emphasize teamwork, pay-for-performance
and overall corporate results.
The members of the Compensation Committee believe, however, that fixed
compensation formulas may not adequately reflect all aspects of the Trust's
and an individual executive officer's performance. Therefore, the Compensation
Committee has retained a high degree of flexibility in structuring the Trust's
compensation programs. This approach allows the Compensation Committee
annually to evaluate subjectively and reward each executive officer's
individual performance and contribution to the Trust's overall financial and
operational success.
The Compensation Committee has from time to time retained compensation
consultants to assist it in structuring the Trust's various compensatory
programs and determining the level of salary, bonus and other awards paid to
the Trust's executive officers. As the Compensation Committee reported last
year, in 1997 it retained SCA Consulting ("SCA") to assist the Compensation
Committee in certain compensation matters, including evaluating the Trust's
compensation and incentive approaches with respect to the Chief Executive
Officer, Mr. Guttman.
Named Executive Officers (other than the Chief Executive Officer). Near the
end of each year, or early in the following year, the Compensation Committee
determines the salary to be paid to each executive officer during the
subsequent year and the bonus to be paid for the current year. Mr. Guttman
assists the Compensation
10
<PAGE>
Committee by making recommendations concerning salaries and bonuses to be paid
to executive officers, other than himself.
Mr. Guttman's recommendations and the Committee's decisions are based upon
their subjective evaluation of each executive officer's performance and
responsibilities as they relate to certain "Performance Factors" including the
productivity of the Trust's leasing effort, the number and quality of
properties acquired, the increase in funds from operations ("FFO"), the
financing transactions completed and the redevelopment and operation of the
Trust's properties. The increasingly complex and competitive nature of the
Trust's business placed greater demands than ever on the executive officers in
1997. The bonuses awarded by the Compensation Committee for 1997 and the
salaries determined each year reflect this fact, as well as the attainment of
certain performance factors in 1997 such as: the Trust acquired over $250
million of real estate assets, overall occupancy at the Trust's properties
increased from 94% in 1996 to 96% in 1997, and FFO per Share increased 5.7%.
In determining the executive officers' salary and bonus levels, the
Compensation Committee also takes into account the total cash compensation
paid to executive officers with similar positions in select successful real
estate investment trusts and other national and regional companies that it
concludes possess revenues, profitability and growth that are comparable to
the Trust's (the "Survey Group"). Some of the companies in the Survey Group
are included in the National Association of Real Estate Investment Trust
equity index. The Compensation Committee's goal is to maintain the total
compensation package for executive officers at a level which is competitive
with the total compensation paid to executive officers of the companies in the
Survey Group.
Chief Executive Officer. As Chief Executive Officer, Mr. Guttman is
compensated pursuant to his employment agreement discussed above and in
accordance with the performance factors discussed earlier. For the reasons
discussed above with respect to the other executive officers, the Compensation
Committee awarded him a $275,000 cash bonus for 1997, which he agreed to forgo
in exchange for an award of Shares equal to 133% of the bonus amount or
$366,000 (see discussion below). Mr. Guttman's salary for 1997 remained at its
1996 level.
As the Compensation Committee reported last year, it has engaged in an
evaluation of three principal elements of Mr. Guttman's compensation and
incentive arrangements--salary and total compensation, long-term incentives
and stock ownership. In completing its evaluation this past year, the
Committee determined that while the Trust's salary arrangement with Mr.
Guttman is competitive, long-term incentives were less than satisfactory and
stock ownership was considerably below the median for non-founder chief
executive officers. The median level of stock ownership reported to the
Compensation Committee was 4.5% of outstanding voting securities (including
outstanding shares of voting securities and options exercisable within 60
days). This median level was significantly below the high end of the group of
comparable companies with non-founder chief executive officers.
The Compensation Committee concluded that Mr. Guttman's equity ownership
fell short of the Committee's objective to link Mr. Guttman's long-term
compensation to increases in shareholder value as evidenced by Share price
appreciation. At March 21, 1997, Mr. Guttman's Shares equaled only 1.5%
(including outstanding shares of voting securities and options exercisable
within 60 days). In order to better link Mr. Guttman's compensation package
with increases in shareholder value, the Compensation Committee took the
following actions.
The Compensation Committee awarded Mr. Guttman two stock options to purchase
Shares, one in March 1997 for 400,000 Shares pursuant to the 1993 Long-Term
Incentive Plan (the "1993 Plan") and one in September 1997 for 400,000 Shares,
100,000 Shares of which was made pursuant to the Amended and Restated 1993
Long-Term Incentive Plan (the "Amended Plan") and 300,000 Shares of which is
subject to shareholder approval at the 1998 Annual Meeting.
In addition, in September 1997 the Compensation Committee approved a plan to
link Mr. Guttman's compensation to shareholder value. The Compensation
Committee approved a Stock in Lieu of Salary Plan and a Stock in Lieu of Bonus
Plan pursuant to which Mr. Guttman may elect to forgo receipt of his salary
and/or bonus in cash and receive instead the number of Shares equal to 133% of
his salary and/or bonus amount divided
11
<PAGE>
by the closing price per Share as of December 31 of the previous year. To
implement the Stock in Lieu of Salary and Bonus Plans, the Trust and Mr.
Guttman entered into restricted share award agreements pursuant to which Mr.
Guttman will receive (unless he elects otherwise) Shares in lieu of his salary
for the years 1998 through 2002 and Shares in lieu of his bonus for the years
1997 through 2001. The terms of these agreements are described above in
"Employment Agreements; Change in Control Arrangements." In connection with
the approval of the Stock in Lieu of Salary and Bonus Plans, Mr. Guttman
agreed that if he elected to receive Shares in lieu of his 1998 salary, his
salary for 1998 would be $475,000, a decrease from his 1997 salary of
$529,000. Mr. Guttman has elected to receive Shares in lieu of cash for his
1998 salary and 1997 bonus; pursuant to this election and the applicable
restricted share award agreements, a total of 39,055 Restricted Shares were
awarded to Mr. Guttman in January 1998. The Compensation Committee awarded Mr.
Guttman a performance share award of 300,000 Shares effective January 1, 1998,
as described above in "Employment Agreements; Change in Control Arrangements."
The Compensation Committee believes that the compensation arrangements
described above will fulfill the objective of linking Mr. Guttman's long-term
compensation directly and closely to increasing shareholder value. Increasing
Mr. Guttman's equity ownership in the Trust will align his interests with
shareholders' long-term interests because the value of Mr. Guttman's options
and restricted share and performance awards over time will increase only as
Share value increases. In approving Mr. Guttman's compensation arrangements,
the Compensation Committee took into account his established track record,
during his tenure since 1980 as Chief Executive Officer, of growing the
Trust's real estate assets from $65 million to approximately $1.5 billion and
its FFO per Share from $.64 to $2.05. The Compensation Committee also
considered Mr. Guttman's leadership roles in the real estate investment trust
and shopping center industries. Mr. Guttman is currently the Chairman of the
National Association of Real Estate Investment Trusts and a Trustee of the
International Council of Shopping Centers.
Amended and Restated 1993 Long-Term Incentive Plan. In 1997, the
Compensation Committee, the Board of Trustees and the shareholders approved
revisions to the 1993 Plan to improve and modify its terms and to qualify the
1993 Plan under the performance-based compensation exception to Section 162(m)
of the Code (the 1993 Plan as amended is referred to hereafter as the Amended
Plan). In Proposal 2 below, the Compensation Committee and the Board of
Trustees are recommending amendments to the Amended Plan to increase (i) the
total number of Shares available for issuance under the Amended Plan and (ii)
the number of Shares which can be made the subject of awards in any one year
to any one Participant (other than the Chief Executive Officer). The existing
limits were inadequate in designing incentive programs for attracting new
candidates for senior positions given the competitive employment market and in
designing incentive programs for existing management. The Compensation
Committee and the Board of Trustees approved the amendments to the Amended
Plan as set forth in Proposal 2 below, and the Board of Trustees unanimously
recommends that the shareholders vote FOR the adoption of such proposal.
Deductibility of Executive Compensation in Excess of $1.0 Million. Section
162(m) of the Code generally disallows a federal income tax deduction to any
publicly held corporation for compensation paid in excess of $1 million in any
taxable year to an executive officer who is named in the Summary Compensation
Table. Exceptions are made for qualified performance-based compensation, among
other things. The Compensation Committee intends generally to structure its
executive awards under the Amended Plan to take advantage of this Section
162(m) exception. However, the Committee does not believe that it is
necessarily in the best interest of the Trust and its shareholders that all
compensation meet the requirements of Section 162(m) for deductibility and the
Committee may determine to award non-deductible compensation in such
circumstances as it deems appropriate. Moreover, in light of the ambiguities
and uncertainties under Section 162(m), no assurance can be given that
compensation intended by the Company to satisfy the requirements for
deductibility under Section 162(m) does in fact do so.
Kenneth D. Brody
Kristin Gamble
Walter F. Loeb
Mark S. Ordan
12
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Donald H. Misner is a full-time employee of the Trust at an annual salary of
$120,000. Mr. Misner was paid a bonus of $105,000 for 1997. During 1997 Mr.
Misner was a Trustee, and on the date of the 1998 Annual Meeting, Mr. Misner's
term as Trustee will expire.
STOCK PRICE PERFORMANCE
The following stock price performance chart compares the Trust's performance
to the S&P 500 and the index of equity real estate investment trusts prepared
by the National Association of Real Estate Investment Trusts ("NAREIT").
Equity real estate investment trusts are defined as those which derive more
than 75% of their income from equity investments in real estate assets. The
NAREIT equity index includes all tax qualified real estate investment trusts
listed on the NYSE, American Stock Exchange or the NASDAQ National Market.
Stock price performance for the past five years is not necessarily indicative
of future results. All stock price performance includes the reinvestment of
dividends.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG FRT
NAREIT AND S&P
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) FRT NAREIT S&P
- --------------------- --------------- --------- ----------
<S> <C> <C> <C>
Measurement Pt-00/00/1992 $100.00 $100.00 $100.00
FYE 00/00/1993 $105.77 $119.65 $109.99
FYE 00/00/1994 $ 93.09 $123.45 $111.43
FYE 00/00/1995 $110.48 $142.30 $153.13
FYE 00/00/1996 $141.81 $192.48 $188.29
FYE 00/00/1997 $143.30 $231.47 $251.13
</TABLE>
13
<PAGE>
CERTAIN TRANSACTIONS
Pursuant to the terms of stock option plans, from 1984 through 1997 officers
and key employees have exercised options and paid for some of the Shares by
issuance of notes to the Trust. Notes accepted pursuant to the 1983 or 1985
stock option plans are for a term extending to the employee's or officer's
retirement date with interest payable quarterly at the per annum rate that is
either the lesser of (i) the Trust's current borrowing rate or (ii) the
current indicated annual dividend rate on the Shares acquired pursuant to the
option divided by the purchase price of such Shares. Notes accepted pursuant
to the Amended Plan are for a period extending to the employee's or officer's
retirement date with interest payable quarterly at the per annum rate that is
the lesser of (i) the Trust's borrowing rate on the date of exercise or (ii)
the indicated annual dividend rate on the date of exercise of the option
divided by the option price of such Shares. The stock option notes are secured
by the Shares, which will not be released until the notes are paid in full.
Pursuant to the terms of a restricted stock agreement, Mr. Guttman borrowed
$210,000, $105,000 of which was repaid in 1992. The remaining balance of
$105,000 is payable on April 15, 2001, with no interest. The note is secured
by 18,975 Shares.
In 1991, the Trust accepted notes from Trust officers in connection with the
1991 Share Purchase Plan for $5,359,922. The current balance of the notes is
$2,972,000. Up to 75% of the original principal balance of these loans may be
forgiven by the Trust if certain conditions are met. In connection with the
1991 Share Purchase Plan, the Trust has loaned officers $1,130,000 with which
to pay income taxes associated with the forgiveness. The interest rate on the
Share purchase loans and related tax loans is 9.39%. On January 1, 1994, the
Trust lent Mr. Kaplan $1,000,000 to purchase 40,000 Shares. The current
balance is $687,500 and he has been loaned $125,000 with which to pay income
taxes associated with the forgiveness. Up to 75% of the original principal
balance of this loan may be forgiven by the Trust if certain conditions are
met. The interest rate on his share purchase loans and related tax loans is
6.24%.
The following table sets forth the indebtedness to the Trust of the officers
as of March 26, 1998:
<TABLE>
<CAPTION>
MAXIMUM
OUTSTANDING CURRENT
DURING BALANCE
NAME TITLE 1997 OF NOTES
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Steven J. Guttman... President and Chief $2,830,000 $2,603,000
Executive Officer
Ron D. Kaplan....... Senior Vice President, 1,593,000 1,618,000
Capital Markets, Chief
Investment Officer
Catherine R. Mack... Vice President, General 333,000 258,000
Counsel and Secretary
Mary Jane Senior Vice President, 783,000 534,000/(2)/
Morrow/(1)/........ Finance & Treasurer, Chief
Financial Officer
Hal A. Vasvari...... Executive Vice President, 955,000 898,000/(2)/
Chief Operating Officer
Cecily A. Ward...... Vice President, Controller 94,000 85,000
</TABLE>
- --------
(1) Ms. Morrow resigned on October 31, 1997.
(2) The balance of these notes shall become due and payable in accordance with
Ms. Morrow's and Mr. Vasvari's respective amended severance agreements.
The terms of these agreements are described above in "Employment
Agreements; Change in Control Arrangements."
A retail women's clothing store owned by Mr. Guttman and his wife, which is
operated by Mr. Guttman's wife, leases space at one of the Trust's properties.
Terms of the lease were negotiated at arms length and reflected prevailing
market conditions. Total payments in 1997 for rent, operating expenses and
real estate taxes were $86,000. In connection with acquisitions, brokerage
commissions of $291,000 were paid in 1997 to a company that is owned by Mr.
Guttman's brother. These commissions were paid pursuant to a brokerage
contract on terms comparable to terms contained in contracts which the Trust
has with brokers providing similar services in other geographic areas. From
time to time the Trustees may actively engage on their own behalf and as
agents for and advisors to others in real estate transactions, including
development and financing. The Trustees have agreed that they will not acquire
an interest in any property which meets the investment criteria of the Trust
without first offering the property to the Trust.
14
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Trustees and executive officers of the Trust are required to file
reports of initial ownership and changes of ownership of the Trust's Shares
with the Securities and Exchange Commission and with the New York Stock
Exchange. To the Trust's best knowledge, based solely on review of copies of
such reports furnished to the Trust and written representations that no other
reports were required, the required filings of all such Trustees and executive
officers were filed timely.
PROPOSAL 2
AMENDMENT TO AMENDED AND RESTATED
1993 LONG-TERM INCENTIVE PLAN
The Trust's shareholders are being asked to approve amendments to the
Amended and Restated 1993 Long-Term Incentive Plan (the "Amended Plan"). The
Trust's Compensation Committee and Board of Trustees have approved the
amendments and recommend that the shareholders approve the amendments.
The 1993 Long-Term Incentive Plan (the "1993 Plan") was originally adopted
by the Board of Trustees on February 15, 1993, and approved by the
shareholders at the 1993 Annual Meeting. The Amended Plan was adopted by the
Trust's Compensation Committee and Board of Trustees, and approved by the
shareholders at the 1997 Annual Meeting. The Amended Plan provides for
awarding of options, stock appreciation rights, restricted shares of
beneficial interest in the Trust, no par value ("Shares"), performance awards,
stock purchase awards, or other stock-based awards ("Awards") to eligible
individuals ("Participants"). The proposed amendments are principally designed
to increase (i) the number of Shares available for issuance under the Amended
Plan from 4,000,000 to 5,500,000, and (ii) the number of Shares that may be
made the subject of Awards under the Amended Plan to a Participant (other than
the Chief Executive Officer) in any one calendar year from 100,000 to 250,000.
The existing limits were inadequate in designing incentive programs for
attracting new candidates for senior positions given the competitive
employment market and in designing incentive programs for existing management.
The following is a summary of the principal provisions of the Amended Plan,
including the amendments that will become effective upon shareholder approval
of this proposal. The summary, however, does not purport to be a complete
description of all the provisions of the Amended Plan, as amended. The
proposed Amended Plan, as amended is attached as Exhibit A for your
consideration. Capitalized terms used in this summary that are not defined
herein have the meanings ascribed to them in the Amended Plan.
OPERATION OF AMENDED PLAN
Purpose. The Amended Plan is intended to assist the Trust in attracting and
retaining highly competent officers, other employees, and consultants. The
Amended Plan will act as an incentive in motivating selected officers and key
employees to achieve long-term business objectives of the Trust. It gives the
Trust added flexibility to tailor individual awards to meet changing business
and tax strategies.
Administration. The Amended Plan is administered by the Compensation
Committee (the "Committee"), the members of which are appointed by the Board
of Trustees and are Non-Employee Trustees intended to qualify as "outside
directors" as that term is used in Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code"). The Committee members are not eligible to
participate in the Amended Plan except with respect to certain automatic, non-
discretionary stock option awards and a right to receive Trustees' fees in
Shares. The Committee will (i) select the officers, other employees, and
consultants of the Trust and its Subsidiaries who will be eligible for and
granted Awards, (ii) determine the amount and type of Awards, (iii) establish
the rules and guidelines relating to the Amended Plan, (iv) establish, modify,
and terminate terms and conditions of Awards; and (v) take such other actions
as may be necessary for proper administration of the Amended Plan.
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Duration. The Amended Plan shall terminate without further action of the
Trustees and the shareholders on May 13, 2003, the tenth anniversary of the
date on which the 1993 Plan was approved by the shareholders.
Shares Available for Issuance. The Amended Plan, as currently in effect,
authorizes the issuance of 4,000,000 Shares. Awards for 3,900,000 Shares have
been granted. The Board of Trustees has approved an increase in the number of
Shares authorized for award grants from 4,000,000 to 5,500,000.
The Amended Plan, as currently in effect, also imposes limits on the
incentive compensation payable to any Participant in any calendar year in
order to comply with Section 162(m) of the Code. It provides that, during the
term of the Amended Plan, (i) the Chief Executive Officer may not be granted
Awards (other than Performance Units denominated in dollars and Dividend
Equivalent Rights) aggregating more than 500,000 Shares per calendar year,
(ii) any other Participant may not be granted Awards (other than Performance
Units denominated in dollars and Dividend Equivalent Rights) aggregating more
than 100,000 Shares per calendar year, (iii) the Chief Executive Officer may
not be granted Dividend Equivalent Rights with respect to more than 500,000
Shares per calendar year, and (iv) any other Participant may not be granted
Dividend Equivalent Rights with respect to more than 100,000 Shares per
calendar year. With respect to Performance Units denominated in dollars, the
Amended Plan provides that the maximum dollar amount that the Chief Executive
Officer may be awarded in any calendar year is $3 million; the maximum dollar
amount that any other Participant may be awarded in any calendar year is $1
million. The Board of Trustees has approved an increase in the number of
Shares a Participant (other than the Chief Executive Officer) may receive
pursuant to Awards in any one calendar year from 100,000 to 250,000.
Amended Plan Participants. Any officer, other employee, or consultant of the
Trust and its Subsidiaries may be selected by the Committee to receive an
Award under the Amended Plan. Approximately 99 officers and other employees
are eligible to participate in the Amended Plan. Non-Employee Trustees are
only eligible to receive automatic, non-discretionary, non-employee stock
option awards and payment of their Trustees' fees in Shares. Following the
Annual Meeting, eight Non-Employee Trustees will be eligible to participate in
the Amended Plan.
AWARDS AVAILABLE UNDER THE AMENDED PLAN
Awards. Awards to Participants under the Amended Plan may take the form of
options, stock appreciation rights, restricted shares, performance units and
stock purchase awards. The Amended Plan also authorizes the award of
performance shares and dividend equivalent rights. Awards under the Amended
Plan may be granted alone or in combination with other awards. Non-Employee
Trustees may only receive automatic, non-discretionary stock options and
payment of their Trustee's fees in Shares under the Amended Plan.
Stock Options. Stock options meeting the requirements of Section 422 of the
Code ("Incentive Stock Options"), and stock options that do not meet such
requirements ("Non-Qualified Options") are both available for grant under the
Amended Plan, subject to terms and conditions as determined by the Committee.
The exercise price for Options must be at least equal to 100% of the Fair
Market Value of the Shares on the date of grant of such Option, and the form
of its payment is at the sole discretion of the Committee.
Stock Appreciation Rights. The Amended Plan permits the awarding of a Stock
Appreciation Right ("SAR") in connection with the award of an option or as a
freestanding right. Upon exercise of the SAR, a Participant may receive cash
and/or Shares, at the sole discretion of the Committee, in an amount equal to
the value of the excess, if any, of the then per Share Fair Market Value over
the per Share Fair Market Value on the date the SAR was awarded (or over the
Option exercise price in the case of an SAR awarded in connection with an
Option). In the case of an SAR awarded in connection with an Option, the
Option shall be canceled to the extent of the number of Shares as to which the
SAR is exercised. When an SAR is awarded, the Committee may establish a limit
on the maximum amount a Participant receives on exercise. At the time the SAR
is awarded, the Committee will decide the date or dates at which it will
become vested and exercisable.
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Dividend Equivalent Rights. Dividend Equivalent Rights ("DERs") may be
awarded in tandem with any Award under the Amended Plan and may be payable
currently or deferred until the lapsing of the restrictions on the DERs or
until the date of the vesting, exercise, payment, settlement or other lapse of
restrictions on the related Award. The Committee may condition the payment of
DERs on the attainment of specified Performance Targets. DERs may be settled
in cash or Shares or a combination thereof, in a single payment or multiple
installments. With respect to DERs awarded in tandem with an Option, the
Committee may provide that a Participant may elect to have amounts payable in
respect of such DERs applied against the exercise price of the Option.
Restricted Shares. The Committee may award Restricted Shares to a
Participant. Such an award gives the Participant the right to receive Shares
subject to risk of forfeiture based upon certain conditions, as may be
determined by the Committee. In addition, the Amended Plan provides that, at
the time of award, the Committee may determine the treatment of any applicable
dividends.
Performance Units and Performance Shares. The Committee may award
Performance Units (which may be payable in cash or Shares) and Performance
Shares. The Amended Plan provides that the vesting of Performance Units and
Performance Shares will be based on the Trust's attainment, within an
established period of time, of specified Performance Targets to be determined
by the Committee. The Performance Targets may be expressed in terms of
earnings per Share, Share price, funds from operations, pre-tax profits, net
earnings, return on equity or assets, gross revenues, EBITDA, dividends,
market share or market penetration, or any combination of the foregoing.
Performance Units may be denominated in dollars or in Shares. Payments in
respect of Performance Units will be made in cash, Shares or any combination
of the foregoing, as determined by the Committee.
Stock Purchase Awards. The Committee may award to Participants Stock
Purchase Awards that consist of a right to purchase Shares, payment for which
shall be as the Committee determines. Pursuant to the Amended Plan, the Trust
may lend funds to Participants who receive Stock Purchase Awards to pay the
income tax associated with any forgiveness of a Purchase Loan. The Committee
will determine the extent to which the Trust shall forgive the repayment of
all or a portion of a Purchase Loan, if any, and the terms of such
forgiveness. The Committee may condition such forgiveness on the attainment of
specified Performance Targets within the Award Period.
Non-Employee Trustees. The Amended Plan provides for the award of a Non-
Qualified Option to purchase 2,500 Shares to each Non-Employee Trustee whose
term continues after the date of each annual meeting until the termination of
the Amended Plan. The exercise price for each such Option is the Fair Market
Value of the Shares on the date of award of the Option. Options are
exercisable in full commencing six months after the date of award and expire
on the tenth anniversary of the date of award. The Amended Plan includes
provisions for the exercisability of such Options should a Non-Employee
Trustee's service with the Trust terminate, based on the reasons for such
termination.
In addition, Trustees' fees will be payable in cash or Shares or a
combination of both, at the election of each Trustee. The amount of the
Trustees' fees will be determined by the Committee each year. On or before the
time when the fees are set for a year, each Trustee will be required to elect
the form of payment of his or her fees. If no election is made, the fees will
automatically be paid in Shares. The fees will be paid on the next Business
Day that is at least six months after the date on which the amount of fees was
set. Shares having a Fair Market Value equal to the amount of the fees payable
in Shares will be issued to the Trustee on such date, except that the Trustees
will receive cash in lieu of any fractional Shares that would have been
otherwise deliverable. Such Shares can be transferred into the Trust's
Dividend Reinvestment Plan but are otherwise subject to restrictions on
transfer for three years after the date of their issuance.
Loans. The Committee has the sole discretion to grant loans (apart from
Purchase Loans and Tax Loans that are made in connection with the Stock
Purchase Awards) under the Amended Plan on such terms and at such rates as it
deems reasonable. The loans are required to be used to pay withholding taxes
in respect of Awards or the exercise price of Options. Non-Employee Trustees
may not receive such loans.
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CHANGE IN CONTROL PROVISIONS
The Amended Plan generally defines a Change in Control to include: (i) the
acquisition by any Person, without approval of the Trustees, of Beneficial
Ownership of more than 20% of the outstanding Voting Securities of the Trust;
(ii) any election of persons to the Board of Trustees that causes two-thirds
of the Board of Trustees to consist of persons other than persons who were
members of the Board of Trustees as of the date of the Amended Plan
("Incumbent Trustees") or persons whose election or nomination by the
shareholders of the Trust was approved by at least two-thirds of the Incumbent
Trustees; (iii) approval of the shareholders of the Trust of a merger,
consolidation, or other reorganization involving the Trust, unless (a) the
shareholders of the Trust immediately before such transaction constitute,
immediately after such transaction, at least a majority of the shareholders of
the Surviving Person resulting from such transaction, (b) the Incumbent
Trustees constitute at least two-thirds of the members of the governing board
of the Surviving Person, and (c) no Person has Beneficial Ownership of 20% or
more of the Surviving Person after any such transaction (except to the extent
such Person had such Beneficial Ownership before any such transaction); (iv) a
complete liquidation or dissolution of the Trust; (v) an agreement for the
sale or other disposition of all or substantially all of the Trust's assets.
Notwithstanding the foregoing, certain events are not deemed to constitute a
Change in Control, including reorganization of the Trust into a holding
company structure.
Upon the occurrence of a Change in Control of the Trust, and unless
otherwise provided in the applicable Award Agreement, the outstanding Options
and SARs will become immediately and fully exercisable under the Amended Plan.
In addition, unless the Committee provides otherwise, the restrictions imposed
on Restricted Shares and on Non-Employee Trustee Awards lapse upon a Change in
Control. The Amended Plan provides for the automatic and accelerated
forgiveness of a Purchase Loan upon a Change in Control.
TERMINATION OF EMPLOYMENT
Options and SARs. The Amended Plan addresses the exercisability of Options
and SARs in certain circumstances and allows for customization of agreements
governing such exercisability.
Restricted Shares. Upon termination of employment, a Participant who has
been awarded Restricted Shares forfeits the right to receive such Shares to
the extent the applicable performance standards, length of service
requirements, or other measurement requirements are not met.
Performance Awards. In the case of Performance Awards, and unless otherwise
provided by the Committee in an Award Agreement, in the event of a
Participant's termination of employment prior to the end of an Award Period,
the Participant will not be entitled to any Performance Units and any
Performance Shares will be forfeited. If a Participant's Disability, death, or
retirement occurs following at least twelve months of participation in any
Award Period, the Participant or such Participant's Beneficiary, as the case
may be, will be entitled to receive a pro-rata share of his or her Performance
Award.
Purchase Loans and Tax Loans. Under the Amended Plan, if a Participant's
employment with the Trust is terminated for Cause, the balance of the Purchase
Loans and Tax Loans made to such Participant will be immediately due and
payable. If a Participant's termination of employment occurs by reason of
death or Disability, the Committee, in its sole discretion, may provide for
the forgiveness of a Purchase Loan as of the date of such a termination in
such amount of the original principal amount of the Purchase Loan as the
Committee so provides. The balance of any loan and any related withholding
taxes are required to be paid to the Trust within 180 days of such termination
of employment. If a Participant's employment terminates by reason of
resignation, the balance of the Participant's Purchase Loans and Tax Loans
will be due and payable within 90 days of such termination. If the Participant
is terminated by the Trust without cause, the Participant will have one year
to repay his or her loans.
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OTHER INFORMATION
Amendments and Termination. The Board of Trustees may amend or terminate the
Amended Plan and the Committee may amend or alter the terms of Awards under
the Amended Plan. No such action may affect or impair the rights of a
Participant under any Award previously granted without such Participant's
consent. No amendment may be made, without shareholder approval, that would
require shareholder approval under the Internal Revenue Code or other
applicable law unless the Committee determines that compliance with such
requirement is no longer desired.
ERISA. The Amended Plan is not subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended.
Antidilution Provisions. The number of Shares authorized to be issued under
the Amended Plan and subject to outstanding Awards (and the purchase or
exercise thereof) may be adjusted to prevent dilution or enlargement of rights
in the event of any stock dividend, reorganization, reclassification,
recapitalization, stock split, combination, merger, consolidation or other
relevant capitalization change. The Amended Plan provides that no adjustment
will be made unless and until such adjustment, either by itself or with other
adjustments not previously made but carried forward, would require an increase
or decrease of at least 1% in the number of Shares available under the Amended
Plan or to which any Award relates immediately prior to the making of such
adjustment.
Transferability. The rights and interests of a Participant in any Award
under the Amended Plan are not transferable except by will or the laws of
descent and distribution, or in the Committee's sole discretion pursuant to a
domestic relations order. During the lifetime of the Participant, only the
Participant, or his or her guardian or legal representative, may exercise the
Participant's rights under the Amended Plan.
NEW PLAN BENEFITS
As described above, the selection of the Participants who will receive
Awards under the Amended Plan, and the size and type of Awards, is to be
determined by the Committee in its sole discretion. As of the date of this
Proxy Statement, no awards have been made under the Amended Plan on the basis
of the share increase detailed in this Proposal. The number and type of awards
to be granted under the Amended Plan to any particular individual cannot be
determined as of such date, except for the options that will automatically be
awarded to certain Non-Employee Trustees as described in the Amended Plan.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the principal United States federal
income tax consequences relating to grants or awards to employees under the
Amended Plan. The Amended Plan is not qualified under Section 401(a) of the
Internal Revenue Code. The summary is not intended to be comprehensive and,
among other things, does not describe state, local, or foreign tax
consequences.
Stock Options. Generally, a Participant will not recognize taxable income
upon the award of a Non-Qualified Option and the Trust will not be entitled to
a tax deduction with respect to such award. Upon exercise of the Option, the
difference between the Fair Market Value of the Shares on the date of exercise
and the exercise price will be taxable as ordinary income to the Participant.
The Trust will be entitled to a tax deduction in the same amount and at the
same time as the Participant recognizes ordinary income, subject to any
deduction limitation under Section 162(m) of the Code (which is discussed
below). The subsequent disposition of Shares acquired upon the exercise of a
Non-Qualified Option will ordinarily result in capital gain or loss.
Subject to the discussion below, a Participant will not recognize taxable
income at the time of award or exercise of an Incentive Stock Option and the
Trust will not be entitled to a tax deduction with respect to such award or
exercise. However, the exercise of an Incentive Stock Option may result in an
alternative minimum tax liability for the Participant.
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Generally, if a Participant holds Shares acquired upon the exercise of an
Incentive Stock Option for at least one year after the date of exercise, and
for at least two years after the date of award of the Incentive Stock Option,
upon disposition of such Shares by the Participant, the difference, if any,
between the sale price of the Shares and the exercise price will be treated as
long-term capital gain or loss to the Participant. Generally, upon the sale or
other disposition of Shares acquired upon the exercise of an Incentive Stock
Option within one year after the date of exercise or within two years after
date of award of the Incentive Stock Option (a "disqualifying disposition"),
any excess of the Fair Market Value of the Shares at the time of exercise of
the option over the exercise price of such option will constitute ordinary
income to the Participant. Any excess of the amount realized by the holder on
the disqualifying disposition over the Fair Market Value of the Shares on the
date of exercise will generally be capital gain. Subject to any deduction
limitation under Section 162(m) of the Code, the Trust will be entitled to a
deduction equal to the amount of such ordinary income recognized by the
Participant.
If an Option is exercised through the use of Shares previously owned by the
Participant, such exercise generally will not be considered a taxable
disposition of the previously owned Shares and thus no gain or loss will be
recognized with respect to such Shares upon such exercise. However, if an
Incentive Stock Option is exercised through the use of previously-owned Shares
that were acquired on the exercise of an Incentive Stock Option, and the
holding period requirement for those Shares is not satisfied at the time they
are used to exercise the Option, such use will constitute a disqualifying
disposition of the previously-owned Shares resulting in the recognition of
ordinary income in the amount described above with respect to disqualifying
dispositions.
Stock Appreciation Rights. No income will be realized by a Participant in
connection with the award of any SAR. The Participant must include in ordinary
income the amount of cash received and the Fair Market Value on the exercise
date of any Shares received upon the exercise of an SAR. The Trust will be
entitled to a deduction, subject to the deduction limitation under Section
162(m) of the Code, equal to the amount included in such Participant's income
by reason of the exercise of any SAR.
Dividend Equivalent Rights. A Participant realizes ordinary income upon the
receipt of Dividend Equivalent Rights in an amount equal to any cash received
and the Fair Market Value of any Shares received, and the Trust will be
entitled to a deduction of the same amount, subject to the deduction
limitation under Section 162(m) of the Code.
Restricted Shares and Performance Shares. An award of Restricted Shares or
Performance Shares generally does not constitute a taxable event for a
Participant or the Trust. However, the Participant will be subject to tax, at
ordinary income rates, when any restrictions on ownership of the Restricted
Shares or Performance Shares lapse. The Trust will be entitled to take a
commensurate deduction at that time, subject to the deduction limitation under
Section 162(m) of the Code.
A Participant may elect to recognize taxable ordinary income at the time
Restricted Shares or Performance Shares are awarded in an amount equal to the
Fair Market Value of the Shares at the time of award, determined without
regard to any forfeiture restrictions. If such an election is made, the Trust
will be entitled to a deduction at that time in the same amounts, subject to
the deduction limitation under Section 162(m) of the Code. Future appreciation
on the Shares will be taxed at the capital gains rate when the Shares are
sold. However, if the Shares are forfeited after making such an election, the
Participant will be unable to claim a deduction.
Performance Units. Generally, a Participant will not recognize any taxable
income and the Trust will not be entitled to a deduction upon the award of
Performance Units. At the time the Participant receives a payment in respect
of Performance Units, the Fair Market Value of any Shares, or the amount of
any cash received in payment for such Performance Units generally is taxable
to the Participant as ordinary income and the Trust will be entitled to a tax
deduction, subject to the deduction limitation under Section 162(m) of the
Code.
Stock Purchase Awards. A Participant who receives a Stock Purchase Award
incurs no tax liability and the Trust does not receive any deduction at the
time Shares are acquired through a Stock Purchase Award.
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However, to the extent a Purchase Loan is forgiven, a Participant will be
required to recognize income in an amount equal to the forgiven portion of the
loan as such portion is forgiven. The Trust will be entitled to a tax
deduction at such time, subject to the deduction limitation under Section
162(m) of the Code.
Non-Employee Trustee Awards. Non-Employee Trustee Options will receive the
same federal income tax treatment as other Non-Qualified Options. The Trustee
will recognize ordinary income equal to the Fair Market Value of the Shares
received in lieu of Trustees' fees and the Trust will be entitled to a
deduction in the same amount, subject to the deduction limitation under
Section 162(m) of the Code.
Deductibility of Executive Compensation. Section 162(m) of the Code
generally disallows a federal income tax deduction to any publicly held
company for compensation paid in excess of $1 million in any taxable year to
the chief executive officer or any of the four most highly compensated
executive officers employed by the corporation on the last day of the taxable
year. Exceptions are made for, among other things, qualified "performance-
based compensation." Qualified performance-based compensation means
compensation paid solely on account of the attainment of objective performance
goals, provided that (i) performance goals are established by a Compensation
Committee consisting solely of two or more outside directors, (ii) the
material terms of the performance-based compensation are disclosed to and
approved by shareholders in a separate shareholder vote prior to payment and
(iii) prior to payment, the Compensation Committee certifies that the
performance goals were attained and other material terms were satisfied.
Except with respect to certain Change in Control payments, the Amended Plan is
designed to conform with the performance-based compensation exception to
Section 162(m) of the Code.
Section 280G of the Code. Under certain circumstances, the accelerated
vesting or exercise of Options or SARs, or the accelerated lapse of
restrictions with respect to other Awards, in connection with a Change in
Control of the Trust might be deemed an "excess parachute payment" for
purposes of the golden parachute tax provisions of Section 280G of the Code.
To the extent it is so considered, the Participant may be subject to a 20%
excise tax and the Trust may be denied a tax deduction.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the Shares present, in
person or by proxy, is required for approval of the amendments to the Amended
Plan. The amendments call for (i) an increase in the number of Shares
authorized for Awards under the Amended Plan from 4,000,000 to 5,500,000, and
(ii) an increase in the number of Shares a Participant (other than the Chief
Executive Officer) may receive pursuant to Awards in any one calendar year
from 100,000 to 250,000.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 2.
PROPOSAL 3
APPROVAL OF OPTION AWARD TO CHIEF EXECUTIVE OFFICER
BACKGROUND
The Trust's Compensation Committee and Board of Trustees awarded, subject to
shareholder approval, a stock option dated September 26, 1997 (the "Option")
to Steven J. Guttman, Chief Executive Officer and President of the Trust, to
purchase 300,000 shares of beneficial interest in the Trust, no par value
("Shares"), at the exercise price of $24.94, the closing price per Share on
the date of award. The award was made as part of the Compensation Committee's
goal of linking long-term incentive compensation to increasing shareholder
value. The Option award was not made under the Trust's Amended and Restated
1993 Long-Term Incentive Plan (the "Amended Plan") due to the Amended Plan's
individual award limits. The option is exercisable in equal annual
installments over four years, beginning on the first anniversary of the date
of award.
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SUMMARY OF TERMS
The Option expires ten years from the date of award or earlier in the event
of Mr. Guttman's termination of employment, as described below. The terms of
the Amended Plan generally govern the Option.
Upon the Trust's termination of Mr. Guttman for cause, his rights to
exercise vested options terminate. Upon the Trust's termination of Mr.
Guttman's employment without cause, the Option, to the extent it is
outstanding and unvested on the date of such termination of employment, is
immediately and fully vested and may be exercised for a period of two years
from the date of termination. Upon termination as a result of disability, the
Option, to the extent it is outstanding and unvested on Mr. Guttman's
disability date, is immediately vested to the extent it would have become
vested had Mr. Guttman continued in the employ of the Trust for a period of
two years following the disability date, and may be exercised for a period of
two years from the date of termination.
In the event of Mr. Guttman's death or his retirement on or after age 62,
the Option, to the extent it is vested, may be exercised for two years. In all
other events of termination, including his voluntary resignation, other than
after a change in control (as described below) or for cause, the Option, to
the extent it is vested, may be exercised for a period of one year. If Mr.
Guttman's employment is terminated for cause, the Option terminates
immediately.
In the event of a change in control, the Option, to the extent it is
outstanding and unvested on the date of such change in control, shall become
immediately and fully vested. Mr. Guttman may surrender the Option, or any
portion thereof, to the Trust for cancellation within 60 days and receive a
cash payment in an amount equal to the excess, if any, of (x) the greater of
(1) the fair market value of the Shares on the date preceding the surrender,
subject to the Option or portion thereof surrendered, or (2) the adjusted fair
market value of the Shares, as defined in the Amended Plan, subject to the
Option or portion thereof surrendered over (y) the aggregate purchase price
for such Shares under the Option or portion thereof surrendered. If Mr.
Guttman does not surrender the Option for such cash payment, and if his
employment is terminated following a change in control, the Option remains
exercisable for one year following such termination, or the term of the
Option, whichever is shorter.
The Option is a non-qualified stock option. The Option requires shareholder
approval as a prerequisite for the listing of shares underlying the Option on
the New York Stock Exchange, Inc., and, because the Option is awarded outside
the limits of the Amended Plan, to permit the Trust to obtain a tax deduction
arising from Mr. Guttman's exercise of the Option, in accordance with Section
162(m) of the Internal Revenue Code of 1986, as amended. For a summary of the
federal income tax consequences relating to non-qualified stock options, see
Proposal 2, above.
The Option was awarded as part of the Compensation Committee's 1997 review
of compensatory arrangements between its most senior executive officers and
the Trust, as discussed in last year's proxy statement and in this proxy
statement. The Committee's primary objectives in granting the Option were to
maintain the total compensation package for Mr. Guttman at a level that is
competitive with the total compensation paid to Chief Executive Officers of
companies in its Survey Group, to link his compensation to the performance of
the Trust, and to align his interests with the shareholders' long-term
interests.
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The following table sets forth the benefits that may be received by Steven
J. Guttman if the award of options to purchase Shares is approved. The closing
price per Share on September 26, 1997 was $24.94.
NEW PLAN BENEFITS
AWARD OF OPTION TO PURCHASE COMMON STOCK
TO STEVEN J. GUTTMAN (1)
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE ($) NUMBER OF SHARES
- ----------------- ---------------- ----------------
<S> <C> <C>
Steven J. Guttman............................. -- 300,000
President and Chief Executive Officer
</TABLE>
- --------
(1) Under this Option award, no options or other benefits will accrue to any
current directors, any executive officers, or any other current employees
of the Trust other than Mr. Guttman.
The affirmative vote of the holders of a majority of the Shares present, in
person, or by proxy, is required for approval of Proposal 3.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 3.
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RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Grant Thornton LLP has been selected as independent public accountants for
the Trust for the current year, and examined the Trust's financial statements
for the year ended December 31, 1997. Grant Thornton LLP also provided limited
reviews of the Trust's quarterly financial information and assisted in
connection with certain other filings with the Securities and Exchange
Commission.
A representative of Grant Thornton LLP will be present at the Annual Meeting
and will have the opportunity to make a statement and answer appropriate
questions from shareholders.
ANNUAL REPORT
A COPY OF THE TRUST'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 1997, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WILL BE MAILED
WITHOUT CHARGE TO SHAREHOLDERS UPON REQUEST. REQUESTS SHOULD BE ADDRESSED TO
THE TRUST, 1626 EAST JEFFERSON STREET, ROCKVILLE, MARYLAND 20852, ATTENTION:
MS. KATHY KLEIN, VICE PRESIDENT--CORPORATE COMMUNICATIONS. THE FORM 10-K
INCLUDES CERTAIN EXHIBITS, WHICH WILL BE PROVIDED ONLY UPON PAYMENT OF A FEE
COVERING THE TRUST'S REASONABLE EXPENSES.
SOLICITATION OF PROXIES, SHAREHOLDER PROPOSALS AND OTHER MATTERS
The cost of this solicitation of proxies will be borne by the Trust. In
addition to the use of the mails, Trust officials may solicit proxies in
person and by telephone or telegraph, and may request brokerage houses and
other custodians, nominees and fiduciaries to forward soliciting materials to
the beneficial owners of Shares.
Proposals of shareholders intended to be presented at the 1999 Annual
Meeting must be received by the Trust no later than November 30, 1998 to be
considered for inclusion in the Trust's proxy statement and form of proxy
relating to such meeting.
The Trustees know of no other business to be presented at the Annual
Meeting. If other matters properly come before the meeting, the persons named
as proxies will vote on them in accordance with their best judgment.
You are urged to complete, sign, date and return your proxy promptly to make
certain your Shares will be voted at the Annual Meeting. For your convenience
in returning the proxy, an addressed envelope is enclosed, requiring no
additional postage if mailed in the United States.
For the Trustees,
LOGO
Catherine R. Mack
Vice President--General
Counsel and Secretary
YOUR PROXY IS IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES.
PLEASE SIGN, DATE AND MAIL IT TODAY.
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FEDERAL REALTY INVESTMENT TRUST
AMENDED AND RESTATED
1993 LONG-TERM INCENTIVE PLAN
ARTICLE I. PURPOSE AND ADOPTION OF THE PLAN
1.01 PURPOSE. The purpose of the Federal Realty Investment Trust Amended and
Restated 1993 Long-Term Incentive Plan (hereinafter referred to as the "Plan")
is to assist the Trust (as hereinafter defined) in attracting and retaining
individuals to serve as Trustees and highly competent personnel who will
contribute to the Trust's success and to act as an incentive in motivating
selected officers and key employees to achieve long-term objectives which will
inure to the benefit of all shareholders of the Trust. It is intended that
this purpose be achieved by extending to officers, employees, consultants, and
Trustees of the Trust and its Subsidiaries a long-term incentive for high
levels of performance and efforts through the grant of Options, Stock
Appreciation Rights, Dividend Equivalent Rights, Performance Awards and/or
Restricted Shares (as each such term is herein defined).
1.02 ADOPTION, AMENDMENT AND TERM. The 1993 Long-Term Incentive Plan (the
"1993 Plan") was originally approved by the Trustees in 1993 and thereafter
approved by the Trust's shareholders at the 1993 Annual Meeting of
Shareholders. The first amendment and restatement of the 1993 Plan was
approved by the Trustees on March 24, 1997 subject to the approval of the
Trust's shareholders at the 1997 Annual Meeting of Shareholders. The 1993 Plan
was amended and restated at the 1997 Annual Meeting at which a quorum was
present and a majority of the votes cast at such meeting with respect to the
Plan were cast in favor of its approval (including, without limitation,
abstentions to the extent abstentions may be counted). The Plan was amended
further by the Board of Trustees on October 6, 1997. The Plan shall terminate
without further action of the Trustees and the shareholders on the tenth
anniversary of the date on which the 1993 Plan was approved by the
shareholders.
ARTICLE II. DEFINITIONS
For purposes of this Plan, capitalized terms shall have the following
meanings:
2.01 ACCEPTANCE DATE means the date, no later than the twentieth (20th)
Business Day after the Offer Date, on which a Participant accepts an offer to
purchase Shares made pursuant to a Stock Purchase Award.
2.02 ADJUSTED FAIR MARKET VALUE means, in the event of a Change in Control,
the greater of (i) the highest price per Share paid to holders of the Shares
in any transaction (or series of transactions) constituting or resulting in a
Change in Control or (ii) the highest Fair Market Value of a Share during the
sixty (60) day period ending on the date of the Change in Control.
2.03 ANNUAL RETAINER means the total amount which is determined each year by
the Trustees to be payable to each Non-Employee Trustee for services during
such year as a Non-Employee Trustee and as a member of a committee or
committees of the Trustees.
2.04 ANNUAL RETAINER PAYMENT DATE means the date determined each year by the
Trustees as the date on which the Annual Retainer for such year shall be paid.
The Annual Retainer Payment Date for a year shall be at least six months after
the date on which the amount of the Annual Retainer for such year is
determined.
2.05 AWARD means (a) any grant to a Participant of any one or a combination
of Non-Qualified Stock Options or Incentive Stock Options (with or without
Stock Appreciation Rights) described in Article VI, Dividend Equivalent Rights
described in Article VI, Restricted Shares described in Article VII,
Performance Awards described in Article VIII, or Stock Purchase Awards
described in Article IX or (b) any grant to a Non-Employee Trustee of a Non-
Employee Trustee Award described in Article X.
2.06 AWARD AGREEMENT means a written agreement between the Trust and a
Participant or a written acknowledgment from the Trust specifically setting
forth the terms and conditions of an Award granted to a Participant.
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2.07 AWARD PERIOD means, with respect to an Award, the period of time, if
any, set forth in the Award Agreement during which specified target
performance goals must be achieved or other conditions set forth in the Award
Agreement must be satisfied.
2.08 BENEFICIAL OWNERSHIP means ownership within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission under the Exchange Act.
2.09 BENEFICIARY means an individual, trust or estate who or which, by a
written designation of the Participant filed with the Trust or by operation of
law, succeeds to the rights and obligations of the Participant under the Plan
and an Award Agreement upon the Participant's death.
2.10 BUSINESS DAY means any day on which the New York Stock Exchange is open
for trading.
2.11 CAUSE means (a) the definition set forth in the employment or other
agreement between the Participant and the Trust or, in absence thereof, (b)
Participant's: (i) failure (other than failure due to disability) to
substantially perform his duties with the Trust, which failure remains uncured
after written notice thereof and the expiration of a reasonable period of time
thereafter in which Participant is diligently pursuing cure; (ii) willful
misconduct which is demonstrably and materially injurious to the Trust or an
affiliate thereof, monetarily or otherwise; (iii) breach of fiduciary duty
involving personal profit; or (iv) willful violation in the course of
performing his duties for the Trust of any law, rule or regulation (other than
traffic violations or misdemeanor offenses). No act or failure to act shall be
considered willful unless done or omitted to be done in bad faith and without
reasonable belief that the action or omission was in the best interest of the
Trust.
2.12 CHANGE IN CAPITALIZATION means any increase or reduction in the number
of Shares, or any change (including, without limitation, a change in value) in
the Shares or exchange of Shares for a different number or kind of shares or
other securities of the Trust or another Person, by reason of a
reclassification, recapitalization, merger, consolidation, reorganization,
spin-off, split-up, issuance of warrants or rights or debentures, stock
dividend, stock split or reverse stock split, property dividend, combination
or exchange of shares, change in corporate structure or substantially similar
event.
2.13 CHANGE IN CONTROL means any of the events set forth below; provided,
however, that the Committee, in its sole discretion, may specify a more
restrictive definition of Change in Control in any Award Agreement and, in
such event, the definition of Change in Control set forth in the Award
Agreement shall apply to the Award granted under such Award Agreement:
(a) An acquisition in one or more transactions (other than directly from
the Trust or pursuant to options granted under this Plan or otherwise by
the Trust) of any Trust Voting Securities by any Person immediately after
which such Person has Beneficial Ownership of 20% or more of the combined
voting power of the then outstanding Trust Voting Securities; provided,
however, in determining whether a Change in Control has occurred, Trust
Voting Securities which are acquired in a "Non-Control Acquisition" (as
hereinafter defined) shall not constitute an acquisition which would cause
a Change in Control. A "Non-Control Acquisition" shall mean an acquisition
by (i) an employee benefit plan (or a trust forming a part thereof)
maintained by (x) the Trust or (y) a Subsidiary, (ii) the Trust or any
Subsidiary, or (iii) any Person in connection with a "Non-Control
Transaction" (as hereinafter defined);
(b) The individuals who, as of the date of this Plan, are members of the
Trustees (the "Incumbent Trustees"), cease for any reason to constitute at
least two-thirds of the Trustees; provided, however, that if the election,
or nomination for election by the Trust's shareholders, of any new member
was approved by a vote of at least two-thirds of the Incumbent Trustees,
such new member shall, for purposes of this Plan, be considered as a member
of the Incumbent Trustees; provided, further, however, that no individual
shall be considered a member of the Incumbent Trustees if such individual
initially assumed office as a result of either an actual or threatened
"Election Contest" (as described in Rule 14a-11 promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Trustees (a "Proxy
Contest"), including, without limitation, by reason of any agreement
intended to avoid or settle any Election Contest or Proxy Contest; or
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(c) Approval by shareholders of the Trust of
(1) A merger, consolidation or other reorganization involving the
Trust, unless:
(i) the shareholders of the Trust, immediately before such merger,
consolidation or reorganization, own, directly or indirectly
immediately following such merger, consolidation or other
reorganization, at least a majority of the combined voting power of
the outstanding voting securities of the Person resulting from such
merger, consolidation or other reorganization (the "Surviving
Person") in substantially the same proportion as their ownership of
the Trust Voting Securities immediately before such merger,
consolidation or other reorganization,
(ii) the individuals who were members of the Incumbent Trustees
immediately prior to the execution of the agreement providing for
such merger, consolidation or other reorganization constitute at
least two-thirds of the members of the governing board of the
Surviving Person,
(iii) no Person (other than the Trust or any Subsidiary, any
employee benefit plan (or any trust forming a part thereof)
maintained by the Trust or any Subsidiary, or any Person which,
immediately prior to such merger, consolidation, or other
reorganization had Beneficial Ownership of 20% or more of the then
outstanding Trust Voting Securities) has Beneficial Ownership of 20%
or more of the combined voting power of the Surviving Person's then
outstanding voting securities, and
(iv) a transaction described in clauses (i) through (iii) shall
herein be referred to as a "Non-Control Transaction,"
(2) A complete liquidation or dissolution of the Trust; or
(3) An agreement for the sale or other disposition of all or
substantially all of the assets of the Trust to any Person (other than
a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur (i) solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the outstanding Trust Voting
Securities as a result of the acquisition of Trust Voting Securities by the
Trust which, by reducing the number of Trust Voting Securities outstanding,
increases the proportional number of shares Beneficially Owned by the Subject
Person: provided, however, that if a Change in Control would occur (but for
the operation of this sentence) as a result of the acquisition of Trust Voting
Securities by the Trust, and after such share acquisition by the Trust, the
Subject Person becomes the Beneficial Owner of any additional Trust Voting
Securities which increases the percentage of the then outstanding Trust Voting
Securities Beneficially Owned by the Subject Person, then a Change in Control
shall occur, or (ii) if the Trust (a) establishes a wholly-owned subsidiary
("Holding Company"), (b) causes the Holding Company to establish a wholly-
owned subsidiary ("Merger Sub"), and (c) merges with Merger Sub, with the
Trust as the surviving entity (such transactions collectively are referred as
the "Reorganization"). Immediately following the completion of the
Reorganization, all references to the Trust Voting Securities shall be deemed
to refer to the voting securities of the Holding Company.
2.14 CODE means the Internal Revenue Code of 1986, as amended from time to
time, or any successor thereto. References to a section of the Code shall
include that section and any comparable section or sections of any future
legislation that amends, supplements or supersedes said section.
2.15 COMMITTEE means a Committee designated by the Trustees having the power
and authority to administer the Plan in accordance with Section 3.01 and as
described in Section 3.02.
2.16 DATE OF GRANT means the date designated by the Committee as the date as
of which it grants an Award, which shall not be earlier than the date on which
the Committee approves the granting of such Award.
2.17 DISABILITY means any physical or mental injury or disease which renders
a Participant incapable of meeting the requirements of the employment
performed by such Participant immediately prior to the
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commencement of such disability. The determination of whether a Participant is
disabled shall be made by the Committee in its sole discretion.
Notwithstanding the foregoing, if a Participant's employment by the Trust
terminates by reason of a disability, as defined in an employment or other
agreement between such Participant and the Trust, such Participant shall be
deemed to be disabled for purposes of the Plan.
2.18 DISABILITY DATE means the date which is six months after the date on
which a Participant is first absent from active employment with the Trust by
reason of a Disability.
2.19 DISINTERESTED PERSON shall have the meaning set forth in Rule 16b-3, as
promulgated by the Securities and Exchange Commission under the Exchange Act.
2.20 DIVIDEND EQUIVALENT RIGHT means a right, as described in Section 6.05,
to receive all or some portion of the cash dividends that are or would be
payable with respect to Shares.
2.21 DIVISION means any of the operating units or divisions of the Trust or
a Subsidiary thereof designated as a Division by the Committee.
2.22 EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.
2.23 FAIR MARKET VALUE means, as of any given date, with respect to any
Awards granted hereunder, the closing trading price of the Shares on such date
as reported on the New York Stock Exchange or, if the Shares are not then
traded on the New York Stock Exchange, on such other national securities
exchange on which the Shares are admitted to trade, or, if none, on the
National Association of Securities Dealers Automated Quotation System if the
Shares are admitted for quotation thereon; provided, however, if there were no
sales reported as of such date, Fair Market Value shall be computed as of the
last date preceding such date on which a sale was reported; provided, further,
that if any such exchange or quotation system is closed on any day on which
Fair Market Value is to be determined, Fair Market Value shall be determined
as of the first date immediately preceding such date on which such exchange or
quotation system was open for trading.
2.24 INCENTIVE STOCK OPTION means an Option designated as an incentive stock
option and which satisfies the requirements of Section 422 of the Code.
2.25 INTEREST means the amount of interest accrued on a Purchase Loan or a
Tax Loan made to a Participant during the relevant period. Interest on a
Purchase Loan or a Tax Loan shall accrue at a fixed rate per annum during the
entire term of the relevant loan. The interest rate for a Purchase Loan shall
be calculated by dividing (i) the amount of cash dividend paid on one Share
for the calendar year preceding the Acceptance Date by (ii) the Share Price,
or such other interest rate as the Committee, in its sole discretion,
determines. The interest rate for a Tax Loan shall be identical to the
interest rate charged on the related Purchase Loan. In no event, however,
shall such rates be greater than the maximum rate chargeable to consumers
under the usury laws of the State of Maryland.
2.26 NON-EMPLOYEE TRUSTEE means each member of the Trustees who is not an
employee of the Trust.
2.27 NON-EMPLOYEE TRUSTEE AWARDS means Awards granted in accordance with
Article X.
2.28 NON-QUALIFIED STOCK OPTION means an Option which is not an Incentive
Stock Option.
2.29 NORMAL RETIREMENT DATE means the date on which a Participant terminates
active employment with the Trust on or after attainment of age 65, but does
not include termination by the Trust for Cause.
2.30 OFFER DATE means the date on which the Committee grants a Participant a
Stock Purchase Award.
2.31 OPTIONS means any Incentive Stock Option or Non-Qualified Stock Option
granted pursuant to the Plan.
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2.32 OPTIONEE means a person to whom an Option has been granted under the
Plan.
2.33 OTHER RETIREMENT DATE means a date, on or after the Participant's
attainment of age 55 but earlier than the Participant's Normal Retirement
Date, which is specifically approved and designated in writing by the
Committee to be the date upon which a Participant retires for purposes of this
Plan.
2.34 OUTSTANDING SHARES means, at any time, the issued and outstanding
Shares.
2.35 PARTICIPANT shall mean any individual selected by the Committee to
receive an Award under the Plan in accordance with Article V and, solely to
the extent provided in Article X of the Plan, any Non-Employee Trustees of the
Trust.
2.36 PERFORMANCE AWARD means Performance Units, Performance Shares or any
combination thereof.
2.37 PERFORMANCE SHARES means Shares issued or transferred to a Participant
under Section 8.03
2.38 PERFORMANCE TARGET has the meaning set forth in Section 8.01.
2.39 PERFORMANCE UNITS means Performance Units granted to a Participant
under Section 8.02.
2.40 PERSON means "person" as such term is used for purposes of Section
13(d) or 14(d) of the Exchange Act, including, without limitation, any
individual, firm, corporation, partnership, joint venture, association, trust
or other entity, or any group of Persons.
2.41 PLAN means the Federal Realty Investment Trust Amended and Restated
1993 Long-Term Incentive Plan as set forth herein, and as the same may be
amended from time to time.
2.42 POOLING TRANSACTION means an acquisition of the Trust in a transaction
which is intended to be treated as a "pooling of interests" under generally
accepted accounting principles.
2.43 PURCHASE LOAN means the loan provided to a Participant by the Trust to
facilitate the Participant's purchase of Shares pursuant to a Stock Purchase
Award.
2.44 PURCHASE LOAN TERM means the period for repayment and satisfaction of a
Purchase Loan.
2.45 RELOAD OPTION shall have the meaning set forth in Section 6.03(f).
2.46 RESTRICTED SHARES means Shares subject to restrictions imposed in
connection with Awards granted under Article VII.
2.47 RULE 16B-3 means Rule 16b-3 promulgated by the Securities and Exchange
Commission under Section 16 of the Exchange Act, as the same may be amended
from time to time, and any successor rule.
2.48 SHARE PRICE means the price per share at which the Stock Purchase Award
shall be offered to a Participant, and shall be equal to the greater of (i)
the average of the closing price of a share in the New York Stock Exchange for
the twenty (20) trading days prior to the Offer Date or (ii) the Fair Market
Value of a Share on the Acceptance Date.
2.49 SHARES mean the common shares of beneficial interest in the Trust, no
par value per share.
2.50 STOCK PURCHASE AWARD means an Award, granted in accordance with Article
IX, of the right to acquire Shares.
2.51 STOCK PURCHASE PRICE means the number of Shares in a Participant's
Stock Purchase Award multiplied by the Share Price.
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2.52 STOCK APPRECIATION RIGHTS means a right to receive all or some portion
of the increase in the value of the Shares as provided in Section 6.04.
2.53 SUBSIDIARY means any Person of which a majority of its voting power or
equity securities or equity interests is owned directly or indirectly by the
Trust.
2.54 TAX LOAN means a loan (or loans) offered to and accepted by a
Participant to offset all or a portion of federal and state taxes that a
Participant incurs as a result of the Trust's forgiveness of his Purchase
Loan.
2.55 TERMINATION OF EMPLOYMENT means the voluntary or involuntary
termination of a Participant's employment with the Trust for any reason,
including, without limitation, death, Disability, retirement or as the result
of a Change in Control. Whether entering military or other government service
shall constitute Termination of Employment, and whether a Termination of
Employment is a result of Disability, shall be determined in each case by the
Committee in its sole discretion.
2.56 TRUST means Federal Realty Investment Trust, a District of Columbia
unincorporated business trust, and its successors.
2.57 TRUST VOTING SECURITIES means the combined voting power of all
outstanding voting securities of the Trust entitled to vote generally in the
election of the Trustees.
2.58 TRUSTEES means the Board of Trustees of the Trust.
ARTICLE III. ADMINISTRATION
3.01 AUTHORITY OF COMMITTEE.
(a) The Plan shall be administered by the Committee which shall have
exclusive and final authority in each determination, interpretation or
other action affecting the Plan and its Participants. The Committee shall
have the sole discretion to interpret the Plan, to select the officers,
other employees, consultants and Trustees (other than Non-Employee
Trustees) to whom Awards may be granted, to determine all claims for
benefits under the Plan, to impose such conditions and restrictions on
Awards as it determines appropriate and to take such steps in connection
with the Plan and Awards granted hereunder as it may deem necessary or
advisable. The Committee may, with respect to Participants who are not
subject to Section 16(b) of the Exchange Act, delegate such of its powers
and authority under the Plan as it deems appropriate to designated officers
or employees of the Trust.
(b) Without limiting the Committee's authority under other provisions of
the Plan, but subject to any express limitations of the Plan, including,
without limitation, Section 11.13(b), the Committee shall have the
authority to accelerate an Award described in Section 2.05(a) and to waive
restrictive conditions for an Award described in Section 2.05(a)
(including, without limitation, any forfeiture conditions), in such
circumstances as the Committee deems appropriate. In the case of any
acceleration of an Award described in Section 2.05(a) after the attainment
of the applicable Performance Target(s), the amount payable shall be
discounted to its present value using an interest rate equal to Moody's
Average Corporate Bond Yield for the month preceding the month in which
such acceleration occurs.
3.02 COMMITTEE. The Committee shall consist of at least two (2) members of
the Trustees and may consist of the entire Trustees; provided, however, that
(A) if the Committee consists of less than the entire Trustees, each member
shall be a "Non-Employee Director" within the meaning of Exchange Act Rule
16b-3 and (B) to the extent necessary for any Award intended to qualify as
performance-based compensation under Section 162(m) of the Code to so qualify,
each member of the Committee, whether or not it consists of the entire
Trustees, shall be an "outside director" within the meaning of Section 162(m)
of the Code and the regulations promulgated thereunder. The Committee shall
hold meetings at such times as may be necessary for the proper administration
of the Plan. The Committee shall keep minutes of its meetings.
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3.03 REQUISITE ACTION. A quorum shall consist of not fewer than two-thirds
of the members of the Committee and a majority of a quorum may authorize any
action. Any decision or determination reduced to writing and signed by a
majority of all of the members of the Committee shall be as fully effective as
if made by a majority vote at a meeting duly called and held.
3.04 EXCULPATION. No member of the Committee shall be liable for any action,
failure to act, determination or interpretation made in good faith with
respect to this Plan or any transaction hereunder, except for liability
arising from his own willful misfeasance, gross negligence or reckless
disregard of his duties. The Trust hereby agrees to indemnify each member of
the Committee for all costs and expenses and, to the extent permitted by
applicable law, any liability incurred in connection with defending against,
responding to, negotiating for the settlement of or otherwise dealing with any
claim, cause of action or dispute of any kind arising in connection with any
actions in administering this Plan or in authorizing or denying authorization
to any transaction hereunder.
ARTICLE IV. AWARDS
4.01 PERFORMANCE UNITS DENOMINATED IN DOLLARS. The maximum dollar amount
that the Chief Executive Officer of the Trust may be awarded in any calendar
year in respect of Performance Units denominated in dollars is $3 million, and
the maximum dollar amount that any Participant (except the Chief Executive
Officer of the Trust) may be awarded in any calendar year in respect of
Performance Units denominated in dollars is $1 million.
4.02 NUMBER OF SHARES ISSUABLE. Subject to adjustments as provided in
Section 11.06, the maximum number of Shares that may be made the subject of
Awards granted under the Plan is 5,500,000; provided, however, that during the
term of the Plan (i) no Participant (other than the Chief Executive Officer of
the Trust) may be granted Awards (other than Performance Units denominated in
dollars and Dividend Equivalent Rights) in the aggregate in respect of more
than 250,000 Shares per calendar year, (ii) the Chief Executive Officer of the
Trust may not be granted Awards (other than Performance Units denominated in
dollars and Dividend Equivalent Rights) in the aggregate in respect of more
than 500,000 Shares per calendar year, (iii) no Participant (other then the
Chief Executive Officer of the Trust) may be granted Dividend Equivalent
Rights with respect to more than 250,000 Shares per calendar year, (iv) the
Chief Executive Officer of the Trust may not be granted Dividend Equivalent
Rights with respect to more than 500,000 Shares per calendar year, and (v) the
aggregate Fair Market Value of the Shares with respect to which Incentive
Stock Options granted under the Plan become exercisable for the first time by
an Optionee during any calendar year shall not exceed $100,000. The Trust
shall reserve, for purposes of the Plan, out of its authorized but unissued
Shares or Shares held in the Trust's treasury, or partly out of each, such
number of Shares as shall be determined by the Trustees.
4.03 REDUCTION. Solely for purposes of applying the Section 4.02 limit on
the maximum number of Shares that may be made the subject of Awards granted
under the Plan (but not for purposes of applying the Section 4.02 limits on
the number of Shares per calendar year that may be made the subject of Awards
granted to individual Participants), upon the granting of an Award, the
maximum number of Shares available under Section 4.02 for the granting of
further Awards shall be reduced as follows:
(a) In connection with the granting of an Award (other than the granting
of a Performance Unit denominated in dollars), the number of Shares shall
be reduced by the number of Shares in respect of which the Award is granted
or denominated.
(b) In connection with the granting of a Performance Unit denominated in
dollars, the number of Shares shall be reduced by an amount equal to the
quotient of (i) the dollar amount in which the Performance Unit is
denominated, divided by (ii) the Fair Market Value of a Share on the date
the Performance Unit is granted.
4.04 SHARES SUBJECT TO TERMINATED AWARDS. Solely for purposes of applying
the Section 4.02 limit on the maximum number of Shares that may be made the
subject of Awards granted under the Plan (but not for purposes of applying the
Section 4.02 limits on the number of Shares per calendar year that may be made
the
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subject of Awards granted to individual Participants), whenever any
outstanding Award or portion thereof expires, is canceled or is otherwise
terminated for any reason without having been exercised or payment having been
made in respect of the entire Award, the Shares allocable to the expired,
canceled or otherwise terminated portion of the Award may again be the subject
of Awards granted hereunder.
ARTICLE V. PARTICIPATION
5.01 ELIGIBLE PARTICIPANTS. Participants in the Plan shall be such officers,
other employees, consultants and Trustees of the Trust and its Subsidiaries as
the Committee, in its sole discretion, may designate from time to time. The
Committee's designation of a Participant in any year shall not require the
Committee to designate such person to receive Awards or grants in any other
year. The designation of a Participant to receive Awards or grants under one
portion of the Plan shall not require the Committee to include such
Participant under other portions of the Plan. The Committee shall consider
such factors as it deems pertinent in selecting Participants and in
determining the type and amount of their respective Awards. More than one type
of Award may be granted to a Participant at one time or at different times.
Non-Employee Trustees shall receive Non-Employee Trustee Awards in accordance
with Article X of the Plan, the provisions of which are automatic and non-
discretionary in operation. Non-Employee Trustees shall not be eligible to
receive any other Awards under the Plan.
ARTICLE VI. STOCK OPTIONS
6.01 GRANT OF OPTION. The Committee may grant Options to Participants either
alone or in addition to other Awards granted under the Plan. Any Option
granted under the Plan shall, subject to the provisions of the Plan, be in
such form as the Committee may, from time to time, approve, and the terms and
conditions of Option Awards need not be the same with respect to each
Participant. The Committee shall have the authority to grant to any
Participant one or more Incentive Stock Options, Non-Qualified Stock Options,
or both types of Options. To the extent that any Option does not qualify as an
Incentive Stock Option (whether because of its provisions or the time or
manner of its exercise or otherwise), such Option or the portion thereof which
does not qualify shall constitute a separate Non-Qualified Stock Option.
6.02 INCENTIVE STOCK OPTIONS. In the case of any grant of an Option,
designated by the Committee to be an Incentive Stock Option, each provision in
the Plan and in any related Award Agreement shall, to the maximum extent
possible, be interpreted in such a manner as to qualify the Option as an
Incentive Stock Option. If any provision of this Plan or such Award Agreement
shall be held not to comply with the requirements necessary to so qualify such
Option, then (i) such provision shall be deemed to have contained from the
outset such language as shall be necessary to qualify the Option as an
Incentive Stock Option, and (ii) all other provisions of this Plan and the
Award Agreement relating to such Option shall remain in full force and effect.
If any Award Agreement covering an Option designated by the Committee to be an
Incentive Stock Option shall not explicitly include any terms required to
qualify such Option as an Incentive Stock Option, all such terms shall be
deemed implicit in the designation of such Option and the Option shall be
deemed to have been granted subject to all such terms.
6.03 TERMS OF OPTIONS. Options granted under the Plan shall be subject to
the following terms and conditions and shall be in such form and contain such
additional terms and conditions, not inconsistent with the terms of this Plan,
as the Committee shall deem desirable:
(a) Option Price. The price per Share of an Option shall be determined by
the Committee at the Date of Grant but shall be not less than the Fair
Market Value of a Share on the Date of Grant.
(b) Option Term. The term of each Option shall be fixed by the Committee,
but no Option shall be exercisable more than ten years after the Date of
Grant. The Committee may, subsequent to the granting of any Option, extend
the term thereof, but in no event shall the term so extended exceed the
maximum term provided for in the preceding sentence.
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(c) Exercisability. Subject to Sections 6.03(g) and 6.03(h)(i) of the
Plan, (i) an Award Agreement with respect to Options may contain such
performance targets, waiting periods, exercise dates and restrictions on
exercise (including, without limitation, a requirement that an Option is
exercisable in periodic installments) as may be determined by the Committee
at the time of grant, and (ii) no Option may be exercised in whole or in
part prior to six months from the Date of Grant. To the extent not
exercised, installments shall accumulate and be exercisable, in whole or in
part, at any time after becoming exercisable, but not later than the date
the Option expires.
(d) Method of Exercise. Subject to whatever installment exercise and
waiting period provisions apply under subsection (c) above, Options may be
exercised in whole or in part at any time during the Award Period, only by
giving written notice of exercise delivered in person or by mail to the
Secretary of the Trust at the Trust's principal executive office. Such
notice shall specify the number of Shares to be purchased and shall be
accompanied by payment in full of the purchase price in such form as the
Committee may accept (including, without limitation, payment in accordance
with a cashless exercise program under which, if so instructed by the
Participant, Shares may be issued directly to the Participant's broker or
dealer upon receipt of the purchase price in cash from the broker or
dealer). If and to the extent determined by the Committee in its sole
discretion at or after grant, payment in full or in part may also be made
in the form of Shares duly owned by the Participant (and for which the
Participant has good title, free and clear of any liens and encumbrances)
or, in the case of Non-Qualified Stock Options, of Restricted Shares or by
reduction in the number of Shares issuable upon such exercise based, in
each case, on the Fair Market Value of the Shares on the date the Option is
exercised (without regard to any forfeiture restrictions, applicable to
Restricted Shares). No Shares shall be issued until Participant shall
generally have the rights to dividends or other rights of a shareholder
with respect to Shares subject to the Option when the Participant has given
written notice of exercise and has paid for such Shares as provided herein.
Notwithstanding the foregoing, if payment in full or in part has been made
in the form of Restricted Shares, an equivalent number of Shares issued on
exercise of the Option shall be subject to the same restrictions and
conditions for the remainder of the Award Period applicable to the
Restricted Shares surrendered therefor.
(e) Alternative Method of Exercise. If the Fair Market Value of the
Shares with respect to which the Option is being exercised exceeds the
exercise price of such Option, an Optionee may, instead of exercising an
Option as provided in Section 6.03(d), request that the Committee authorize
payment to the Optionee of the difference between the Fair Market Value of
part or all of the Shares which are the subject of the Option and the
exercise price of the Option, such difference to be determined as of the
date prior to the date the Committee receives the request from the
Optionee. The Committee, in its sole discretion, may grant or deny such a
request from an Optionee with respect to part or all of the Shares as to
which the Option is then exercisable and, to the extent granted, shall
direct the Trust to make the payment to the Optionee either in cash or in
Shares or in any combination thereof; provided, however, that payment in
Shares shall be made based upon the Fair Market Value of Shares as of the
date the Committee received the request from the Optionee. An Option shall
be deemed to have been exercised and shall be canceled to the extent that
the Committee grants a request pursuant to this Section 6.03(e).
(f) Reload Options. On or before the date of the 1997 Annual Meeting of
Shareholders, the Committee shall have the authority to specify, at the
time of grant or, with respect to Non-Qualified Stock Options, at or after
the time of grant, that a Participant shall be granted a Non-Qualified
Stock Option (a "Reload Option") in the event such Participant exercises
all or a part of an Option (an "Original Option") by surrendering in
accordance with Section 6.03(d) of the Plan already owned Shares in full or
partial payment of the purchase price under the Original Option, subject to
the availability of Shares under the Plan at the time of such exercise, and
subject to the limits provided for in Section 4.02; provided, however, that
no Reload Option shall be granted to a Non-Employee Trustee. Each Reload
Option shall cover a number of Shares equal to the number of Shares
surrendered in payment of the purchase price under such Original Option,
shall have a purchase price per Share equal to the Fair Market Value of a
Share on the Date of Grant of such Reload Option and shall expire on the
stated expiration date of the Original Option. A Reload Option shall be
exercisable at any time and from time to time after the Date of Grant of
such Reload Option (or, as the Committee in its sole discretion shall
determine at or after the time of grant, at
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such time or times as shall be specified in the Reload Option); provided,
however, that a Reload Option granted to a Participant subject to Section
16 of the Exchange Act shall not be exercisable during the first six months
from the Date of Grant of such Reload Option. Any Reload Option may provide
for the grant, when exercised, of subsequent Reload Options to the extent
and upon such terms and conditions, consistent with this Section 6.03(f),
as the Committee in its sole discretion shall specify at or after the time
of grant of such Reload Option. A Reload Option shall contain such other
terms and conditions, which may include a restriction on the
transferability of the Shares received upon exercise of the Original Option
representing at least the after-tax profit received upon exercise of the
Original Option, as the Committee in its sole discretion shall deem
desirable and which may be set forth in rules or guidelines adopted by the
Committee or in the Award Agreements evidencing the Reload Options.
(g) Effect of Change in Control. In the event of a Change in Control, all
Options outstanding on the date of such Change in Control shall become
immediately and fully exercisable. In addition, in the sole discretion of
the Committee at the time of an Award, and to the extent set forth in an
Award Agreement evidencing the grant of an Option, an Optionee will be
permitted to surrender to the Trust for cancellation within sixty (60) days
after such Change in Control any Option or portion of an Option to the
extent not yet exercised and the Optionee will be entitled to receive a
cash payment in an amount equal to the excess, if any, of (x) (A) in the
case of a Non-Qualified Stock Option, the greater of (1) the Fair Market
Value, on the date preceding the date of surrender, of the Shares subject
to the Option or portion thereof surrendered or (2) the Adjusted Fair
Market Value of the Shares subject to the Option or portion thereof
surrendered, or (B) in the case of an Incentive Stock Option, the Fair
Market Value, on the date preceding the date of surrender, of the Shares
subject to the Option or portion thereof surrendered over (y) the aggregate
purchase price for such Shares under the Option or portion thereof
surrendered.
(h) Exercise of Options Upon Termination of Employment.
(i) Exercise of Vested Options Upon Termination of Employment.
(A) Termination. Subject to Section 6.03(b), unless the Committee,
in its sole discretion, provides otherwise, upon a Participant's
Termination of Employment other than by reason of death, Disability
or retirement on or after the Participant's Normal Retirement Date
or following a Change in Control, the Participant may, within three
months from the date of such Termination of Employment, or such
longer period as the Committee, in its sole discretion, provides,
exercise all or any part of his Options as were exercisable at the
date of Termination of Employment; provided, however, that if such
Termination of Employment is for Cause, the right of such
Participant to exercise such Options shall terminate at the date of
Termination of Employment.
(B) Disability or Retirement. Subject to Section 6.03(b), unless
the Committee, in its sole discretion, provides otherwise, upon a
Participant's Disability Date or Termination of Employment by reason
of retirement on or after the Participant's Normal Retirement Date,
the Participant may, within two years after such Disability Date or
Termination of Employment, as the case may be, exercise all or a
part of his Options which were exercisable upon such Disability Date
or Termination of Employment (or which became exercisable at a later
date pursuant to Section 6.03(h)(ii)).
(C) Death. Subject to Section 6.03(b), unless the Committee, in
its sole discretion, provides otherwise, in the event of the death
of a Participant while employed by the Trust or within the
additional period of time described in Section 6.03(h)(i)(B) from
the date of the Participant's Disability Date or Termination of
Employment by reason of retirement on or after the Participant's
Normal Retirement Date to the extent all or any part of the Option
was exercisable as of the Disability Date or the date of such
Termination of Employment and did not expire during such additional
period and prior to the Participant's death, the right of the
Participant's Beneficiary to exercise the Option under the Plan
shall expire upon the expiration of two years from the date of the
Participant's death (but in no event more than two years from the
Participant's Disability Date or the date of the Participant's
Termination of Employment, as the case may be) or on the date of
expiration of the Option determined pursuant to Section 6.03(b),
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whichever is earlier. In all other cases of death following a
Participant's Termination of Employment, the Participant's
Beneficiary may exercise the Option within the time provided in
6.03(h)(i)(A), above. In the event of the Participant's death, the
Committee may, in its sole discretion, accelerate the right to
exercise all or any part of an Option which would not otherwise be
exercisable.
(D) Change in Control. Subject to Section 6.03(b), upon an
Optionee's Termination of Employment following a Change in Control,
each Option held by the Optionee that was exercisable as of the date
of such Termination of Employment shall remain exercisable for a
period not ending before the earlier of (A) the first anniversary of
the termination of the Optionee's employment or (B) the expiration
of the stated term of the Option.
(ii) Termination of Unvested Options Upon Termination of
Employment. Subject to Section 6.03(b), to the extent all or any part
of an Option was not exercisable as of the date of Termination of
Employment, the right to exercise such Option shall expire at the date
of such Termination of Employment. Notwithstanding the foregoing, and
subject to Section 6.03(b), the Committee, in its sole discretion and
under such terms as it deems appropriate, may permit a Participant who
terminates employment on or after the Participant's Normal Retirement
Date or Other Retirement Date and who will continue to render
significant services to the Trust after his Termination of Employment,
to continue to accrue service with respect to the right to exercise his
Options during the period in which the individual continues to render
such services.
6.04 STOCK APPRECIATION RIGHTS.
(a) Stock Appreciation Right Awards. The Committee may, in its sole
discretion, either alone or in connection with the grant of an Option,
grant Stock Appreciation Rights in accordance with the Plan, the terms and
conditions of which shall be set forth in an Award Agreement. If granted in
connection with an Option, a Stock Appreciation Right shall cover the same
Shares covered by the Option (or such lesser number of Shares as the
Committee may determine) and shall, except as provided in this Section
6.04, be subject to the same terms and conditions as the related Option.
(b) Time of Grant. A Stock Appreciation Right may be granted (i) at any
time if unrelated to an Option, or (ii) if related to an Option, either at
the time of grant, or at any time thereafter during the term of the Option.
(c) Stock Appreciation Right Related to an Option.
(i) Exercise. Subject to Section 6.04(h), a Stock Appreciation Right
granted in connection with an Option shall be exercisable at such time
or times and only to the extent that the related Options are
exercisable, and will not be transferable except to the extent the
related Option may be transferable. A Stock Appreciation Right granted
in connection with an Incentive Stock Option shall be exercisable only
if the Fair Market Value of a Share on the date of exercise exceeds the
purchase price specified in the related Incentive Stock Option
Agreement.
(ii) Amount Payable. Upon the exercise of a Stock Appreciation Right
related to an Option, the holder shall be entitled to receive an amount
determined by multiplying (A) the excess of the Fair Market Value of a
Share on the date preceding the date of exercise of such Stock
Appreciation Right over the per Share purchase price under the related
Option, by (B) the number of Shares as to which such Stock Appreciation
Right is being exercised. Notwithstanding the foregoing, the Committee
may limit in any manner the amount payable with respect to any Stock
Appreciation Right by including, without limitation, such a limit in
the Agreement evidencing the Stock Appreciation Right at the time it is
granted.
(iii) Treatment of Related Options and Stock Appreciation Rights Upon
Exercise. Upon the exercise of a Stock Appreciation Right granted in
connection with an Option, the Option shall be canceled to the extent
of the number of Shares as to which the Stock Appreciation Right is
exercised, and upon the exercise of an Option granted in connection
with a Stock Appreciation Right, the Stock
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Appreciation Right shall be canceled to the extent of the number of
Shares as to which the Option is exercised or surrendered.
(d) Stock Appreciation Right Unrelated to an Option. Stock Appreciation
Rights unrelated to Options shall contain such terms and conditions as to
exercisability (subject to Section 6.04(h)), vesting and duration as the
Committee shall determine, but in no event shall they have a term of
greater than ten (10) years. Upon exercise of a Stock Appreciation Right
unrelated to an Option, the Participant shall be entitled to receive an
amount determined by multiplying (A) the excess of the Fair Market Value of
a Share on the date preceding the date of exercise of such Stock
Appreciation Right over the Fair Market Value of a Share on the date the
Stock Appreciation Right was granted, by (B) the number of Shares as to
which the Stock Appreciation Right is being exercised. Notwithstanding the
foregoing, the Committee may limit in any manner the amount payable with
respect to any Stock Appreciation Right by including such a limit in the
Agreement evidencing the Stock Appreciation Right at the time it is
granted.
(e) Method of Exercise. Stock Appreciation Rights shall be exercised by a
Participant only by a written notice delivered in person or by mail to the
Secretary of the Trust at the Trust's principal executive office,
specifying the number of Shares with respect to which the Stock
Appreciation Right is being exercised. If requested by the Trust, the
Participant shall deliver the Award Agreement evidencing the Stock
Appreciation Right being exercised and the Award Agreement evidencing any
related Option to the Secretary of the Trust who shall endorse thereon a
notation of such exercise and return such Agreement to the Participant.
(f) Form of Payment. Payment of the amount determined under Sections
6.04(c) and (d) may be made in the sole discretion of the Committee solely
in whole Shares in a number determined at their Fair Market Value on the
date preceding the date of exercise of the Stock Appreciation Right, or
solely in cash, or in a combination of cash and Shares. If the Committee
decides to make full payment in Shares and the amount payable results in a
fractional Share, payment for the fractional Share will be made in cash.
(g) Modification. No modification of an Award shall adversely alter or
impair any rights or obligations under the Award Agreement without the
Participant's consent.
(h) Effect of Change in Control. In the event of a Change in Control, all
Stock Appreciation Rights shall become immediately and fully exercisable.
In addition, in the sole discretion of the Committee at the time of an
Award, and to the extent set forth in an Award Agreement evidencing the
grant of a Stock Appreciation Right (but not with respect to any Stock
Appreciation Right granted in connection with an Incentive Stock Option), a
Participant will be entitled to receive a payment from the Trust in cash or
Shares, in either case, with a value equal to the excess, if any, of (A)
the Adjusted Fair Market Value, on the date preceding the date of exercise,
of the Shares over (B) the aggregate Fair Market Value, on the date the
Stock Appreciation was granted, of the Shares subject to the Stock
Appreciation Right or portion thereof exercised.
(i) Exercise of Stock Appreciation Rights Upon Termination of Employment.
(i) Exercise of Vested Stock Appreciation Rights Upon Termination of
Employment.
(A) Termination. Subject to Section 6.04(c) or (d), as the case
may be, unless the Committee, in its sole discretion, provides
otherwise, upon a Participant's Termination of Employment other than
by reason of death, Disability or retirement on or after the
Participant's Normal Retirement Date or following a Change in
Control, the Participant may, within three months from the date of
such Termination of Employment, or such longer period as the
Committee, in its sole discretion, provides, exercise all or any
part of his Stock Appreciation Rights as were exercisable at the
date of Termination of Employment; provided, however, that if such
Termination of Employment is for Cause, the right of such
Participant to exercise such Stock Appreciation Rights shall
terminate at the date of Termination of Employment.
(B) Disability or Retirement. Subject to Section 6.04(c) or (d),
as the case may be, unless the Committee, in its sole discretion,
provides otherwise, upon a Participant's Disability Date or
Termination of Employment by reason of retirement on or after the
Participant's Normal
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Retirement Date, the Participant may, within two years after such
Disability Date or Termination of Employment, as the case may be,
exercise all or a part of his Stock Appreciation Rights which were
exercisable upon such Disability Date or Termination of Employment
(or which became exercisable at a later date pursuant to Section
6.04(i)(ii)).
(C) Death. Subject to Section 6.04(c) or (d), as the case may be,
unless the Committee, in its sole discretion, provides otherwise, in
the event of the death of a Participant while employed by the Trust
or within the additional period of time described in Section
6.04(i)(i)(B) from the date of the Participant's Disability Date or
Termination of Employment by reason of retirement on or after the
Participant's Normal Retirement Date to the extent all or any part
of the Stock Appreciation Right was exercisable as of the Disability
Date or the date of such Termination of Employment did not expire
during such additional period and prior to the Participant's death,
the right of the Participant's Beneficiary to exercise the Stock
Appreciation Right under the Plan shall expire upon the earlier of
(x) the expiration of two years from the date of the Participant's
death (but in no event more than two years from the Participant's
Disability Date or the date of the Participant's Termination of
Employment, as the case may be) or (y) the date of expiration of the
Stock Appreciation Right determined pursuant to Section 6.04(c) or
(d), as the case may be. In all other cases of death following a
Participant's Termination of Employment, the Participant's
Beneficiary may exercise the Stock Appreciation Right within the
time provided in 6.04(i)(i)(A), above. In the event of the
Participant's death, the Committee may, in its sole discretion,
accelerate the right to exercise all or any part of a Stock
Appreciation Right which would not otherwise be exercisable.
(D) Change in Control. Subject to Section 6.04(c) or (d), as the
case may be, upon a Participant's Termination of Employment
following a Change in Control, each Stock Appreciation Right held by
the Participant that was exercisable as of the date of such
Termination of Employment shall remain exercisable for a period not
ending before the earlier of (A) the first anniversary of the
termination of the Participant's employment or (B) the expiration of
the stated term of the Stock Appreciation Right.
(ii) Termination of Unvested Stock Appreciation Rights Upon
Termination of Employment. Subject to Section 6.04(c) or (d), as the
case may be, to the extent all or any part of a Stock Appreciation
Right was not exercisable as of the date of Termination of Employment,
the right to exercise such Stock Appreciation Right shall expire at the
date of such Termination of Employment. Notwithstanding the foregoing,
and subject to Section 6.04(c) or (d), as the case may be, the
Committee, in its sole discretion and under such terms as it deems
appropriate, may permit a Participant who terminates employment on or
after the Participant's Normal Retirement Date or Other Retirement Date
and who will continue to render significant services to the Trust after
his Termination of Employment, to continue to accrue service with
respect to the right to exercise his Stock Appreciation Rights during
the period in which the individual continues to render such services.
6.05 DIVIDEND EQUIVALENT RIGHTS. The Committee, in its sole discretion, may
grant to Participants Dividend Equivalent Rights in tandem with an Award. The
terms and conditions applicable to each Dividend Equivalent Right shall be
specified in the Award Agreement under which the Dividend Equivalent Right is
granted. Amounts payable in respect of Dividend Equivalent Rights may be
payable currently or deferred until the lapsing of restrictions on such
Dividend Equivalent Rights or until the vesting, exercise, payment, settlement
or other lapse of restrictions on the Award to which the Dividend Equivalent
Rights relate. In the event that the amount payable in respect of Dividend
Equivalent Rights are to be deferred, the Committee shall determine whether
such amounts are to be held in cash or reinvested in Shares or deemed
(notionally) to be reinvested in Shares. If amounts payable in respect of
Dividend Equivalent Rights are to be held in cash, there may be credited at
the end of each year (or portion thereof) interest on the amount of the
account at the beginning of the year at a rate per annum as the Committee, in
its sole discretion, may determine. Dividend Equivalent Rights may be settled
in cash or Shares or a combination thereof, in a single installment or
multiple installments. With respect to Dividend Equivalent Rights granted in
tandem with an Option, the Award Agreement may provide that the
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Participant may elect to have amounts payable in respect of such Dividend
Equivalent Rights applied against the exercise price of such Option. To the
extent necessary for any Dividend Equivalent Right intended to qualify as
performance-based compensation under Section 162(m) of the Code to so qualify,
the terms and conditions of the Dividend Equivalent Right shall be such that
payment of the Dividend Equivalent Right is contingent upon the attainment of
specified Performance Targets within the Award Period, as provided for in
Article VIII, and such Dividend Equivalent Right shall be treated as a
Performance Award for purposes of Section 11.13(b).
ARTICLE VII. RESTRICTED SHARES
7.01 RESTRICTED SHARE AWARDS. The Committee, in its sole discretion, may
grant to Participants Restricted Shares, either alone or in addition to other
Awards. The Committee may grant to any Participant an Award of Restricted
Shares in such number, and subject to such terms and conditions relating to
forfeitability and restrictions on delivery and transfer (whether based on
performance standards, periods of service or otherwise) as the Committee shall
establish. The terms of any Restricted Share Award granted under this Plan
shall be set forth in an Award Agreement which shall contain provisions
determined by the Committee and not inconsistent with this Plan. The
provisions of Restricted Share Awards need not be the same for each
Participant receiving such Awards.
(a) Issuance of Restricted Shares. As soon as practicable after the Date
of Grant of a Restricted Share Award, the Trust shall cause to be
transferred on the books of the Trust Shares, registered on behalf of the
Participant in nominee form, evidencing the Restricted Shares covered by
the Award, but subject to forfeiture to the Trust retroactive to the Date
of Grant if an Award Agreement delivered to the Participant by the Trust
with respect to the Restricted Shares covered by the Award is not duly
executed by the Participant and timely returned to the Trust. All Shares
covered by Awards under this Article VII shall be subject to the
restrictions, terms and conditions contained in the Plan and the Award
Agreement entered into by and between the Trust and the Participant. Until
the lapse or release of all restrictions applicable to an Award of
Restricted Shares, the stock certificates representing such Restricted
Shares shall be held in custody by the Trust or its designee. Upon the
lapse or release of all restrictions with respect to an Award as described
in Section 7.01(e), one or more stock certificates, registered in the name
of the Participant, for an appropriate number of Shares as provided in
Section 7.01(e), free of any restrictions set forth in the Plan and the
Award Agreement, shall be delivered to the Participant.
(b) Shareholder Rights. Beginning on the Date of Grant of the Restricted
Share Award and subject to execution of the Award Agreement as provided in
Section 7.01(a), the Participant shall become a shareholder of the Trust
with respect to all Shares subject to the Award Agreement and shall have
all of the rights of a shareholder, subject to the provisions of Section
7.01(c).
(c) Treatment of Dividends. At the time an Award of Restricted Shares is
granted, the Committee may, in its sole discretion, determine that the
payment to the Participant of dividends, or a specified portion thereof,
declared or paid on such Restricted Shares shall be (i) deferred until the
lapsing of the restrictions imposed upon such Restricted Shares and (ii)
held by the Trust for the account of the Participant until such time. In
the event that dividends are to be deferred, the Committee shall determine
whether such dividends are to be reinvested in Shares (which shall be held
as Restricted Shares) or held in cash. If deferred dividends are to be held
in cash, there may be credited at the end of each year (or portion thereof)
interest on the amount of the account at the beginning of the year at a
rate per annum as the Committee, in its sole discretion, may determine.
Payment of deferred dividends in respect of Restricted Shares (whether held
in cash or as additional Shares of Restricted Shares), together with
interest accrued thereon, if any, shall be made upon the lapsing of
restrictions imposed on the Restricted Shares in respect of which the
deferred dividends were paid, and any dividends deferred (together with any
interest accrued thereon) in respect of any Restricted Shares shall be
forfeited upon the forfeiture of such Restricted Shares.
(d) No Pledge. None of the Restricted Shares may be pledged.
(e) Delivery of Shares Upon Release of Restrictions. Upon expiration or
earlier termination of the forfeiture period without a forfeiture and the
satisfaction of or release from any other conditions prescribed
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by the Committee, the restrictions applicable to the Restricted Shares
shall lapse. As promptly as administratively feasible thereafter, subject
to the requirements of Section 11.06, the Trust shall deliver to the
Participant or, in case of the Participant's death, to the Participant's
Beneficiary, one or more stock certificates for the appropriate number of
Shares, free of all such restrictions, except for any restrictions that may
be imposed by law.
(f) Effect of Change in Control. Unless the Committee shall determine
otherwise at the time of grant of an Award of Restricted Shares, any
restriction periods and restrictions imposed on Restricted Shares under the
Plan shall lapse upon a Change in Control and within ten (10) Business Days
the stock certificates representing Restricted Shares, without any such
restrictions, shall be delivered to the applicable Participant.
7.02 TERMS OF RESTRICTED SHARES.
(a) Forfeiture of Restricted Shares. Subject to Sections 7.01(f) and
7.02(b), all Restricted Shares shall be forfeited and returned to the Trust
and all rights of the Participant with respect to such Restricted Shares
shall terminate unless the Participant continues in the service of the
Trust as an employee until the expiration of the forfeiture period for such
Restricted Shares and satisfies any and all other conditions set forth in
the Award Agreement. The Committee, in its sole discretion, shall determine
the forfeiture period (which may, but need not, lapse in installments) and
any other terms and conditions applicable with respect to any Restricted
Share Award.
(b) Waiver of Forfeiture Period. Notwithstanding anything contained in
this Article VII to the contrary, the Committee may, in its sole
discretion, waive the forfeiture period and any other conditions set forth
in any Award Agreement under appropriate circumstances (including, without
limitation, the death, Disability or retirement of the Participant or a
material change in circumstances arising after the date of an Award) and
subject to such terms and conditions (including, without limitation,
forfeiture of a proportionate number of the Restricted Shares) as the
Committee shall deem appropriate, provided that the Participant shall at
that time have completed at least one year of employment after the Date of
Grant.
ARTICLE VIII. PERFORMANCE AWARDS
8.01 PERFORMANCE TARGETS.
(a) Performance Targets. Performance Targets for Performance Awards may
be expressed in terms of (i) earnings per Share, (ii) Share price, (iii)
funds from operations, (iv) pre-tax profits, (v) net earnings, (vi) return
on equity or assets, (vii) gross revenues, (viii) EBITDA, (ix) dividends,
(x) market share or market penetration or (xi) any combination of the
foregoing, and may be determined before or after accounting changes,
special charges, foreign currency effects, acquisitions, divestitures or
other extraordinary events. Performance Targets may be in respect of the
performance of the Trust and its Subsidiaries (which may be on a
consolidated basis), a Subsidiary or a Division. Performance Targets may be
absolute or relative and may be expressed in terms of a progression within
a specified range. The Performance Targets with respect to an Award Period
shall be established in writing by the Committee by the earlier of (i) the
date on which a quarter of the Award Period has elapsed or (ii) the date
which is ninety (90) days after the commencement of the Award Period, and,
in any event while the performance relating to the Performance Targets
remain, substantially uncertain.
(b) Determination of Performance. Prior to the vesting, payment,
settlement or lapsing of any restrictions with respect to any Performance
Award made to a Participant who is subject to Section 162(m) of the Code,
the Committee shall certify in writing that the applicable Performance
Targets have been satisfied.
8.02 PERFORMANCE UNITS. The Committee, in its sole discretion, may grant
Awards of Performance Units to Participants, the terms and conditions of which
shall be set forth in an Award Agreement between the Trust and the
Participant. Performance Units shall be denominated in Shares or a specified
dollar amount and, contingent upon the attainment of specified Performance
Targets within the Award Period, represent the right to receive payment as
provided in Section 8.02(b) of the specified dollar amount or a percentage
(which may not
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be more than 100%) thereof depending on the level of Performance Target
attainment. Each Award Agreement shall specify either a fixed number of
Performance Units to which it relates or a formula pursuant to which the
number of Performance Units may be calculated, the Performance Targets which
must be satisfied in order for the Performance Units to vest and the Award
Period within which such Performance Targets must be satisfied.
(a) Vesting and Forfeiture. Subject to Sections 8.01(b) and 8.04, a
Participant shall become vested with respect to the Performance Units to
the extent that the Performance Targets set forth in the Agreement are
satisfied for the Award Period.
(b) Payment of Awards. Payment to Participants in respect of vested
Performance Units shall be made as soon as practicable after the last day
of the Award Period to which such Award relates unless the Award Agreement
evidencing the Award provides for the deferral of payment, in which event
the terms and conditions of the deferral shall be set forth in the Award
Agreement. Subject to Section 8.04, such payments may be made entirely in
Shares valued at their Fair Market Value as of the last day of the
applicable Award Period or such other date specified by the Committee,
entirely in cash, or in such combination of Shares and cash as the
Committee in its sole discretion shall determine at any time prior to such
payment.
8.03 PERFORMANCE SHARES. The Committee, in its sole discretion, may grant
Awards of Performance Shares to Participants, the terms and conditions of
which shall be set forth in an Agreement between the Trust and the
Participant. Each Award Agreement may require that an appropriate legend be
placed on Share certificates. Awards of Performance Shares shall be subject to
the following terms and provisions:
(a) Rights of Participant. The Committee shall provide at the time an
Award of Performance Shares is made the time or times at which the actual
Shares represented by such Award shall be issued in the name of the
Participant; provided, however, that no Performance Shares shall be issued
until the Participant has executed an Award Agreement evidencing the Award,
the appropriate blank stock powers and, in the sole discretion of the
Committee, an escrow agreement and any other documents which the Committee
may require as a condition to the issuance of such Performance Shares. If a
Participant shall fail to execute the Award Agreement evidencing an Award
of Performance Shares, the appropriate blank stock powers and, in the sole
discretion of the Committee, an escrow agreement and any other documents
which the Committee may require within the time period prescribed by the
Committee at the time the Award is granted, the Award shall be null and
void. At the sole discretion of the Committee, Shares issued in connection
with an Award of Performance Shares shall be deposited together with the
stock powers with an escrow agent (which may be the Trust) designated by
the Committee. Except as restricted by the terms of the Award Agreement,
and subject to Section 8.03(d), upon delivery of the Shares to the escrow
agent, the Participant shall have, in the sole discretion of the Committee,
all of the rights of a shareholder with respect to such Shares, including,
without limitation, the right to vote the Shares and to receive all
dividends or other distributions paid or made with respect to the Shares.
(b) Non-transferability. Subject to Section 11.04, until any restrictions
upon the Performance Shares awarded to a Participant shall have lapsed in
the manner set forth in Sections 8.03(c) or 8.04, such Performance Shares
shall not be sold, transferred or otherwise disposed of and shall not be
pledged or otherwise hypothecated, nor shall they be delivered to the
Participant. The Committee may also impose such other restrictions and
conditions on the Performance Shares, if any, as it deems appropriate.
(c) Lapse of Restrictions. Subject to Sections 8.01(b) and 8.04,
restrictions upon Performance Shares awarded hereunder shall lapse and such
Performance Shares shall become vested at such time or times and on such
terms, conditions and satisfaction of Performance Targets as the Committee
may, in its sole discretion, determine at the time an Award is granted.
(d) Treatment of Dividends. At the time the Award of Performance Shares
is granted, the Committee may, in its sole discretion, determine that the
payment to the Participant of dividends, or a specified portion thereof,
declared or paid on actual Shares represented by such Award which have been
issued by the Trust to the Participant shall be (i) deferred until the
lapsing of the restrictions imposed upon such Performance Shares and (ii)
held by the Trust for the account of the Participant until such time. In
the event that dividends
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are to be deferred, the Committee shall determine whether such dividends
are to be reinvested in Shares (which shall be held as additional
Performance Shares) or held in cash. If deferred dividends are to be held
in cash, there may be credited at the end of each year (or portion thereof)
interest on the amount of the account at the beginning of the year at a
rate per annum as the Committee, in its sole discretion, may determine.
Payment of deferred dividends in respect of Performance Shares (whether
held in cash or in additional Performance Shares), together with interest
accrued thereon, if any, shall be made upon the lapsing of restrictions
imposed on the Performance Shares in respect of which the deferred
dividends were paid, and any dividends deferred (together with any interest
accrued thereon) in respect of any Performance Shares shall be forfeited
upon the forfeiture of such Performance Shares.
(e) Delivery of Shares. Upon the lapse of the restrictions on Performance
Shares awarded, the Committee shall cause a stock certificate to be
delivered to the Participant, free of all restrictions hereunder.
8.04 EFFECT OF CHANGE IN CONTROL. In the event of a Change in Control:
(a) With respect to Performance Units, unless otherwise determined by the
Committee, the Participant shall (i) become vested in all Performance Units
and (ii) be entitled to receive in respect of all Performance Units which
become vested as a result of a Change in Control a cash payment within ten
(10) Business Days after such Change in Control in an amount as determined
by the Committee at the time of the Award of such Performance Unit and as
set forth in the Award Agreement.
(b) With respect to Performance Shares, unless otherwise determined by
the Committee, restrictions shall lapse immediately on all Performance
Shares.
(c) The Award Agreements evidencing Performance Shares and Performance
Units shall provide for the treatment of such Awards (or portions thereof)
which do not become vested as the result of a Change in Control, including,
without limitation, provisions for the adjustment of applicable Performance
Targets.
8.05 TERMINATION. Except as provided in Section 8.04, and unless otherwise
provided by the Committee, in its sole discretion, in the Award Agreement, the
following provisions shall apply to Performance Awards:
(a) Termination of Employment. Unless otherwise provided below, in the
case of a Participant's Termination of Employment prior to the end of an
Award Period, the Participant will not be entitled to any Performance
Awards, and any Performance Shares shall be forfeited.
(b) Disability, Death or Retirement. Unless otherwise provided by the
Committee, in its sole discretion, in the Award Agreement, if a
Participant's Disability Date or Termination of Employment by reason of
death or retirement on or after the Normal Retirement Date or Other
Retirement Date occurs following at least twelve months of participation in
any Award Period, but prior to the end of an Award Period, the Participant
or such Participant's Beneficiary, as the case may be, shall be entitled to
receive a pro-rata share of his Performance Award as determined under
Subsection (c).
(c) Pro-Rata Payment.
(i) Performance Units. With respect to Performance Units, the amount
of any payment made to a Participant (or Beneficiary) under
circumstances described in Section 8.05(b) will be the amount
determined by multiplying the amount of the Performance Units payable
in Shares or dollars which would have been earned, determined at the
end of the Award Period, had such employment not been terminated, by a
fraction, the numerator of which is the number of whole months such
Participant was employed during the Award Period, and the denominator
of which is the total number of months of the Award Period. Any such
payment shall be made as soon as practicable after the end of the
respective Award Period, and shall relate to attainment of Performance
Targets over the entire Award Period.
(ii) Performance Shares. With respect to Performance Shares, the
amount of Performance Shares held by a Participant (or Beneficiary)
with respect to which restrictions shall lapse under circumstances
described in Section 8.05(b) will be the amount determined by
multiplying the amount of the Performance Shares with respect to which
restrictions would have lapsed, determined at the end
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of the Award Period, had such employment not been terminated, by a
fraction, the numerator of which is the number of whole months such
Participant was employed during the Award Period, and the denominator
of which is the total number of months of the Award Period. The
Committee shall determine the amount of Performance Shares with respect
to which restrictions shall lapse under this Section 8.05(c)(ii) as
soon as practicable after the end of the respective Award Period, and
such determination shall relate to attainment of Performance Targets
over the entire Award Period. At that time, all Performance Shares
relating to that Award Period with respect to which restrictions shall
not lapse shall be forfeited.
(d) Other Events. Notwithstanding anything to the contrary in this
Article VIII, the Committee may, in its sole discretion, determine to pay
all or any portion of a Performance Award to a Participant who has
terminated employment prior to the end of an Award Period under certain
circumstances (including, without limitation, a material change in
circumstances arising after the Date of Grant) and subject to such terms
and conditions that the Participant shall have completed, at his
Termination of Employment, at least one year of employment after the Date
of Grant.
8.06 MODIFICATION OR SUBSTITUTION. Subject to the terms of the Plan, the
Committee may modify outstanding Performance Awards or accept the surrender of
outstanding Performance Awards and grant new Performance Awards in
substitution for them. Notwithstanding the foregoing, no modification of a
Performance Award shall adversely alter or impair any rights or obligations
under the Agreement without the Participant's consent.
ARTICLE IX. STOCK PURCHASE AWARDS
9.01 GRANT OF STOCK PURCHASE AWARD. The Committee, in its sole discretion,
may grant Stock Purchase Awards to Participants either alone or in addition to
other Awards granted under the Plan. A Stock Purchase Award shall consist of
the right to purchase Shares of the Trust and to pay for such Shares either in
cash or through a Purchase Loan or a combination of both, in the Committee's
sole discretion. A Participant shall have until 5:00 P.M. on the twentieth
(20th) Business Day following his Offer Date to accept a Stock Purchase Award
and sign an Award Agreement relating to the Stock Purchase Award.
9.02 TERMS OF PURCHASE LOANS AND TAX LOANS.
(a) Purchase Loan. The Trust shall provide to each Participant who
accepts a Stock Purchase Award a Purchase Loan in the principal amount
equal to the portion of the Stock Purchase Price designated by the
Committee as not payable in cash. Each Purchase Loan shall be evidenced by
a promissory note. The term of the Purchase Loan shall be such period of
time as may be determined by the Committee, in its sole discretion, but,
payable in full upon Termination of Employment subject to the terms of this
Article IX, and the proceeds of the Purchase Loan shall be used exclusively
by the Participant for payment of the Stock Purchase Price.
(i) Interest on Purchase Loan. From the Acceptance Date until the
Participant's Purchase Loan is forgiven, paid in full or otherwise
satisfied in full, Interest on the outstanding balance of the Purchase
Loan shall accrue and be payable quarterly in arrears on each date of
payment of a cash dividend on the Shares purchased by the Participant
pursuant to a Stock Purchase Award. If no quarterly cash dividend is
paid on the Shares for a quarter, Interest shall accrue (without any
interest thereon) on the last day of the quarter, and shall be
satisfied from future cash dividends paid on such Shares as provided
for in Section 9.03(b) hereof. Any accrued but unpaid Interest on a
Purchase Loan shall be due on the last day of the Purchase Loan Term.
(ii) Forgiveness of Purchase Loan. Subject to Section 9.02(a)(iii),
the Committee shall have the right, in its sole discretion, at the
Offer Date, to determine (i) the extent to which the Trust shall
forgive the repayment of all or a portion of a Purchase Loan and (ii)
the terms of such forgiveness. To the extent necessary for the
forgiveness of a Purchase Loan intended to qualify as performance-based
compensation under Section 162(m) of the Code to so qualify, the terms
and conditions of the Purchase
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Loan shall be such that forgiveness of the Purchase Loan is contingent
upon the attainment of specified Performance Targets within the Award
Period, as provided for in Article VIII, and such Purchase Loan shall
be treated as a Performance Award for purposes of Section 11.13(b).
(iii) Effect a Change in Control. In the event of a Change in
Control, the outstanding balance and Interest due on any Purchase Loan
will be completely forgiven as of the date of such Change in Control.
(b) Tax Loan. In order to provide a Participant cash to fulfill federal,
state and local tax obligations arising as a result of the forgiveness of a
Purchase Loan, the Committee may, in its sole discretion, offer a Tax Loan
to a Participant subject to such terms as the Committee, in its sole
discretion, determines. The Tax Loan shall be prepayable, in whole or in
part, at any time and from time to time, without penalty.
(i) Interest on Tax Loan. Each Tax Loan shall bear Interest at a rate
identical to the rate of Interest charged on the Participant's Purchase
Loan and shall be evidenced by a promissory note. Interest on each Tax
Loan, or any balance thereof, shall accrue and be payable quarterly in
arrears on the same date and in the same manner as Interest on a
Purchase Loan, as provided in Sections 9.02(a)(i) and 9.03(b) of the
Plan, until such Tax Loan is paid in full.
9.03 SECURITY FOR LOANS.
(a) Stock Power. Purchase Loans and Tax Loans granted to Participants
shall be secured by a pledge of the Shares acquired with a Purchase Loan
pursuant to a Stock Purchase Award. Except as the Committee may otherwise
determine, such loans shall be fully recourse with respect to a
Participant. The stock certificates for the Shares purchased by a
Participant under the Plan shall be issued in the Participant's name, but
shall be held as security for repayment of the Participant's Purchase Loan
and/or any Tax Loan by the Chief Financial Officer of the Trust (or for a
Stock Purchase Award made to the Chief Financial Officer, by the Chief
Executive Officer) together with a stock power executed in blank by the
Participant (the execution and delivery of which by the Participant shall
be a condition to the issuance of the Stock Purchase Award). During the
Purchase Loan Term, the Participant shall be entitled to exercise all
rights applicable to such Shares, including, without limitation, the right
to vote such Shares and, subject to Section 9.03(b), the right to receive
dividends paid on such Shares. When the Purchase Loan and any accrued but
unpaid Interest thereon has been repaid or otherwise satisfied in full, the
Chief Financial Officer (or Chief Executive Officer, as the case may be)
shall deliver to the Participant the stock certificates for the Shares
purchased by a Participant under the Plan, other than the Shares, if any,
retained as collateral for the Tax Loan under Section 9.03(c), provided the
Participant executes and delivers to the Chief Financial Officer (or Chief
Executive Officer, as the case may be) a substitute stock power for any
stock certificates representing the portion of the Stock Purchase Award
retained by the Trust to secure repayment of any Tax Loan and any accrued
but unpaid Interest thereon, as provided for in Section 9.03(c) of this
Plan.
(b) Assignment of Dividends. To secure repayment of his Purchase Loan,
Tax Loan and Interest, each Participant shall also execute an assignment to
the Trust of all cash dividends paid on the Shares purchased by the
Participant with a Purchase Loan pursuant to a Stock Purchase Award. The
Trust shall deduct from each cash dividend paid by the Trust on such Shares
an amount equal to the Interest due to the Trust for that quarter on the
Participant's Purchase Loan, and Tax Loan, if any, and shall also deduct
accrued but unpaid Interest on the Purchase and Tax Loan, such deductions
to be made in the following order: (i) first to satisfy the Interest due on
the Purchase Loan for that quarter, (ii) second to satisfy the Interest due
on the Tax Loan for that quarter, (iii) third to satisfy any accrued but
unpaid Interest on the Purchase Loan, and (iv) fourth to satisfy any
accrued but unpaid Interest on the Tax Loan. To the extent that the cash
dividend exceeds the total of the foregoing subsections (i) through (iv),
the Trust shall distribute the remainder of the dividend to the
Participant. In the event the Interest due on the Participant's Purchase
Loan and Tax Loan is greater than the cash dividend paid that quarter on
such Shares (or if the dividend is insufficient to repay accrued but unpaid
Interest from previous quarters), such unpaid Interest shall accrue and be
payable in each succeeding quarter and then in accordance with Section
9.02(a)(i) (in the case of the Purchase Loan), Section 9.02(b)(i) (in the
case of the Tax Loan) and this Section 9.03.
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(c) Release and Delivery of Stock Certificates at End of Purchase Loan
Term. The Trust shall release and deliver to each Participant certificates
for the Shares purchased by the Participant under the Plan at the end of
the Purchase Loan Term, provided the Participant has paid or otherwise
satisfied in full the balance of the Purchase Loan, any Tax Loan and any
accrued but unpaid Interest. In the event the balance of the Purchase Loan
is not repaid, forgiven or otherwise satisfied within ninety (90) days
after the end of the Purchase Loan Term (or such longer time as the
Committee, in its sole discretion, shall provide for repayment or
satisfaction), the Trust shall retain a portion of Shares purchased under
the Stock Purchase Award, as provided in Section 9.04(d).
If a Participant has not paid or otherwise satisfied the balance of the
Tax Loan and any accrued but unpaid Interest thereon at the end of the
Purchase Loan Term, the Trust shall retain as security for repayment of the
Tax Loan and any accrued but unpaid Interest thereon the stock certificates
for a portion of the Shares purchased by the Participant pursuant to a
Stock Purchase Award representing Shares that have a Fair Market Value
(determined as of the last day of the Purchase Loan Term) equal to 200% of
the outstanding balance of the Tax Loan and any accrued but unpaid Interest
thereon as of the last day of the Purchase Loan Term, such stock
certificates to be retained in the possession of the Chief Financial
Officer, of the Trust (or the Chief Executive Officer, as the case may be)
as security for repayment of such indebtedness.
For purposes of this Section, a Participant shall be considered to have
paid in full for that number of Shares acquired with a Purchase Loan
determined by multiplying the number of Shares covered by a Stock Purchase
Award by a fraction, the numerator of which is the sum of (i) the
cumulative amount of the Purchase Loan principal which has been forgiven
under Section 9.02(c) on the date such calculation is made and (ii) the
portion of the Purchase Loan, if any, which has been prepaid by such date,
and the denominator of which is the original principal amount of the
Purchase Loan.
In the event of a Participant's Termination of Employment prior to the
end of the Purchase Loan Term, the stock certificates for the Shares
purchased by the Participant pursuant to a Stock Purchase Award shall be
released and delivered to the Participant (or his Beneficiary) or retained
by the Trust, depending upon whether the Participant has repaid the balance
of the Purchase Loan, Tax Loan and any accrued but unpaid Interest on the
Purchase and Tax Loans, in accordance with Section 9.04 of this Plan.
(d) Release and Delivery of Stock Certificates during Purchase Loan
Term. On January 31 of each year of a Purchase Loan Term, the Trust shall
release and deliver to each Participant certificates for a portion of the
Shares purchased by a Participant pursuant to a Stock Purchase Award,
provided that such Participant is employed by the Trust as of such date.
The Trust shall retain as security for repayment of the Purchase Loan, the
Tax Loan and any accrued but unpaid Interest thereon, a portion of the
Shares purchased by a Participant having a Fair Market Value (determined as
of January 30 of each year of the Purchase Loan Term) equal to 200% of the
outstanding balance of the Purchase Loan, Tax Loan and any accrued but
unpaid Interest thereon as of January 31 of each year during the Purchase
Loan Term. Certificates representing the remaining Shares purchased
pursuant to a Stock Purchase Award shall be delivered to such Participant.
A Participant shall not transfer, sell or otherwise dispose of Shares
released pursuant to this Section during the remainder of the Purchase Loan
Term; provided, however, that such Shares may be pledged as collateral for
other indebtedness of the Participant; provided, further, however, that in
the event of a Change in Control, all such transfer restrictions on such
Shares shall lapse.
9.04 TERMINATION OF EMPLOYMENT.
(a) Termination of Employment by Death or Disability. On the Offer Date,
the Committee, in its sole discretion, may provide for the forgiveness of a
Purchase Loan as of the date of Participant's Termination of Employment by
reason of death or Disability, in such an amount of the original principal
amount of the Purchase Loan as the Committee shall designate; provided that
the Participant (or his Beneficiary, in the case of the Participant's
death) shall first tender to the Trust within one hundred and eighty (180)
days of such Termination of Employment: (i) the amount of the Trust's
minimum withholding tax obligation which would be created as a result of
the forgiveness of the Purchase Loan and (ii) the amount of the balance of
Participant's Purchase Loan, Tax Loan and any accrued but unpaid Interest
on such Loans.
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(b) Termination of Employment by Voluntary Resignation or Without
Cause. In the event of a Participant's Termination of Employment by
voluntary resignation, the Participant shall repay to the Trust the entire
balance of the Purchase Loan, the Tax Loan and any accrued but unpaid
Interest on such Loans, which shall be deemed immediately due and payable,
within ninety (90) days of the date of Participant's Termination of
Employment by voluntary resignation. In the event of a Participant's
Termination of Employment by the Trust without Cause, the Participant shall
be obligated to repay the balance of the Purchase Loan, Tax Loan and any
accrued but unpaid Interest on the Purchase and Tax Loans within twelve
(12) months of the date of Participant's Termination of Employment.
(c) Termination of Employment for Cause. In the event of a Participant's
Termination of Employment for Cause, the Participant's Purchase Loan, Tax
Loan, and accrued but unpaid Interest on such Loans, shall become due and
payable immediately upon the date of such Participant's Termination of
Employment.
(d) Retention of Stock Purchase Award. If a Participant fails to repay
the balance of the Purchase Loan, Tax Loan and accrued but unpaid Interest
on the Purchase and Tax Loans within the applicable time periods as
provided in the Participant's promissory notes and in this Section 9.04,
the Trust shall retain that portion of the Shares acquired through a Stock
Purchase Award which has a Fair Market Value (as of the last day of such
applicable time period) equal to the sum of the outstanding principal
balance of Participant's Purchase Loan and Tax Loan and accrued but unpaid
Interest on the Purchase and Tax Loans, and the Trust shall be obligated to
distribute to the Participant stock certificates for only that portion of
the Stock Purchase Award which is equal in value to the difference between
the Fair Market Value of the Shares covered by the Stock Purchase Award and
the sum of the principal balance of the Participant's Purchase Loan and Tax
Loan and the accrued but unpaid Interest on the Purchase and Tax Loans,
such Fair Market Value and balance to be determined as of the date such
Purchase Loan, Tax Loan and Interest payments are due as set forth in
Participant's promissory notes and the foregoing Section 9.04.
9.05 RESTRICTIONS ON TRANSFER. Subject to Section 11.04, no Stock Purchase
Award or Shares purchased through such an Award and pledged to the Trust as
collateral security for the Participant's Purchase Loan, Tax Loan and accrued
but unpaid Interest thereon shall be transferable by the Participant other
than by will or by the laws of descent and distribution.
ARTICLE X. NON-EMPLOYEE TRUSTEE AWARDS
10.01 GRANT OF NON-EMPLOYEE TRUSTEE AWARDS. Each individual whose term as a
Trustee continues after the date of each annual meeting of shareholders of the
Trust, commencing with the 1997 annual meeting, and continuing until the date
this Plan terminates, shall as of the date of each such annual meeting of
shareholders be granted a Non-Employee Trustee Award consisting of an Option
to purchase 2,500 Shares. The exercise price for such Options shall be the
Fair Market Value of a Share on the Date of Grant. All such Options shall be
designated as Non-Qualified Stock Options and shall have a ten year term. Such
Options shall be fully exercisable six months after the Date of Grant,
provided, however, in the event of a Change in Control, such Options shall
become immediately and fully exercisable.
If a Non-Employee Trustee's service with the Trust terminates by reason of
death or Disability, any Option held by such Non-Employee Trustee may be
exercised for a period of two years from the date of such termination or until
the expiration of the Option, whichever is shorter. If a Non-Employee
Trustee's service with the Trust terminates other than by reason of death or
Disability, under mutually satisfactory conditions, any Option held by such
Non-Employee Trustee may be exercised for a period of one year from the date
of such termination, or until the expiration of the stated term of the Option,
whichever is shorter. All applicable provisions of the Plan not inconsistent
with this Section 10.01 shall apply to Awards granted to Non-Employee
Trustees; provided, however, that the Committee may not exercise discretion
under any provision of the Plan with respect to Options granted under this
Section 10.01 to the extent that such discretion is inconsistent with Exchange
Act Rule 16b-3.
10.02 PAYMENT OF ANNUAL RETAINER. During the term of this Plan, each Non-
Employee Trustee shall have the option of receiving his Annual Retainer in
cash or Shares or a combination of both. Each Non-Employee
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Trustee shall be required to make an annual irrevocable election regarding the
form of payment of his Annual Retainer. The election must be in writing and
must be delivered to the Secretary of the Trust on or before the date on which
the amount of the Annual Retainer for a year is determined; provided, however,
that for the Trust's 1997 fiscal year an election with respect to the form of
payment of the Annual Retainer was made on December 31, 1996, and the Annual
Retainer Payment Date for such fiscal year shall be June 30, 1997. If no
election is made with respect to a year, a Non-Employee Trustee's Annual
Retainer for such year will automatically be paid in Shares. The Annual
Retainer for a year shall be paid to the Trustees on the Annual Retainer
Payment Date for such year. The total number of Shares to be issued to a Non-
Employee Trustee who receives Shares pursuant to this Section 10.02 shall be
determined by dividing the dollar amount of the portion of the Annual Retainer
payable in Shares for a particular year by the Fair Market Value of a Share on
the Business Day immediately preceding the Annual Retainer Payment Date. In no
event shall the Trust be required to issue fractional Shares. Whenever under
the terms of this Section a fractional Share would otherwise be required to be
issued, an amount in lieu thereof shall be paid in cash based upon the Fair
Market Value of such fractional Share. Shares issued pursuant to this Section
shall not be transferable for three years from the date of their issuance,
provided, however, in the event of a Change in Control all such restrictions
on such Shares shall lapse.
ARTICLE XI. TERMS APPLICABLE TO ALL AWARDS GRANTED UNDER THE PLAN
11.01 PLAN PROVISIONS CONTROL AWARD TERMS EXCEPT UPON TERMINATION.
(a) Termination. An employment or other agreement, if applicable, between
a Participant and the Trust shall govern with respect to the terms and
conditions applicable to Awards granted to such Participant under the Plan
upon a Termination of Employment; provided, however, that to the extent
necessary for an Award intended to qualify as performance-based
compensation under Section 162(m) of the Code to so qualify, the terms of
the Plan shall govern the Award; and, provided further, that the Committee
shall have reviewed and, in its sole discretion, approved the employment or
other agreement.
(b) Plan Provisions Control Generally. Except as provided in Section
11.01(a), the terms of the Plan shall govern all Awards granted under the
Plan, and in no event shall the Committee have the power to grant to a
Participant any Award under the Plan which is contrary to any provisions of
the Plan. In the event any provision of any Award granted under the Plan
shall conflict with any of the terms in the Plan as constituted on the Date
of Grant of such Award, the terms of the Plan as constituted on the Date of
Grant of such Award shall control. Except as provided in Section 3.01(b),
Section 8.06 or Section 11.03 or unless otherwise provided by the
Committee, in its sole discretion, in the Award Agreement, the terms of any
Award granted under the Plan may not be changed after the Date of Grant of
such Award so as to materially decrease the value of the Award without the
express written approval of the Participant.
11.02 AWARD AGREEMENT. No person shall have any rights under any Award
granted under the Plan unless and until the Trust and the Participant to whom
such Award shall have been granted shall have executed and delivered an Award
Agreement or received any other Award acknowledgment authorized by the
Committee expressly granting the Award to such person and containing
provisions setting forth the terms of the Award. If there is any conflict
between the provisions of an Award Agreement and the terms of the Plan, the
terms of the Plan shall control.
11.03 MODIFICATION OF AWARD AFTER GRANT. Except as provided in Section
3.01(b) or Section 8.06, or unless otherwise provided by the Committee, in its
sole discretion, in the Award Agreement, no Award granted under the Plan to a
Participant may be modified (unless such modification does not materially
decrease the value of the Award) after the Date of Grant except by express
written agreement between the Trust and the Participant; provided that any
such change (a) shall not be inconsistent with the terms of the Plan, and (b)
shall be approved by the Committee.
11.04 LIMITATION ON TRANSFER. The rights and interest of a Participant in
any Award under the Plan may not be assigned or transferred other than by will
or the laws of descent and distribution or, in the Committee's sole
discretion, pursuant to a domestic relations order (within the meaning of
Exchange Act Rule 16a-12). During
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the lifetime of a Participant, and except as the preceding sentence provides,
only the Participant personally may exercise rights under the Plan. Except as
otherwise specifically provided in the Plan, a Participant's Beneficiary may
exercise the Participant's rights only to the extent they were exercisable
under the Plan at the date of the death of the Participant and are otherwise
currently exercisable.
11.05 TAXES. The Trust shall be entitled, if the Committee deems it
necessary or desirable, to withhold (or secure payment from the Participant in
lieu of withholding) the amount of any withholding or other tax required by
law to be withheld or paid by the Trust with respect to any amount payable
and/or Shares issuable under such Participant's Award, or with respect to any
income recognized upon the lapse of restrictions applicable to an Award or
upon a disqualifying disposition of Shares received pursuant to the exercise
of an Incentive Stock Option, and the Trust may defer payment or issuance of
the cash or Shares upon the grant, exercise or vesting of an Award unless
indemnified to its satisfaction against any liability for any such tax. The
amount of such withholding or tax payment shall be determined by the Committee
or its delegate and shall be payable by the Participant at such time as the
Committee determines. The Committee shall prescribe in each Award Agreement
one or more methods by which the Participant will be permitted to satisfy his
tax withholding obligation, which methods may include, without limitation, the
payment of cash by the Participant to the Trust and the withholding from the
Award, at the appropriate time, of a number of Shares sufficient, based upon
the Fair Market Value of such Shares, to satisfy such tax withholding
requirements. The Committee shall be authorized, in its sole discretion, to
establish such rules and procedures relating to any such withholding methods
as it deems necessary or appropriate, including, without limitation, rules and
procedures relating to elections by Participants who are subject to the
provisions of Section 16 of the Exchange Act to have Shares withheld from an
Award to meet such withholding obligations.
11.06 CHANGES IN CAPITALIZATION.
(a) In the event of a Change in Capitalization, the Committee shall
conclusively determine the appropriate adjustments, if any, to (i) the
maximum number and class of Shares or other securities with respect to
which Awards may be granted under the Plan, (ii) the maximum number and
class of Shares or other securities with respect to which Awards may be
granted to any Participant during any calendar year, (iii) the number and
class of Shares or securities which are subject to outstanding Awards
granted under the Plan and the purchase price therefor, if applicable, and
(iv) the Performance Targets.
(b) Any such adjustment in the Shares or other securities subject to
outstanding Incentive Stock Options (including, without limitation, any
adjustments in the purchase price) shall be made in such manner as not to
constitute a modification as defined by Section 424(h)(3) of the Code and
only to the extent otherwise permitted by Sections 422 and 424 of the Code.
(c) If, by reason of a Change in Capitalization, a Participant shall be
entitled to exercise an Award with respect to, new, additional or different
shares of stock or securities, such new, additional or different shares
shall thereupon be subject to all of the conditions, restrictions and
performance criteria which were applicable to the Shares subject to the
Award, as the case may be, prior to such Change in Capitalization.
(d) No adjustment of the number of Shares available under the Plan or to
which any Award relates that would otherwise be required under this Section
shall be made unless and until such adjustment either by itself or with
other adjustments not previously made under this Section would require an
increase or decrease of at least 1% in the number of Shares available under
the Plan or to which any Award relates immediately prior to the making of
such adjustment (the "Minimum Adjustment"). Any adjustment representing a
change of less than such minimum amount shall be carried forward and made
as soon as such adjustment together with other adjustments required by this
Section and not previously made would result in a Minimum Adjustment.
Notwithstanding the foregoing, any adjustment required by this Section
which otherwise would not result in a Minimum Adjustment shall be made with
respect to Shares relating to any Award immediately prior to exercise of
such Award. No fractional Shares or units of other securities shall be
issued pursuant to any such adjustment, and any fractions resulting from
any such adjustment shall be eliminated in each case by rounding downward
to the nearest whole share.
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<PAGE>
11.07 LOANS. The Trust shall be entitled, if the Committee in its sole
discretion deems it necessary or desirable, to lend money to a Participant for
purposes of (a) exercising his rights under an Award hereunder or (b) paying
any income tax liability related to an Award; provided, however, that Non-
Employee Trustees shall not be eligible to receive such loans. Such a loan
shall be evidenced by a promissory note payable to the order of the Trust
executed by the Participant and containing such other terms and conditions as
the Committee may deem desirable.
11.08 SURRENDER OF AWARDS. Any Award granted to a Participant under the Plan
may be surrendered to the Trust for cancellation on such terms as the
Committee and such Participant approve.
11.09 NO RIGHT TO AWARD; NO RIGHT TO EMPLOYMENT. No employee or other person
shall have any claim of right to be granted an Award under this Plan. Neither
the Plan nor any action taken hereunder shall be construed as giving any
employee any right to be retained in the employ of the Trust.
11.10 AWARDS NOT INCLUDABLE FOR BENEFIT PURPOSES. Income recognized by a
Participant pursuant to the provisions of the Plan shall not be included in
the determination of benefits under any employee pension benefit plan (as such
term is defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended) or group insurance or other benefit plans applicable to
the Participant which are maintained by the Trust, except as may be provided
under the terms of such plans or determined by resolution of the Trustees.
11.11 GOVERNING LAW. The Plan and all determinations made and actions taken
pursuant to the Plan shall be governed by the laws of the District of Columbia
other than the conflict of laws provisions of such laws, and shall be
construed in accordance therewith.
11.12 NO STRICT CONSTRUCTION. No rule of strict construction shall be
implied against the Trust, the Committee, or any other person in the
interpretation of any of the terms of the Plan, any Award granted under the
Plan or any rule or procedure established by the Committee.
11.13 INTERPRETATION.
(a) Rule 16b-3. The Plan is intended to comply with Exchange Act Rule
16b-3 and the Committee shall interpret and administer the provisions of
the Plan or any Award Agreement in a manner consistent therewith. Any
provisions inconsistent with such Rule shall be inoperative and shall not
affect the validity of the Plan. The Trustees are authorized to amend the
Plan and to make any such modifications to Award Agreements to comply with
Exchange Act Rule 16b-3, as it may be amended from time to time, and to
make any other such amendments or modifications deemed necessary or
appropriate to better accomplish the purposes of the Plan in light of any
amendments made to Exchange Act Rule 16b-3.
(b) Section 162(m) of the Code. Unless otherwise expressly stated in the
relevant Award Agreement, each Option, Stock Appreciation Right and
Performance Award granted under the Plan is intended to be performance-
based compensation within the meaning of Section 162(m)(4)(C) of the Code
(except that, in the event of a Change in Control, payment of Performance
Awards to a Participant who remains a "covered employee" with respect to
such payment within the meaning of Section 162(m)(3) of the Code may not
qualify as performance-based compensation). The Committee shall not be
entitled to exercise any discretion otherwise authorized hereunder with
respect to such Awards if the ability to exercise such discretion or the
exercise of such discretion itself would cause the compensation
attributable to such Awards to fail to qualify as performance-based
compensation. Notwithstanding anything to the contrary in the Plan, the
provisions of the Plan may at any time be bifurcated by the Trustees or the
Committee in any manner so that certain provisions of the Plan or any
Performance Award intended (or required in order) to satisfy the applicable
requirements of Section 162(m) of the Code are only applicable to persons
whose compensation is subject to Section 162(m).
11.14 CAPTIONS. The captions (i.e., all Section headings) used in the Plan
are for convenience only, do not constitute a part of the Plan, and shall not
be deemed to limit, characterize or affect in any way any provisions of the
Plan, and all provisions of the Plan shall be construed as if no captions have
been used in the Plan.
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<PAGE>
11.15 SEVERABILITY. Whenever possible, each provision in the Plan and every
Award at any time granted under the Plan shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of the
Plan or any Award at any time granted under the Plan shall be held to be
prohibited by or invalid under applicable law, then (a) such provision shall
be deemed amended to accomplish the objectives of the provision as originally
written to the fullest extent permitted by law and (b) all other provisions of
the Plan and every other Award at any time granted under the Plan shall remain
in full force and effect.
11.16 REGULATIONS AND OTHER APPROVALS.
(a) The obligation of the Trust to sell or deliver Shares with respect to
Awards granted under the Plan shall be subject to all applicable laws,
rules and regulations, including, without limitation, all applicable
federal and state securities laws, and the obtaining of such approvals by
governmental agencies as may be deemed necessary or appropriate by the
Committee.
(b) Each Award is subject to the requirement that, if at any time the
Committee determines, in its sole discretion, that the listing,
registration or qualification of Shares issuable pursuant to the Plan is
required by any securities exchange or under any state or federal law, or
the consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the grant of an Award
or the issuance of Shares, no Awards shall be granted or payment made or
Shares issues, in whole or in part, unless listing, registration,
qualification, consent or approval has been effected or obtained free of
any conditions as acceptable to the Committee.
(c) Notwithstanding anything contained in the Plan or any Award Agreement
to the contrary, in the event that the disposition of Shares acquired
pursuant to the Plan is not covered by a then current registration
statement under the Securities Act of 1933, as amended (the "Securities
Act"), and is not otherwise exempt from such registration, such Shares
shall be restricted against transfer to the extent required by the
Securities Act and Rule 144 or other regulations thereunder. The Committee
may require any individual receiving Shares pursuant to an Award granted
under the Plan, as a condition precedent to receipt of such Shares, to
represent and warrant to the Trust in writing that the Shares acquired by
the individual are acquired without a view to any distribution thereof and
will not be sold or transferred other than pursuant to an effective
registration thereof under said Act or pursuant to an exemption applicable
under the Securities Act or the rules and regulations promulgated
thereunder. The certificates evidencing any of such Shares shall be
appropriately amended to reflect their status as restricted securities as
aforesaid.
11.17 CONSTRUCTION. Whenever used herein, nouns in the singular shall
include the plural and the masculine pronouns shall include the feminine
gender.
11.18 POOLING TRANSACTIONS. Notwithstanding anything contained in the Plan
or any Agreement to the contrary, in the event of a Change in Control which is
also intended to constitute a Pooling Transaction, the Committee shall take
such actions, if any, as are specifically recommended by an independent
accounting firm retained by the Trust to the extent reasonably necessary in
order to assure that the Pooling Transaction will qualify as such, including,
without limitation, (i) deferring the vesting, exercise, payment, settlement
or lapsing of restrictions with respect to any Award, (ii) providing that the
payment or settlement in respect of any Award be made in the form of cash,
Shares or securities of a successor or acquirer of the Trust, or a combination
of the foregoing, (iii) postponing or deferring the forgiveness of any Loan
hereunder, and (iv) providing for the extension of the term of any Award to
the extent necessary to accommodate the foregoing, but not beyond the maximum
term permitted for any Award.
11.19 AMENDMENT AND TERMINATION.
(a) Amendment. The Trustees shall have complete power and authority to
amend the Plan at any time it is deemed necessary or appropriate: provided,
however, that the Trustees shall not, without the affirmative approval of
shareholders of the Trust, make any amendment that requires shareholder
approval under Section 162(m) of the Code or under any other applicable
law, unless the Trustees determine that compliance therewith is no longer
desired. No termination or amendment of the Plan may, without the
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<PAGE>
consent of the Participant to whom any Award shall theretofore have been
granted under the Plan, adversely affect the right of such individual under
such Award; provided, however, that the Committee may, in its sole
discretion, change Performance Targets as provided in Section 8.06 and make
such provision in the Award Agreement for amendments which, in its sole
discretion, it deems appropriate.
(b) Termination. The Trustees shall have the right and the power to
terminate the Plan at any time. No Award shall be granted under the Plan
after the termination of the Plan, but the termination of the Plan shall
not have any other effect and any Award outstanding at the time of the
termination of the Plan may be exercised after termination of the Plan at
any time prior to the expiration date of such Award to the same extent such
Award would have been exercisable had the Plan not terminated.
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<PAGE>
PROXY
FEDERAL REALTY INVESTMENT TRUST
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned, a shareholder of Federal Realty Investment Trust (the
"Trust"), hereby constitutes and appoints THOMAS F. COONEY, ESQ., RON D.
KAPLAN and CECILY A. WARD, or any of them, as the true and lawful attorneys
and proxies of the undersigned, with full power of substitution, for and in
the name of the undersigned, to vote and otherwise act at the Annual Meeting
of Shareholders of the Trust to be held at Woodmont Country Club, 1201
Rockville Pike, Rockville, Maryland on Wednesday, May 6, 1998 at 10:00 a.m.,
or at any adjournment thereof, with respect to all of the Common Shares of
Beneficial Interest of the Trust which the undersigned would be entitled to
vote, with all the powers the undersigned would possess if personally present,
on the following matters.
The undersigned hereby ratifies and confirms all that the aforesaid
attorneys and proxies may do hereunder.
(TO BE SIGNED ON REVERSE SIDE)
SEE REVERSE SIDE
<PAGE>
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
This Proxy when properly executed will be voted as directed by the
undersigned shareholder. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
"FOR" PROPOSALS 1, 2 AND 3.
FOR WITHHELD
1. Election of Dennis L. Berman,
Trustees: [ ] [ ] Kristin Gamble
The Board of Trustees unanimously recommends a vote FOR the two Nominees.
For all, except as otherwise indicated (INSTRUCTION: TO WITHHOLD AUTHORITY TO
VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME IN
THE LIST.)
2. Approval of FOR AGAINST ABSTAIN
Amendment to
the "Amended [ ] [ ] [ ]
Plan":
The Board of Trustees unanimously recommends a vote FOR the Amendment to the
"Amended Plan".
3. Approval of stock FOR AGAINST ABSTAIN
option award to the
Chief Executive [ ] [ ] [ ]
Officer:
The Board of Trustees unanimously recommends a vote FOR the award.
4. In their discretion, on any other matters properly coming before the meeting
or any adjournment thereof.
SIGNATURE(S) DATE
---------------------------------------- ------------------
NOTE: Please sign exactly as your name(s) appear(s) hereon. If the shares are
held jointly each party must sign. If the shareholder named is a corpora-
tion, partnership or other association, please sign its name and add your
own name and title. When signing as an attorney, executor, administrator,
trustee, guardian or in any other representative capacity, please also
give your full title or capacity.
